A Wizard Takes on the SEC Filings Market
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Back in early May when Vice President Al Gore tapped former California Congressman Tony Coelho to chair his 2000 presidential campaign, tongues wagged over Coelho's past, having resigned from Congress in 1989 rather than face an ethics probe over his financial dealings. Washington insiders predicted that Coelho's business dealings would become a campaign issue for Gore, but early speculation quickly abated as reporters failed to get a grasp on just what Coelho's interests were.
Things might have been different had the Washington press corps used 10K Wizard, a new online SEC filings service that launched about the same time.
Unlike other online SEC filings services such as FreeEDGAR or EDGAR Online which require laborious searching through document after document, 10K Wizard allows its users to conduct a key-word, full-text search across every SEC document ever filed online. Someone interested in wine could find every filing which mentions the word, likewise coal, cookies colas or Coelho.
10K Wizard is the only online site offering key work searches across all SEC documents. And while EDGAR Online's premium site has a limited search capability for people's names, it turned up nothing when we asked it to find Tony or Anthony Coelho.
We also found out he had been sued as a director of International Thoroughbred Breeders and forced off the board in 1998 as part of the legal settlement. And in 1997 he had a $1 million loan from Crop Grower's Insurance written off when that company was acquired by Fireman's Fund. There's no telling what's in the other 320 filings we didn't check out.
But 10K Wizard's CEO Martin Zacarias wasn't looking to dish up dirt on Gore's campaign manager last year when he got the idea for the company. Instead, the Harvard MBA was frustrated with existing online services as he searched them for information that would find better opportunities for his investment advisory services clients. He teamed up with President Lee Kimbrell, a former game developer with the idea that financial data should be freely searchable.
They initially approached the venture capital community for funds to develop the technology, but soon decided that they could do it faster themselves and not have to give up equity at this early stage.
"Time definitely was an issue. We wanted to move to development as soon as possible. More importantly, we wanted to get to the proof-of-concept point before we looked at raising any capital, if at all," Zacarias said.
His action holds an important lesson for other entrepreneurs.
"This strategy in the long run, we felt, would lower our overall cost of equity; i.e., raise more funds for less give up," he said. "So far this strategy has worked out well: we have a solid product that will only be better in the coming months; we are comfortably capitalized, giving us the opportunity to focus on the business as opposed to money raising; and, more importantly, VCs are calling us now."
Along with systems designer Doug Barnes, they decided to throw out all the off-the-shelf software and build their own proprietary full-text, cross-indexing and search system that automatically updates the indexing as new filings arrive from the SEC.
The result is a fast, free service that instantly trumped EDGAR Online and FreeEDGAR when it launched in May using about $600,000 it raised from friends and business associates. The proprietary system is surprisingly fast, taking less time to finish than the download time for an average 10-Q quarterly report.
Zacarias said while the full-text searching clearly puts them ahead of the competition, he intends to maintain that lead with technology and new offerings.
"We're looking at a number of new services, including cross-indexing news feeds and detailed analyses of IPOs." In addition, he's looking for other " ponderous data repositories" that can use their technology.
"We're looking at legal databases and anything else where our technology can enable easy access to vast amounts of text data."
10K Wizard already offers a lot of extras including e-mail alerts of company filings, the ability to download data formatted for Excel or Word, summaries of institutional fund holdings, insider trading and other things that is either not offered by FreeEDGAR or for which EDGAR Online charges extra. 10K Wizard also offers a nifty time saver: the ability to have a section or even an entire filing e-mailed automatically. In addition, the 10K Wizard filings are indexed in much more detail than those on other services, making it faster and easier to find and go to specific sections, such as balance sheets, operating statements and the like. This and other advanced features are available only to registered users, but the registration is free.
Price is a hot button for Zacarias who emphasized that he is committed to keeping 10K Wizard free even as they add new features and data. Advertising and licensing their technology to other sites will, he believes, provide a sufficient path to profitability - something he expects within a year without having to raise more money. By contrast, EDGAR Online, which went public in May, has cumulative losses in excess of $5 million.
And while an IPO is not yet something he thinks about a lot, Zacarias says that an offering might be possible once they nail down two or three clients for the search technology and a daily page-view level in the two to three million range.
EDGAR Online and FreeEDGAR have pretty much had this playing field all to themselves and it's clear that they will have now to scramble to play catch-up if they want to remain in the game.
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