Goldman Sachs invests $100m in predictive analytics firm APT

Investment banking giant Goldman Sachs has invested $100 million in Applied Predictive Technologies, a US-based company whose cloud software helps business test out their strategies by conducting experiments. 

APT counts US giants WalMart and McDonalds, and UK brands Boots and Shell, among its customers. According to founder Jim Manzi, its software helps companies tackle a problem that emerges as they become more sophisticated in their use of analytics. 

"There's an enormous amount of rhetoric about how businesses can use analytics to spot patterns in their data and identify business actions," he told Information Age this morning. 

"But our observation is that it is very difficult to separate causality from correlation," he said. In other words, conventional analytics cannot reveal how a business's actions impact outcomes. 

The solution, Manzi claims, is to run experiments. Boots, for example, uses APT's software to experiment with the arrangement of products in its stores. It tries various arrangement in different stores, and inputs the resulting data in the system. 

APT's cloud-based solution guides the user through a workflow that helps them accurately analyse that data. 

"The trick is disentangling signal from noise," says Manzi. "That turns out to be rather complicated. We invented the mathematics required to do it, and we built a workflow for companies to use."

The technology can be applied to anything from marketing strategies to training programmes, allowing businesses to test their impact empirically and therefore plan future investments.

Manzi said a number of clients used the software to test the efficacy of social discount services that exploded in popularity last year. "They found that, as least as they were currently designed, group discounting programmes weren't delivering value."

Predictive analytics, says Manzi, "helps you make decisions that might seem risky, but they aren't, because you've tested the outcome". 

Privately held, APT does not reveal its revenue figures, but Manzi says it has more than 100 "large" customers. Goldman Sach's $100 million investment gives is a minority stake in the company. 

The company will use the money to fund further international expansion, most immediately in Japan, and to invest in its cloud infrastructure, he says. 

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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