KoreTalkX #11 with Peter Wright
Peter Wright, President, Founder of Intro-act is a career research analyst with prior roles and responsibilities including: Managed Boston Institutional Sales for Cantor Fitzgerald, Director of Research for Tradition, buyside analyst at Fidelity, and sellside analyst at CIBC World Markets. Peter has a reputation for creating differentiated research being ranked #1 by Institutional Investor Best of the Buyside for two years in the technology sector. At Intro-act he is responsible for product vision, development and investor engagement.
Marketing and Communications
Marketing and Communications
Rafael Gonclaves 00:48
Hello, everybody, very happy to be here with Peter Wright, co founder of Intro-Act. My name is Rafael Gonclaves. And I’m the Communications Coordinator for KoreConX. And welcome to the KoreTalkX. If you’re on LinkedIn on YouTube and Facebook, very happy to have you here, good morning, good evening, or good afternoon, depending on where you’re at. Because we are here talking to the whole community. Peter, welcome. Very happy, very excited to have this great KorePartner here on the show. So tell us a little bit more about you. And I would love to hear more about your company. Wonderful, because yours.
Peter Wright 01:27
Thank you very much for having me and happy to be part of your amazing network. I’ve been amazed at what you and Oscar and the team at KoreConX have done for entrepreneurial people and companies that want to be part of the bigger broader capital markets. My background, I’m actually maybe one of the most memorable things is I was born and raised in Alaska. I always had a passion for the investment research industry. My passion is really finding the undiscovered, so finding undiscovered stocks, finding less discovered wines, you know, my passion is finding things that that, you know, are not necessarily known by all. Background really is in research. I was a cell site analyst for a number of years at CIBC World Markets, by site analyst at Fidelity, covering semiconductor stocks during that tenure, Director of research at a shop called tradition that we started up a research group and then I ran Boston, institutional sales for Cantor Fitzgerald. So I’d seen research from a sell side by side, you know, managing the product and selling the product perspective. But four years ago, started the company Intro Act, which is really about making actionable introductions. It’s a capital introduction company. And the passion that I have an undiscovered really is kind of the core of what we do. And we focus on helping companies in the inefficient part of the capital markets. Find investors.
Rafael Gonclaves 03:13
Wow, that’s, that’s amazing. I almost regret now because we’re talking about AI investments. I almost regret that you should be talking about wine, right? You said your your loved wine. I almost regret it by now. But But okay, well, let’s let’s take it to the plant. We have lots of entrepreneurs that listen to us that rely on us. So we can schedule another session to talk about your your wining discoveries.
Peter Wright 03:38
Count me in, count me in I love it.
Rafael Gonclaves 03:40
I love it. Yeah, I have a feeling that this is going to be this would be our our best show ever. But, but I have to ask the company’s called Intro-Act, the act in the name, is it based on the Jobs Act?
Peter Wright 04:00
Right? So it’s the idea is actionable introductions, is the intro act. So if you reverse it actual introductions, and you run up, and so that’s a that’s a really good way to think of it. So we have a process for making capital introduction that is a little different than the traditional way for a couple of 100 years. If you think of what a broker-dealer does, it’s really connecting issuers and entrepreneurs with capital. And they’re the middlemen doing that. The way that they they do it is largely kind of a Rolodex approach. They are big companies with lots of people, each of those professionals having a Rolodex of relationships that they market you know, deal flow to and ideas. Ai. Artificial Intelligence enables you to approach connecting these two worlds, issuers and investors in a different way a more data-driven approach. So when connecting the inefficient part of the market, the economics just don’t really support a Rolodex-driven approach often of setting up meetings. So a lot of the companies that might be on, on, you know, your, your platform, Reg A, they’re smaller companies, and it’s sometimes hard to get the attention of bigger institutional investors. So what you want to do is study their behavior. And the way you could do that very efficiently is through AI. If you think of the stack in AI, really, there’s aggregating data, and in our case, we look at about 800 different factors that fall into five categories. So fundamental data, you know, how is your sales growing? What is your margin profile? What is your capital requirements to grow your business, that’s fundamental factors.
The second type of data that we use in our system is valuation data, which is usually using a fundamental factor against the price of your underlying security, whether it be a market cap or, or an enterprise value, you know, to relative to, you know, a fundamental factor. The third type of data that we look at is sentiment data. And this is very important, this is what kind of the experts out there are expecting from you. So earnings estimates, target prices, readings, Headlines, news flow, on your name, all of this stuff goes into kind of the sentiment of how people are feeling about your stock. The fourth bucket is technical factors, which are really price and volume. If you think of your price and how much volume is behind it, it’s the manipulation of that into many different, you know, things such as moving averages, or relative strength, or whatever. And then the fifth and final one is macro factors. So GDP, inflation, jobs, data, all of that. But those are the five types of data that typically get consumed by an investor, institutional investor, when making a decision to buy or sell stock. So that’s the data that we put in about 800 of those factors go into our model and have been tested, we create super factors, with just combinations of these factors, there’s about 60 of those, to give you an idea of these factors. And what we do is train on pattern recognition. So we train on 13 F data, the 7000 or so institutional investors, and we say, what is their behavior? What are they doing? What are they buying? What are they selling, and against these 800 factors, our system learns what they liked most to buy, and what they like most to sell. And so that’s the first step in a three step process of capital introduction is finding the right type of investor that you should be selling your story to just like you sell any product, the first one is getting your target. Right? So we use a data driven approach, AI approach to doing that. So that derives our target list,
Rafael Gonclaves 07:48
Wow, yeah, you’re the you probably have a huge Alexa behind it. Right?
Peter Wright 07:54
Well, that’s the thing. So when people say, you know, a database, is a database of investors worth that much? Not really, you know, because you don’t have relationships to it, you don’t really have the intelligence behind it. So if you look at a database of 160,000 investors or so institutional investors, which is, I think about what our database has, it’s really not that valuable. What do you do with that, as an individual company, you can’t it’s too much. It’s big data. It’s an intelligence. So you have to you have to funnel it down through some form of intelligence to figure out who within that 160,000 is the right ones for you. Wow, we do. The second step we do is research which is by my passion, my love. And so research is really all about building awareness. So once you’ve got that distribution list, what you want to do is put forms of content video like this, or written research in front of investors, to make them aware of why you’re a special story and why the world needs your company. And, and you’re entrepreneurship. And from there, we put it over a platform, there’s lots of platforms you can use, we happen to use SendGrid. But it enables us to track opens and clicks. So in intro act, we make no cold calls. So that’s the funny thing is we have a data driven approach. We don’t use a Rolodex, yet we make no cold calls. And how do we do that? Simple. In today’s world, as everybody who’s selling any product, you can see kind of the viewership data, if you will, in our case of who’s opening who’s clicking who’s downloading the reports. So we might send a report on a company to 5000 investors. But if only 150 or 200 of those investors, you know, click on on those reports routinely month after month after month. We have our target list. We don’t care about the other, you know, 4100 that didn’t. We’ll try and get them in a more efficient way over time. But what we really want to do is cultivate relationships with that that list so it’s it’s a funnel process, and then we set meetings for the companies with the issuers we work for with these investors that are consuming this content.
Rafael Gonclaves 10:00
Wow, wow. Yeah, really? That’s a really, that’s really intelligent approach actually, right? Because if you have like big data like just that 160,000 investors, you’re not going to call everyone. It’s unreal, right? You can’t you can’t do that you cannot, you cannot have enough manpower to do that. But at narrowing down really impacts the process of investor acquisition, right, you really change the approach you have on investors really change the approach you have towards the companies raising capital. Right? And how is it? How is it coming for the investor acquisition business?
Peter Wright 10:47
So again, how, what is it for the industry?
Rafael Gonclaves 10:50
How do you feel it towards the investor acquisition business? Do you believe that this technology is the future? How do you feel about it?
Peter Wright 11:03
I think it’s really changing. So the rules are changing around privacy rules in the retail world. You know, the, there’s there is a concentration of wealth at all levels, you know, at the micro level, and at the macro level. So everybody thinks about concentration of wealth in the form of, you know, the top 10% of civilization is getting more and more and more wealth, same is true in a lot of things right now, I sometimes I thought we were living in the second Gilded Age, in where monopolies rule, monopolies are able to concentrate more and more wealth, in the institutional investment world. It’s very true, you know, that more wealth is is concentrated among the big guys among passive ETFs. But what that means is, it’s just more important than ever, for smaller companies and entrepreneurs, to be able to smartly attract the smaller investors, the RIAs and family offices that are willing and able to invest in their type of story. And so capital introduction is absolutely alive. And well. It’s, it’s, it’s just we’re big believers that the world is moving to ways where that process has to be much more efficiently driven through technology through AI, is there’s fewer middlemen that are able to really monetize that that type of capital introduction for smaller players.
Rafael Gonclaves 12:26
Yeah, yeah. Smaller players, generally. They can. They can rely on that right home technology technologies, is the small companies best friend they believe, right? Because, I mean, you can sell, you can find customers on Instagram, you can find for customers on Facebook ads, you can target ads. And targeting is really, it’s really all about it right now. Right? So, you you guys act among four industries, right? You have cannabis, you have mobility. Which of this markets, do you find more challenging? I think I suppose I may be wrong, that mobility due to its nature, is really challenging, because it’s we’re talking about the early stages of of clean mobility. But cannabis also has regulatory issues. So. So tell us a little bit more about the challenges you face? In the industry as you act?
Peter Wright 13:30
I love it. That is that’s one of my favorite topics. So how do we go about selecting the industries that we want to focus on? What we focus on is progressive industries. So I’ll give you a statistic that’s kind of mind-blowing. If you think of the efficient market as the Russell 3000, and the inefficient market as maybe the 5000 publicly traded companies below that. And you were to create an index out of those two groups of companies over time since the beginning of 2000, January 1 of 2000. So 20, 21 years of data, 22 years of data, the efficient market actually outperforms the inefficient market on an index basis in the long run. However, this is a really interesting stat in every single quarter with the exception of two, if you create an index of the top 25 names in the inefficient versus the efficient market, you outperform almost every time reshuffling into the inefficient market. Which basically can take a step back says if you’re a good stock picker, you can make a lot more money playing the inefficient market than the efficient market a lot more so the Delta is about 8x. It’s an enormous delta between the two situations. So you know what it makes me realize is that what you really want to do is find diamonds in the rough, so how do you find diamonds in the rough? Our system appears maybe qualitative at a high level, it’s very quantitative. What we cover is what we call progressive industries. Progressive industries are defined as the industry within a sector that is attracting the most new capital. So within consumer staples as the sector cannabis happened in in 2020, and 2021, to be attracting the most new capital coming from, it’s a formula that we have looking at number of companies and dollars value. So it’s a weighted basis that we look at it but cannabis happened to be defined as you know, the industry that had the most new names and the most new capital on a combined basis coming in private and public markets. We’re looking at Progressive industries cycle. So within consumer discretionary, as you mentioned, this mobility within financials, it’s crypto within industrials, its space tech, we’re launching on next month, very excited about that sector. That will be coming out on. And so within every sector, we look at this progressive industry, and it’s really defined just very simply as where the most new capital is coming coming to work. And the reason we do this Rafael is that we really are believers in efficient market. So we think that getting an information advantage on the Intel’s and exons of the world is very difficult, because so many people cover it. And it’s it’s efficiently priced in the market. That is not the case for these these emerging industries. So we focus on these emerging industries where there really is an opportunity to create disproportionate value for investors by finding these diamonds in the rough where new capital concentration exists.
Rafael Gonclaves 16:43
Wow, that’s amazing. That’s amazing. Talking about underdogs. Yeah. And cannabis has been facing a lot of regulatory issues. We know that because some places in something a lot of places, it’s to legal, both for recreational use or for medical use, the med tech industry is starting to open this debate. And cannabis has been both in the USA and Canada. It’s the scene is changing quickly. But throughout the world, it’s it isn’t. And I believe, I believe it’s it shouldn’t be data-driven, right? Because you’re not going to convince someone know, invest in cannabis. But it’s illegal in a lot of places. No, but invest in cannabis built trust me. You’re not trusting you. You’re the person the investors trusting data, right?
Peter Wright 17:40
That’s it. I mean, cannabis is a really good industry to analyze. And the thing I would say is, if you were in the industry as an operator, there’s challenges in every industry, for sure regulatory competition, changing regulations, there’s lots of things to eat, which is a tax tax situation taxed at gross margins at operating margin line, lots of challenges in cannabis. However, if you were an operator, what you would realize is you’re in an absolute growth industry happens to be a lot of private players are doing quite well some of the bigger public companies aren’t doing quite as well because they’re investing for the future. So their economics are not quite generating the same cash flow, some of these private companies are the US versus Canadian situation very different, you know, us happens to be making a lot more money. The economics are much better in the US than than Canada, for the industry, just the way it was set up and kind of the competitive landscape. Or again, the market has not rewarded cannabis for the fundamental growth and the fundamental cash generation that’s already occurring in the industry as a whole. And the biggest reason for that goes to one of the fundamental reasons we started this company. So Intro-Act’s technology side actually came from a couple of professors at BU, guy named Charles Tolec, who worked on the Human Genome Project, a very, very smart data scientist. It’s sort of the bioinformatics division at at BU, and Mark Kahn, who’s the head of the statistics department there and these two professors started a hedge fund strategy, which was really under the belief it was a low-frequency trading that really was under the belief if you could understand how many buyers and how many sellers are given stock. That’s all you needed to know. You didn’t need to know anything about their fundamentals and valuation and sentiment, macro data, technical data. That’s the stuff we look at. At the end of the day, if you could figure out who who has more buyers on a weighted average basis not all buyers are the same and sellers are the same but on a weighted average basis. If you know if you look at a stock and you have 10 buyers and all buyers are equal sized you have five sellers is the stock going to go up down, stocks gonna go up. If you have 10, sellers and buyers, all investors equal size in this example is the stock going up or down, it’s going down. So you can predict with 100% certainty if you can figure out who’s buying and selling. And that’s kind of their, their strategy and some of the intelligence that’s performed quite well. That’s a technology that we leveraged, they kind of finding an ICERs we’re targeting. But the same thing is true for cannabis bringing this back to cannabis. Do I think cannabis is going to be a wonderful sector to invest in in the future? Absolutely. And the statistic I would look at for that hockey stick is when institutional investors can start to invest in the space. So right now, if you look at ownership of the cannabis industry, it’s about 10% institution, a lot of Canadian institutions or some hedge funds that are playing it and stuff like that, but most institutions aren’t investing in it, because they can’t get, you know, the custody player behind them to do it. Or they fear that, you know, it’s not federally legal yet. So they can be, you know, violating some crimes. So if you look at some of the regulations, I don’t think cannabis is going to be federally legalized in the US ever, you know, they’re building it on a state-by-state basis. Like other topics, you know, not to compare it to anything very controversial now, but like abortion, and like a lot of these things are going to be controlled at the state level, cannabis is going to be controlled at the state level as well. I’m pretty sure of that. But decriminalization passing things like the state act, passing things like the SAFE Act that make it easier for the capital markets and the banking industry to support this growth industry, and tax. It is healthy, it’s certainly going to happen, it’s just a matter of time when that happens. As soon as that happens, institutions are going to step into this industry, and there’s going to be a hockey stick, you’re going to be behind it. That you know, it’s just waiting for it. And sometimes you’re better off waiting, waiting for it to happen, and then participating in it, you know, and that’s the game that investors play. How much do you want to anticipate?
Rafael Gonclaves 22:05
Yeah, and actually, Joe Biden has already stood for decriminalization a couple of times, right. So in the USA, it’s more like a state policy. But I agree, I don’t think it’s going to be federally legal, ever. And especially considering the amount of money to the market, the potential money that this market can, can have and taxes that can be paid. Right? They are all players, and they’re all players in this game. What about mobility? I work for 10 years in the mobility business. And I know that mobility companies, car car makers, even even people in the oil business, especially if the we have we have a war going on right now. Right between Russia and Ukraine. The petroleum prices? They they are they’re extremely unpredictable. And mobility services have been growing a lot, right? Electric cars, batteries, even shared car services. How do you see the mobility market in the next couple of years?
Peter Wright 23:29
You know, so if you think of mobility, three big themes, and you touched on I think all of them so transportation is getting smarter. So it’s getting autonomous. Transportation is getting more efficient, that’s the share right? So if you think of how many cars are parked not being utilized, if you can utilize it more efficiency, and cleaner, so batteries and and more efficient in kind of from an energy equation perspective, so smarter, more efficient use and, and cleaner. So, you know, I think from an investment perspective, you know, batteries is really similar, and I think it’s the next semiconductors that are kind of starting now. So whether it be you know, solid state printing batteries I think there’s going to be some room there but I think batteries are very, very real on the EV situation and starting to take off and we know that that’s going to be the every everything is going battery at some point, you know, ice, internal combustion engine type cars are going to be collector’s items here pretty soon for race cars and stuff like that, possibly, but not Not, not anything, not anything on the streets for a while, in 10 years from now. I think that that’s an industry where scale matters. So I would say if you look at the auto industry today, do what I discount, you know, the GMs and Fords and Toyotas and Volkswagens getting into the EV business definitely not they can be big players like that. Slump and take their fair share market share. The problem with the investment landscape is if you look at how those big companies that I just mentioned, are valued their asset value, their number of factories that they have that built these, these ice cars, internal combustion engine cars are becoming worthless. So they’re gonna have to go through this cycle and conversion of kind of reinventing their book value, if you will. So their book value is going to be replaced with a lot of investment. So companies like Tesla have an enormous advantage over these bigger guys, just from a cost of capital perspective, because their Giga factories are going to continue to be Giga factories, they don’t have to reinvent themselves while these other guys really have to write off their book over a period of time. But I think that I think there’s lots of opportunities. There’s lots of, you know, companies that are in your network, the KoreConX network that are solving for pieces of this. And I think one of the things that I look forward to find diamonds in the rough is starting with what is your ecosystem? So any one entrepreneur is only one entrepreneur, when you have something like mobility, which is an enormous opportunity? How are you going to be addressing that enormous opportunity? You can’t do it alone? Yeah, so one of the best questions ask is, what is your ecosystem? You know, who are the other big guys that you’re going to be riding on the coattails of to make yourself bigger?
Rafael Gonclaves 26:22
Yeah, I worked. I worked almost 10 years for Volkswagen in Brazil. And we had an estimate, at least in Brazil and or in other countries, but for every every job inside Volkswagen, it would generate seven jobs in the industry around it. Suppliers, parts, resellers and transportation. That’s that’s a huge ecosystem, right? If you if you multiply by seven, the number of the number of jobs created that directly ecosystem, right.
Peter Wright 26:56
That’s a powerful stat. I like that. Yeah.
Rafael Gonclaves 26:58
Yeah, at least in Brazil, I don’t know exactly in other places. But for every job inside the factory, we had seven around it, either in banking, because I worked for the Financial Services Division, either in banking, or parts, or transportation, or bank or anything else. We had seven jobs. So that’s, that’s exactly what I’m talking about at ecosystem. And mobility, mobility is getting really smarter. I mean, I know a lot of people that sold their cars to use apps, you know, to move through applications and higher rent cars, or, I mean, it is smart, smarter is cheaper. It’s eco-friendly. And I really believe that in investments, rely on that, right. Because if you have an efficient company and eco friendly company, a profitable company, wow. Who doesn’t want to go there?
Peter Wright 28:03
Right. Yeah, that’s amazing.
Rafael Gonclaves 28:06
Yeah, we all want to be part of it. You also interact also works on cloud based solutions, right?
Peter WRight 28:16
Cloud based solutions for human ourselves. We’re a cloud based company. Yes.
Rafael Gonclaves 28:21
Yeah. Okay. All right. All right. So yeah, cloud, the cloud. The cloud is there, right? Because AI is all about is all about clouding for me having information on the cloud. Right? That’s, that’s good. That’s good. So let’s, let’s, we’re reaching half an hour. So we don’t want to bore people that are watching us live on LinkedIn, or YouTube or Facebook. I just have one more question. Do you believe that this artificial intelligence intelligence system for capital raising, it reduces risks? Of course, is it just sad? But do you believe that it also helps the compliance environment? Because you have to be compliant full time otherwise, AI will automatically get you out of it? Right.
Peter Wright 29:09
Definitely. No, and I think that I think that it’s actually a very interesting point and AI could could really. Compliance is something that is a specialist, you know, it’s it’s a back office office, typically a lawyer, a smart person, trying to keep everybody compliant and on the right side of the law, and the regulations. And what AI does when you do it is it brings it down to the user level. So it’s replicating human behavior so that we actually the way that I think about if you step to take a step back is you know, if you think of technology, there’s hardware, there’s software, and there’s their service, I guess, is kind of the three sectors of technology and hardware is really robotics and all the things that a human senses do so they can see they can Hear, they can smell, they can touch, they can manually move stuff, all of that is robotically being replaced. Software is really replacing the brain. And it’s predicting it’s analyzing, it’s optimizing an AI is really kind of an extension and kind of next generation of where software can go. And it’s a, it’s a segment of kind of that software industry of making things smarter using data, analyzing data and making things predictive. And, and, and optimized. So it compliance, for example, you know, one of the things that I see a big benefit of using AI, is you don’t need to rely on somebody in the back office to be keeping you completely clean, they might be setting the rules, they might still be very much required. But that one person in the back office running compliance can’t be watching every single sales guy in every single person, you know, out in the field, AI can can deliver applications to the endpoints and, and optimize you know, and and predict when you might be running into a compliance or risk of any sort. So AI is just more ubiquitous, you know, in enabling intelligence to be with each individual person, you’ve got a certain skill set, I’ve got a certain skill set. If we rely on a piece of software that brings some intelligence and predictive and optimization capability to us, all of us can be more efficient. And that’s really the way that I see AI. So compliance is just one example of what AI can bring down.
Rafael Gonclaves 31:35
Yeah, yes, yes, especially, especially at KoreConX compliance is a very, very important subject, because we enable companies to raise capital from non-accredited investors. So of course, people have to believe to trust what we’re doing. People have to trust the companies, the companies have just trust people. And compliances is obviously a big deal. It’s part of our daily routine, right. And also, AI can also help us a lot, achieve goals. Always compliantly of course, because that’s the only way to do business. And AI is a big is our is the biggest tool we have now, I believe, right? AI is really changing the way everyone’s business and how we operate and how we do things and how we get things done. Everybody, everybody’s got an Alexa behind right or a Siri or a virtual assistant to help to help play songs or to help remember the tasks or keep the track of their schedule. I set my my my Alexa here to remind me of some of some deadlines I had for my PhD thesis and it helped me a lot so we can always use technology for better right.
Peter Wright 32:56
I love it. I love it. You’re right.
Rafael Gonclaves 32:58
Yes. So the was great. It was great meeting you. It was a great chat. I hope our listeners enjoy it. Enjoy it. So do you have any any thoughts you any message you’d like to convey to finish? If you’d like to invite people to follow your company, please? The stage is yours?
Peter Wright 33:16
Absolutely. Well, I’m appreciative of being part of your network. It’s a very powerful network, I think it’s more powerful than just raising the capital. I think you’re empowering a lot of entrepreneurs to follow their dreams and make the world a better place. And it sounds maybe corny, but I’m a big believer that what you’re doing is much more powerful than then what a lot of the bigger companies are, are doing, you know, and more ideas for more people is better, and just happy to be part of your ecosystem. So if I could ever be helpful to any of your clients looking to kind of expand their ownership base their capital structure cap table into kind of an institutional type situation would love to be helpful to
Rafael Gonclaves 33:58
All that’s great. I’m sure our listeners people that get our newsletter, people that follow us on LinkedIn. They they definitely love this chat. It was great meeting you, Peter, thank you very much. And 2021 who’s listening to us to everybody out there. Don’t forget to follow us on LinkedIn, YouTube, Facebook, we are also on Spotify. You can look up KoreTalkX, and you can follow us. This is the 11th episode. We already have a small library that we’re building up, right, we keep building within and up. And it’s getting richer and richer. And it was a great moment being here with you, Peter. I learned a lot. I learned a lot every day at his job. It’s it’s been an adventure and thanks again. Thanks a lot for being with us today.
Peter Wright 34:44
Thank you so much.
Rafael Gonclaves 34:46
Thank you see you soon. Take care