Disruptive Technology

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Innotribe Names Startup Challenge Finalists

June 17, 2013 in Current Events, Disruptive Technology | Permalink

In a time of layoffs, belt tightening and the chanting of “do more with less” ringing through departments, there is nothing better than watching startups pitch for capital. They are dye-in-the-wool optimists who think they have the better mouse trap. That’s why I’m happy that I managed to attend the last 2013 regional startup challenge sponsored by Innotribe, SWIFT’s innovation initiative last Thursday.

This was the third and final regional challenges hosted by Innotribe this year. It held one in Singapore in April and another in London in May. In each competition, the audience, which is composed of venture capitalists and angel investors, select three startups and two innovative companies to send to Sibos, where they will compete for a $50,000 grand prize.

Second- and subsequent place winners can expect a warm handshake, according to Innotribe’s Nektarios Liolios, who emceed the New York event with colleague Matteo Rizzi.

With heightened airport security, I guess a set of steak knives really was out of the question.

To be honest, the face time that participants had with venture capital firms attending and judging at these events is more valuable than the actual cash prize.

This year P2P Cash and XYVerify repeated their 2012 victory as startup finalists. Realty Mogul joined them with its first time win. Each of the companies is under three-years old and has had less than $1 million in combined revenue or investments in the past 12 months.

P2P Cash offers clients a free cash transfers to mobile wallets from around the globe using existing industry standards and SWIFT’s infrastructure. The company plans to make its revenue by splitting the difference between the wholesale foreign exchange (FX) exchange rate and the retail exchange rate with participating banks.

XVVerify provides “geofencing” that determines whether a user can use applications and data by determining their location by cell towers triangulation. Early interest in technology is coming from the mobile gaming industry and, not surprisingly, the state of Nevada.

Realty Mogul seeks to place qualified investors into a private real estate investments. Launched two months ago, the company vets all potential properties and management teams and then creates a special-purpose vehicle like a limited-liability company (LLC), in which clients can invest as little as $5,000.

Quantum4d and Entrepreneurial Finance Lab (EFL) will also be going to Sibos for compete against other innovator finalists. Unlike the startup contestants, innovators are small companies that brings something innovative to the market place.

In the case of Quantum4d, it is the company’s pattern-recognition software that provides an intuitive graphical representation of big data. In its pitch before the VC audience, the presenter suggested its use in anti-money laundering (AML), but that’s really just the tip of the iceberg for this technology.

The team over at EFL uses psychometric principles to help determine credit worthiness in emerging markets that lack the maturity to support typical credit scoring. The process involves conducting a benchmark survey in a region about intellect, business acumen, ethics, and other factors that will help decide whether a client likely would repay a loan. After EFL gathers and processes the benchmark data, it compares a potential client’s answers to the benchmark data, assigns it a value and sends that value on to the requesting bank or financial institution.

All of regional finalist presented well and have sound business plans, but I found the voting process interesting. Audience members weren’t asked to vote for the company’s they liked best, but which one would best improve the financial services industry as a whole.

I felt this put some firms that had more mature business models and likelihood of success at a disadvantage and helped firms looking to break into untapped markets. I’d like to acknowledge a few of the challengers that didn’t make the first cut, but still bring interesting things to the table and are worth a look.

First is QuantConnect that has created an online community for quantitative analysts and retail investors. The community provides quants with free and low-cost virtual infrastructure services, which they can use to create, back-test and run their quantitative trading strategies. As part of the agreement, retail investors can then use these community-published trading strategies and mirror the quant’s trades. By providing these strategies to the retail investor, brokers can expect to see more retail trade flow, which will bring more liquidity to the market.

The other two are AgileCredit and PeopleHedge, which provide for online lending and FX hedging capabilities for small and medium-sized businesses (SMBs) that did not have access to them previously.

AgileCredit looks to recreate the local banker relationship with its online clients by tracking client performance and addressing small issues that could affect loan repayments before the grow into larger problems. It also plans to keep its costs of client acquisition low by partnering with other hosted business applications focused on the SMB vertical.

PeopleHedge reduces a SMB’s FX exposure risk, which helps the SMB expand its overseas markets. Using PeopleHedge’s services guarantees the FX rate when a client’s customer finalizes their online purchase. If the exchange rate moves into the merchant’s favor by the end of the monthly cycle, the merchant keeps the extra profit. If it moves against the merchant, the original locked-in rate prevails. PeopleHedge accomplishes this by aggregating its clients’ FX exposure into a monthly FX options contract. According to the company’s presenter, PeopleHedge is capable of hedging transactions as small as a dollar.

There were also several other startup focused in the retail space, but I’ll save those for bloggers covering that space.

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Avoiding Information Leakage in Social Media

April 25, 2013 in Architecture, Disruptive Technology | Permalink

Will the financial services industry limit its use of social media as yet another branding and marketing channel?

For Mike Manning, co-founder and CEO of start-up DealVector, social media offers financial institutions a way to connect and interact to drive revenue. The key, he says, is to protect one’s identity and provide just enough information to avoid any unintended information leakage.

DealVector launched its LinkedIn-esque investor-to-investor networking platform approximately two months ago so that user could find fellow collateralized loan obligation (CLO), collateralized debt obligation (CDO), residential mortgage-backed securities (RMBS) and trust preferred securities (TRUPS) investors without tipping their hands to the world like CXA Corp. had to do in 2012.

For those who don’t remember the event, CXA took advertisements in the Wall Street Journal and other publications seeking other investors in several RMBS series so they could pursue “rep & warranty” breaches against the dealers who sold them the securities. The advertisements were a simple laundry list all of the instruments in question. CXA did not published how much of each instrument it owned, but the world knew that CXA had inventory in those securities.

To avoid information leakage, DealVector provides access to its networking platform to only those who can bring something to the table. The vendor vets everyone who applies for membership and users should not expect to sign up with a G-mail or Hotmail address. And if they are purposely vague on their details, expect a follow-up phone call from DealVector.

Once vetted, users will notice that there is zero creativity when it comes to user names. Everyone has a DealVector-assigned user number- 62, 183, 451 or whatever. This prevents users from accidentally revealing their identities accidentally by using a name that they might already use for an email account, social media site or online gaming.

Users can message known community members directly or send a message to the community at large and only those users who previously registered interest in that specific topic can see the message.

When it is time to take a conversation offline, a click of a button will send the user’s contact details to the fellow user. However, DealVector’s holds all the identity and contact information in escrow and users will not see another user’s information until they send their own.

This is not to say that DealVector users know absolutely nothing about other community members. Similar to eBay and e-commerce sites, each user is given a “seller’s rating” based on previous transactions as well as the number of fellow users a member has recruited personally to join the platform.

No other information is stored on the hosted platform beyond user contact details, conversation details and interaction statistics, which should make information security staff sleep sounder at night.

As Manning often says, “DealVector’s purpose is to bring parties to a table so that they can start a conversation and that is it.’

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Low-Latency Zeptonics Mired in Legal Woes

February 7, 2013 in Architecture, Disruptive Technology, Trading | Permalink

About eight months ago, Australian low-latency networking equipment provider Zeptonics, made a hit at SIFMA Tech Leadership Forum and Expo with the announcement of its new 50-port low-latency Layer-1 ZeptoLink networking device.

Everything seemed rosy for the trading appliance start-up until the Australian Federal Court ruled on a tort brought against Zeptonics by fellow-Australian low-latency trading and networking equipment provider Zomojo.

In its decision issued this week, the Federal Court of Australia has ordered Zeptonics cease all use of its ZeptoLink, Zepto Access KRX, ZeptoNIC and ZeptoMatch offerings and turn them over to Zomojo.

All existing third-parties using or testing vendor’s ZeptoLink and ZeptoAccess offerings, which include about half of the top global proprietary-trading firms, also are under order by the Australian court “to not facilitate directly or indirectly their use.”

The basis of Zomojo’s tort is that while Zeptonics founder Matt Hurd was a co-managing director and head of the its R&D team between 2005 to early 2011, he used knowledge gained from his position to develop and market high-speed trading devices beginning in 2010 when he founded Zeptonics. Other complaints made in the same lawsuit include breach of fiduciary responsibility to disclose business opportunities presented to Zomojo and soliciting Zomojo employees during their restraint periods.

According to an official statement from Zeptonics, its products are the result of starting from a clean slate and two years of “inventiveness and hard work of a talented team of more than twenty people” and millions of dollars in investment.

However, the company will comply with the court order, but believes that it has “substantial ground for appeal,” the statement adds.

 

 

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New York Startup Conferences

October 22, 2012 in Current Events, Disruptive Technology, Fi-Tech Culture | Permalink

November is definitely turning into the startup month for Manhattan. I’ve noticed that I’m already attending two startup conferences in the coming weeks.

The first one is the FinTech Startup Weekend that runs the weekend of November 2. It’s a three-day competition that brings together techies (developers, coders, designers) and suits (marketing, finance and law) interested in financial technology. Over the weekend, participants will develop startup ideas and business pitches. On the last day of the conference, judges will award prizes, one of which might be a slot in Partnership for New York City Fund‘s Finalist Day. Winners of this separate competition go on to take part in the 12-week The FinTech Innovation Lab, which is run by the Partnership for New York City Fund and Accenture and helps early-stage growth companies develop their products further.

Roughly two weeks later, there is the NY Business Expo 2012 that takes place November 14-15. This conference provides a number of seminars that every startup needs to know about growing its business as well as a one-to-one mentoring sessions with serial entrepreneurs, angel investors, lawyers specialized in startups, incubator managers or experts with similar experience.

Also during the conference, Los Angeles-based accelerator StartEngine will showcase a number of its leading startups to the New York audience.

If you plan to attend either of these conferences, be sure to bring a lot of business cards.

 

 

 

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Avoid Big Data’s Hype

October 9, 2012 in Architecture, Design, Disruptive Technology | Permalink

This morning I received an email explaining that by deploying this vendor’s Big Data solution, it would let me outperform my business rivals while it goes on to balance my checkbook and wash my car on Sunday.

I get a tons of these unsolicited emails every day as a journalist. I’m not naming names since after reading the correspondence a few more times, the sender’s life seems difficult enough.

Marketing hype aside, this ignorance running through the industry about Big Data and its capabilities really sticks in my crawl.

Let me make this perfectly clear: Big Data is not a panacea for all your data ills.

If someone tells you it is, run! Run hard; run fast and don’t stop until you have as many secured doors between you and the idiot as possible.

Stuffing all of your organization’s terabytes and petabytes of data willy-nilly into a Big Data environment will not solve your problems.

Remember the first rule of programming, Garbage In Garbage Out (GIGO).

If you don’t know what you want achieve at the beginning the process, there’s no technology that will give you what you want at the end. Know what you are looking for at the outset and which data sets will help you find your answer.

Big Data is not a magic box. It is a way for applications to access heterogeneous data formats without needing to go through the time or expense of converting existing data into a common format.

In other words, it protects your existing data’s sunk cost when it comes to storage while making it easier to exploit by other applications.

This promise has a lot of people throwing all their data, as well as a few kitchen sinks, into Big Data projects.

Don’t be one of them. It just will be an expensive and painful lesson in how not to make your goals.

Again, lay out what you want to achieve with your project before deciding which data and applications you’ll need to integrate into it.

One approach in selecting which data sets to integrate first is to view data as a commodity. The most accessed data sets are liquid commodities while infrequently accessed data set are illiquid commodities.

Address the liquid markets first since that is where you can find the immediate returns.

Handling the illiquid data is a bit trickier. There are benefits in accessing illiquid data in Big Data environments like trading illiquid instruments on the market. However, apply the same risk-reward analysis before you make the investment. Will the return from incorporating the illiquid data sets into the Big Data environment justify their integration expense? Could better returns be found elsewhere?

Each organization needs to make its own call.

As with any project, be sure you know what you want to achieve, select the proper tools for the job and you’ll go far.

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