KaChing offers new take on social investing

December 16, 2008 | Eric Eldon | Comments | |

Does a 20-something without actual money in the stock market know more about picking stocks than an experienced money manager? Maybe sometimes, given all the bad investments made in mortgage companies and related securities in recent years. KaChing, a stock-picking site launching today, aims to find the best investors — regardless of how much money or experience they have — and help them make more money.

Competing services include Cake Financial, Zecco, Wikinvest, Covestor, PersonalRIA and many others. KaChing differentiates itself through its investor-analysis software and its use of social networks to bring in thousands of users.

The Securities and Exchange Commission has also designated kaChing a registered investment advisor. Next year, the Redwood City, Calif. company will begin letting users link their brokerage accounts to top investors on the site, so they can make actual stock trades that emulate the stars.

To get started, you join the site, add your portfolio of stocks — a fantasy portfolio, for now — then provide details about your overall investment strategy and rationale for picking particular companies. KaChing compares this information to stocks’ actual performance in the market. Then kaChing uses behavior-based software to figure out which investors are performing best, based on a set of criteria it has developed. The “Skill Score” measures whether an investor’s superior returns are due to skill — based on their stated investment strategy — or luck. The “Research Rating” measures how other users react to an investor’s rationale for picking stocks, through features like comments.

The company has already gained more than 350,000 users, largely from its Facebook application. As other app developers have already done, kaChing has turned its Facebook users into users on the site it’s launching today.

When the stock-trading service launches next year, top investors will be able to make money from the site. KaChing will charge a one percent convenience fee for stock trades conducted through the service and split the revenue with the investors who others emulate.

The company has gotten funding from some big names in Silicon Valley investing, including Andy Rachleff and Bruce Dunlevie of Benchmark Capital, entrepreneur Marc Andreessen, Kleiner Perkins affiliated partners Kevin Compton and Doug Mackenzie, former Opsware chief executive Ben Horowitz, Open Table president Jeff Jordan and Ronnie Lott and Harris Barton of HRJ Capital.

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About the Author, Eric Eldon

Eric currently covers digital media technology and business news, especially what's happening on social networks and their platforms. He also writes and edits stories about venture capital, and lots of other stuff, too. He started at VentureBeat in the spring of 2007, half a year or so after Matt Marshall left his reporting job at the San Jose Mercury News to found the site. Eric previously cofounded a startup called Writewith, that was building editorial software for newspapers and other groups of writers. The startup didn't work out, but he learned a lot.

  • Brad Franchis
    The "S.E.C.-approved" headline here is totally misleading and dangerous (Eric, what's up?). I can't understand how kaChing and CoVestor can dupe both reporters and investors, at least any who have heard of the term due diligence.

    The fact is that no legitimate broker dealer in the world will risk its license or the inevitable litigation which will arise from unhappy investors just so kaChing or CoVestor can pay Joe-The-Plumber types a few bucks for a hot hand (no matter what they call the payment). Nor will you find a clearing firm to clear the transactions. It is simply in violation of the 1940 Investment Advisors Act.

    Let's see if anyone at kaChing will actually tell us what formal assurance they have received from either the SEC or FINRA.

    Go to http://www.adviserinfo.sec.gov/IAPD/Content/Sea... and type in "kaching" and click the resulting name link. Then look at Schedules A and B. You will see that Andy Rachleff invested in and became CEO of kaChing more than two years ago. The only news this year is the merger with FSX (Dan Carroll) in January and some angel money from Rachleff's friends in June (I doubt any of them know how to spell FINRA). So this is just a fluff announcement to appear to have something fresh. It will only mislead the truly uninformed.