#128 - Michael Babineau and Kevin Hale

**Craig Cannon** (0:00)
Hey, how's it going? This is Craig Cannon, and you're listening to Y Combinator's podcast. Today's episode is with Michael Babineau and Kevin Hale. Michael is co-founder and CEO of Second Measure. Second Measure analyzes billions of credit card transactions to answer real-time questions on consumer behavior. They were in the summer 2015 batch of YC, and you can check them out at secondmeasure.com. Kevin is a partner at YC. Before working at YC, he co-founded Wufoo. You can find Michael on Twitter at Mike Babineau, and Kevin is at I Like Vess.
All right, here we go.
Mike, Kevin was your group partner when you did YC in the summer 2015 batch. What idea did you apply with?

**Michael Babineau** (0:43)
So our basic idea at the time was really to use credit card data to help investors make better investment decisions.
And I think one thing that, and that is actually not really far from what we do today. The only, like the main evolution is that now we work with companies as well, not just investors. But I think a big part of the idea though, is not just to look at credit card data and try to find interesting things and then tell investors about it, but instead to build an analytics platform, throw that in front of investors and then let them answer their own questions.

**Craig Cannon** (1:15)
And what led you to coming up with that idea?

**Michael Babineau** (1:18)
Oh, that is a good question. So I did not, like I don't come from an investing background or I don't come from finance at all. I actually worked in video games in the same street with my co-founder, Lillian. So she and I met at Electronic Arts.
We worked together there and then at another gaming startup. Before that, I was in ad tech and like I've always been in, we're both software engineers. Like we've always been in the tech world, but we've got plenty of friends in finance and one of those friends just out of the blue called me one day and was like, Mike, I need your help. I've got two terabytes of data on a hard drive. How do I load this into Excel?
And that was like, it was one of those moments where, again, as a software engineer, right? Like, you know, I hear, I get this question like, oh God, you know, like why? Like why are you asking me this, right? So he's in New York, like I'm in the Bay Area. It's the middle of the afternoon.
Why, like why am I fielding this? And I like wasn't feeling particularly helpful.
I was like, what did your engineer, like what, you know, do you ask your dev team, do you ask your engineering team? And I just hear silence.
And then Mike, what are you talking about? We've got an IT guy and that's it. And that blew my mind because he was at a $30 billion hedge fund. And like, I just assume that all hedge funds, you know, look like Two Sigma or Ren Tech or, you know, these, these like, just these, these places that have hundreds of quants and hundreds of engineers, but in reality, most, most hedge funds have a handful of analysts and just some back office support, right? They don't have any coders in house. That I think that's when we realized there was this huge opportunity because investors are like, you know, investors, they, they make money off of, off of having an information edge, right? Off of knowing things that other people don't. And they're like, and a lot of people who work at hedge funds are very, very clever, right? They're, they're looking for this edge, like wherever they can find it. And over the, like over recent years, increasingly they've been looking at things like Google trends, right? To see like, oh, is there some leading indicator in search terms that would indicate some, you know, some like bigger shift in consumer sentiment about, I don't know, some company.

**Kevin Hale** (3:39)
Very unsophisticated sort of analysis.

**Michael Babineau** (3:42)
Yeah, yeah. But at the same time, like a clever idea and it, you know, oftentimes works, right? You've got investors like subscribing to things like Comscore, looking at how many, how many visits to a website are happening. And because that roughly is like roughly correlated with actual sales.
And it's also like this nice leading indicator in the sense that public companies only come out with, they only report metrics once a quarter. And it's like not right at the end of the quarter, it's actually sometime afterwards. So you can actually look at how many people visit, if you can see how many people visited amazon.com over the past quarter, then like you can look at the full quarter of information.