Arjun Sethi’s Company-Picking Strategies are Gaining Traction Among Investors
Arjun Sethi articulates his thoughts with a level of self-assuredness that hints at a deeper knowledge. In a recent Zoom conversation, he boldly pronounces that he expects to control half of the global private data space in the next five years, making it virtually impossible for others to rival him. The certainty with which he speaks echoes the gravitas of Warren Buffett discussing the stock market.
Sethi, who is one of the co-founders at the venture firm Tribe Capital, refers to Termina, an AI software tool based on a subscription model developed for quantitative due diligence. Tribe Capital recently introduced this platform, and Sethi is optimistic that it can optimize outcomes for an increasing number of investors who sign up. However, this proposition raises certain concerns. For instance, if Termina is as promising as Sethi claims, why would Tribe Capital empower rival investment firms with such an advanced tool? Moreover, why should investors place their trust in Termina, considering it uses customer data to keep enhancing its performance?
Founded a mere six months ago, Termina had a soft launch last month, offering two products. The first is a dashboard designed to enable investors to instantly evaluate the health of a company by comparing it with others in Termina’s original proprietary dataset and the customer’s personal data. The second tool helps investors consider external variables that could affect their investments, such as anticipated market shifts. Sethi likens Termina’s functionality to having a thousand associates at one’s disposal.
Although Sethi chose not to reveal the names of the early adopters of Termina, he did mention that they include pension funds, sovereign funds, and private equity funds. He broadly refers to this group as a significant segment of capital deployment entities who prefer maintaining a low profile.
Discussing his ambitions for the business, Sethi points out that the biggest starting advantage for Termina is the transactional data from approximately 1,500 companies. This significant amount of data has been fed into multiple third-party large language models. He refrained from naming these LLMs. In addition to this, Termina has developed its own LLM, which is aimed at boosting the benchmarking capabilities of investors.
Termina’s clients supply their raw data in order to utilise the tool. As Sethi explains, this might be for merger and acquisition purposes. In such a scenario, a private equity company would input their own data, and this is also true for other venture capital firms. The software then generates comparison datasets of existing companies from across all sectors and stages. Referring to Termina, Sethi makes the claim that it is the genuine Bloomberg of private markets.
There may be scepticism about the idea of Termina managing such a large amount of sensitive data. Given that every firm’s most prized asset is its data, this scepticism could be intensified due to Termina’s connection with Tribe Capital.
However, Sethi refutes such concerns. He highlights that Tribe invests in companies from seed to Series C-stage and seeks venture-like returns. On the other hand, Termini is making it possible for anyone in any asset class to consider investing into software companies, regardless of their stage. Therefore, the two have very distinct strategies.
Sethi, previously the founder of MessageMe which sold to Yahoo and later an associate with Chamath Palihapitiya at Social Capital, expresses confidence in his stature to execute his current operations. He attributes the success of convincing investors to participate in Termina to the long-term establishment of trust.
Whilst Termina’s intimate relations with Tribe could be seen as advantageous or disadvantageous, it surely presents a unique dynamic. Tribe, an investor in Termina, benefits from a team well-rehearsed in collaboration. For instance, Sethi, who resigned as CEO of Tribe last December to also concentrate on Termina, now serves as Tribe’s chairman and chief investment officer. The seven-person startup Termina is also home to several individuals who divide their time between the two firms.
One of the individuals in this mix is Alex Chee, a cofounder of MessageMe alongside Sethi, a fellow worker at Social Capital, and a subsequent co-founder of both Tribe and Termina. Chee is in charge of Termina’s day-to-day functions and maintains his position as Tribe’s Chief Product Officer. Jake Ellowitz, another co-founder at Termina and briefly an employee at Social Capital, serves as Tribe’s CTO.
On the other hand, Tribe is relatively new and has yet to establish itself. Despite its age of just six years, the 30-employee firm boasts an impressive $1.6 billion in assets under management. While they have seen some successful investments in crypto tokens, their other investments are yet to exit, and the future of those bets is uncertain, showcasing the boundaries of quantitative analysis. For instance, Carta, the company managing cap tables, has taken heat for possibly dubious strategies, and Bolt, the company that once buzzed about one-click checkout, now is not.
Also important to mention is that Termina’s clients are not signing contracts to share their data exclusively with the company. If a competitor’s system is superior, Termina could be at risk.
Regardless, Sethi disregards any talk of obstacles. “Our existence and the reason why clients choose to work with us derive from us having the highest quality data globally, and the best product on the market. We don’t have any unique patents. Our work is entirely based on trade secrets. Our tool doesn’t outperform others by tenfold; rather, it’s about a thousand times more efficient than people’s existing practices.”
As for what that means for Tribe, he apparently has bigger ambitions now. “My whole goal is that as one venture firm, I could only do so much. As a company, I can just do that much more.”
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