Increase Alpha, a financial technology startup, has announced the close of a $3.5 million seed funding round. The company is preparing to launch its equity predictive signal engine, a tool designed for hedge funds and other institutional investors.

The investment was led by Bartt Kellermann, the CEO of Battle of the Quants, an organization that connects quantitative investors with new data and technology. The funding will support the company’s market introduction and continued development.

A New Approach in a Crowded AI Market

The funding arrives as many financial institutions are exploring artificial intelligence to find new trading advantages. However, general-purpose models like Large Language Models (LLMs) have shown limitations in financial markets, often struggling with the complexities of market data and a lack of transparency. A widely cited MIT study noted that the financial services industry showed “little to no structural change” from these technologies.

Increase Alpha addresses this issue with a platform built specifically for financial analysis. Its Predictive Artificial Intelligence (PAI) does not use any LLM technologies. Instead, it relies on proprietary indicators shown to influence stock prices. Trained on public, compliant data, the model converts company disclosures and market information into clear, institutional-grade predictions. This focused method helps avoid common issues like hallucination, overfitting, and hindsight bias that affect other AI systems.

“In an industry where unique, uncorrelated, and consistent alpha has become increasingly rare, we’ve demonstrated that it’s not only possible, but scalable.”

Sid Ghatak, Founder and CEO of Increase Alpha

Fueling Market Entry and Client Onboarding

With the new capital, Increase Alpha is focused on its go-to-market strategy. The company is actively working with hedge fund managers, Chief Investment Officers, and data buyers to validate the product’s technical performance and business applications.

Pilots and trials are already underway with several large hedge funds, and the company is in the process of onboarding additional clients. The objective is to integrate its ready-to-use signals into existing investment strategies, offering predictive insights without requiring firms to perform internal data cleansing or signal processing.

From University Research to a Wall Street Solution

Increase Alpha started as a long-term research project at Villanova University, where founder Sid Ghatak was a professor. The project was based on a simple hypothesis: the right public data, when paired with a specialized prediction engine, could consistently forecast stock market movements. This work was developed over eight years of academic research and validated through four years of real-time trials.

The company reports its engine has produced 90% cumulative excess returns, or “alpha,” over the last three years, identifying equities with an average accuracy of 70%.

Ghatak brings a deep background in AI policy and financial technology. He serves as the Chief Technical Advisor at the National Artificial Intelligence Association and works with The White House and Congress on AI legislation. Previously, he was a Director at the U.S. General Services Administration, where he co-authored the federal AI Maturity Model to guide AI adoption in the public sector.

“We are at an inflection point in fintech where predictive AI will become fundamental to investment strategies. With years of academic research and real-world trials, Increase Alpha now delivers proven predictive capabilities that institutional investors can trust. Our goal isn’t to just create another model, but redefine how AI technology is applied in finance.”

Sid Ghatak, Founder and CEO of Increase Alpha

Investor Confidence in a Differentiated Technology

The lead investor noted that the company’s distinct approach was a primary reason for his support. By combining a purpose-built AI with a clear understanding of the hedge fund industry, Increase Alpha stands apart from more generalized AI applications.

“After seeing how Increase Alpha merged AI, data and hedge funds I decided to invest. This combination is so completely unique and effective that they have the potential to reimagine the entire hedge fund space.”

Bartt Kellermann, CEO of Battle of the Quants

Origianl Creator: Ekaterina Pisareva
Original Link: https://justainews.com/applications/predictive-analytics-and-data-science/this-ai-tool-avoids-llms-to-predict-stocks-and-just-raised-3-5m/
Originally Posted: Tue, 07 Oct 2025 20:51:41 +0000