Black Swan is using huge datasets to divine future behaviour

The founders of Black Swan went from scribbling down ideas on a beer mat to being able to predict where the next flu outbreak will hit

Black Swan is using huge datasets to divine future behaviour

Up until recently fortune-telling was a realm predominantly populated by self-proclaimed psychics. You certainly wouldn’t expect to see tech entrepreneurs peddling premonitions. But predictions are exactly what the founders of Black Swan, the data-mining startup, make their living on. And unlike those of tabloid astrologists and the mystics frequenting circus tents, Steve King’s and Hugo Amos’s predictions are usually bang on the money.

It all started in early 2011 when the co-founders were drowning their sorrows with a pint. “All great ideas are born out of frustration,” says Amos, the startup’s chief strategy officer. A mind-bogglingly slow project was provoking their exasperation as they’d spent innumerable hours trying to connect different data sets with each other in order to come up with better PR. Washing down their vexations with golden amber, they played with ideas of how they could create a solution to their problem. As the conversation went on they realised that not only would connecting internal and online data provide a lot of valuable insight, it would also enable companies to more accurately predict when and how to push their products. This idea – hastily jotted down on a coaster that’s now framed in the company’s headquarters – would soon change their lives. “Writing on that beer mat was the starting point for Black Swan,” says Amos. “Usually you won’t do anything about ideas like that but this one stuck, making us think we might be on to something.” That would prove to be the first of many accurate predictions.

Recognising the vision’s potential, the founders launched Black Swan and devoted the better part of a year to building the first prototype of Nest, its software platform. “It was ugly but functional,” says Amos. It essentially empowered clients by connecting their internal information with the accumulated knowledge of the world wide web. “We figured that you would see some interesting patterns if you linked those two data sets,” says Amos. This data would enable companies to predict consumer behaviour and better plan everything from ad campaigns to solving supply chain issues.

But it doesn’t matter how ingenious an idea is if people are unwilling to pay for it. Fortunately the founders had a few tricks up their sleeves when it came to attracting customers. “One of the key drivers to our success is the network that we’ve acquired after years working in the advertising industry,” says Amos. Utilising their relationships they were brought on as an R&D project by Disney. Bagging the cinematic powerhouse as a customer is a coup for any startup and for Black Swan it would provide the foundation upon which the founders would organically grow their clientele in the years to come. “Any new business was either from word of mouth or referrals,” says Amos. “We didn’t actually do any marketing or sales activity until this year.”

Given how vital the relationship would become, it may be surprising to hear that Black Swan’s first project with Disney didn’t go exactly to plan. “There is a saying that rain drives people to the cinema,” says King, CEO of Black Swan. “We were so convinced that we could prove it that we told Disney that we’d do it for free if we were wrong.” Disney agreed and the two founders set out to verify their theory. But they hit a tiny snag: the result proved that wet weather actually has no effect on whether people go to watch films. “But we did actually find out that low pressure drives people to movie theatres,” says King. “Fortunately, Disney kindly paid us anyway.”

And Black Swan desperately needed that cash. While the sale of King’s digital agency Digital Jigsaw and a £2.5m investment from equity firm Blackstone had seen the company through its initial development, the startup was quickly running out of money. “We only survived on early payments from clients,” says King. However, living on the financial edge was actually a huge benefit. “It made us much more problem-orientated,” says King. “We had to solve specific problems accurately, otherwise we wouldn’t get projects and then we wouldn’t survive.” The financial situation improved even more in 2013 when the company raised its series A, spearheaded by Japanese investor Mitsui. The influx of capital was invested in the improvement of Nest and helped solve Black Swan’s cashflow issues.

Armed with healthier finances, the startup received another boost when the Sunday Times awarded it the top spots on two of its lists. First Black Swan was named number one in the publication’s Tech Track Ones to Watch in 2014 and then the UK’s fastest growing startup in the Start-up Track 15 2015 list. “Both Hugo and I were over the moon,” says King. “It had a huge impact on our business and validated us in our customers’ eyes.”

In the years that followed, Black Swan offered a wide range of predictions to companies like Samsung, Debenhams, Vodafone and PepsiCo. “We did a job for Tesco,” says Amos. “For many years they’d failed to forecast when the first big barbecue weekend would happen.” By combining Tesco’s sales data with weather reports, trending Twitter topics and online chatter, Black Swan was able to say when people would fire up their grills and how many hamburgers people in different areas were likely to buy. Using similar methods, the company has been able to predict in which postcodes flu outbreaks will emerge and helped 7-Eleven in Japan boost profits by over 12%.

However, the company hasn’t just helped businesses grow but has also improved the world through its non-profit division White Swan. The story behind it started with Black Swan wanting to help King’s sick sister. “About eleven years ago, she began to become incredibly tired,” he says. Little by little and without the doctors being able to tell them why, his family watched her condition deteriorate to the point where she needed a wheelchair and help to go to the toilet. Desperate to find the cause, Black Swan’s team used its algorithms to scan the internet and even posted a video asking people to reply if they had suffered similar symptoms. “Rather than looking for problems the way doctors talked about them, we searched for human descriptions,” says King. “We then cross-referenced the keywords with the NHS’s list of diseases.”

This resulted in five potential diagnoses that King urged his sister’s doctor to test for. “He looked at me like I was mad,” he says. Fortunately, that didn’t deter the doctor from checking out the leads and a week later King’s sister was diagnosed with Parkinson’s dystonia and began her treatment. “I phoned home a few days later at lunch time and there my sister was, sounding absolutely normal,” he says. “She’d actually been cleaning the house all day.” Now she’s even training for a triathlon. Since then, White Swan has helped the NHS predict spikes in A&E visits and is currently on track to become an independent charity by the end of the summer.

And that isn’t the only thing on the cards for Black Swan. At the moment, the scaleup has offices in the UK, the US, Hungary and South Africa but is soon expecting to grow even further. “Now we’re at a point where we want to scale in a much bigger way,” says King. Having raised £6.2m in its series B last year, the founders have earmarked the money for the future growth of the company and the improvement of its Nest platform. For instance, while the founders’ networks helped the scaleup secure its first clients, it has now introduced commercial and marketing teams to drive the business’s sustainability. However, the founders aren’t stopping there. Not only are they already preparing for a potential series C round in 2018 but they also reveal their plans for an upcoming IPO. “We want to start our listing process and float on the Nasdaq in 2020,” says King.

Before those plans come to fruition, the immediate focus of the founding team is to expand Black Swan across the pond. “We see a lot of opportunities in the US,” says Amos. One of the reasons for the expansion is to get closer to clients like Unilever, Disney and PepsiCo. Another is the prospect of finding new ones. “The US is more ready for our services than the UK is,” says Amos. “Of course we’ll still be growing Europe but we’ll be focusing on the States.”

Given the successes of the past, we certainly see great things on the horizon for Black Swan. And we’re willing to bet that they’re seeing it too. 

Eric Johansson
Eric Johansson

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