Are you investing in Aggregator Platforms?
Working with Aggregators – 3 Mistakes to Avoid
In last 6 months, we have done Tech DD for 2 VC funds that were investing into aggregators. Both aggregators belong to separate business domains but essentially they were solving the same demand-supply problem.
What are Aggregators?
Aggregators are Digital Solutions that gather content, information, services, products from various other Digital Platforms or Sources and supply to the consumers. They consolidated this collected data at a single place for viewing, consuming and buying for their consumers.
What are the different types of Aggregators?
- Service Aggregators
- Social Aggregators
- News Aggregators
- Content Aggregators
- API Aggregators
- Consumer Products / Shopping
How does it work?
Aggregators gather information from various other platforms so naturally, they are involved in Data Sharing and Opening endpoints to all other platforms involved.
Usually data is retrieved via APIs or file sharing mechanisms or directly accessing from databases. So, they are highly dependent on how these 3rd party platforms are behaving, how frequently they are upgrading themselves technologically and their policies of data sharing. This puts the Aggregators risking their own business model.
3 Mistakes to Avoid
Based on the Aggregator cases we have done so far for Tech DD, we want to share below top 3 mistakes to avoid.
1. Not checking the data sharing agreement: Funds should ask the entity for copy of formal agreement executed with 3rd party platforms and check data sharing and data ownership clauses in it.
2. Not verifying architecture in terms of Scalability: Funds must check if the system architecture allows easy upgrades without impacting routine business and accommodating the changes to APIs.
3. Not verifying Data Contracts: Funds must Data Contracts in terms of what is being fetched. If you are fetching PII data from 3rd parties then it’s a red flag.
Why should investment funds be worried?
Given the nature of this kind of solution, funds are directly subject to risks of,
- Exposure to non-compliance
- Exposure to security loopholes
- Leakage of Sensitive Information
- Threat to fund’s brand and reputation
- Loss of customer / user trust in brand
What precautions are you taking to safeguard your investments from technology risks involved with Aggregators?