bloomberg terminal

Auto Added by WPeMatico

Securitization platform Cadence surpasses $125M deal volume and raises $4M

Published April 7, 2020

Securitization is a critical function of the modern financial system. Banks “package” individual loans, say a mortgage or an auto loan, into a group with similar characteristics and sell them to other investors. That gets the debt off the originator’s balance sheet so that they can offer more loans, while also offering private investors alternative investment opportunities to buy up.

Despite the scale of the market — the trade association SIFMA’s research shows that the volume for asset-backed securities reached more than $300 billion in 2019 (excluding mortgages) — much of that structuring remains relatively ad hoc, with structuring agents and buyers constantly seeking each other out.

Much in the way that real estate and startup crowdsourcing platforms democratized access to those alternative investments, Cadence wants to expand access to securitized products while increasing the velocity of transactions for originators and lowering prices. Founder and CEO Nelson Chu said that “our job is to bring transparency and efficiency to this market and through all the various things that we do.” The company operates on top of the Ethereum blockchain network.

Founded in 2018 and launched publicly in 2019, the New York City-based capital markets startup has now structured $88 million in notes across 76 offerings and 12 originators according to the company. The firm’s public leaderboard shows that the largest originators were Sellers Funding with more than $23 million and Wall Street Funding with almost $26 million in transaction volume. Chu said that “I think we are the 21st largest structuring agent the United States in 2020 so far,” which is not a bad place to be for a young startup in a massive multi-trillion dollar market.

In addition to that $88 million volume processed on the company’s retail platform, Cadence also structured a $40 million whole business securitization with FAT Brands, the owner of restaurant chains like Fatburger and Yalla Mediterranean. The company notes that the structuring reduced the company’s interest costs by $2 million.

The company has hit a number of milestones over the past two years. It closed a seed round of $4 million in December led by Revel VC, with Revel’s Thomas Falk, Navtej S. Nandra, former President of E*Trade, and portfolio manager Oliver Wriedt joining the company’s board.

In addition, back in 2019, the company said that it also became the first digital asset company to launch a digital asset ticker on Bloomberg Terminal and also the first to join the Bloomberg App Portal. It also secured the first financial debt rating for a digital asset.

The company has a variety of revenue streams from different areas of its platform. It takes transaction fees on each deal, but also derives revenues from hosting data related to the performance of the underlying loans. Given the company’s technology stack, it has better and more verified data about how the underlying assets that back each security are performing, giving all investment holders a much more robust look at the health of their portfolio.

Longer term, Cadence’s goal is to move to a mostly SaaS model for originators and buyers. “We can be very, very beneficial to every single counterparty involved when we become that,” Chu said, adding “we essentially are Switzerland … because our incentives are all aligned.”

I asked about how the company is responding to the COVID-19 situation, and Chu said that as the world saw in the 2008 global financial crisis, “there are pockets of opportunity here that we continue to find, and we allow retail, accredited investors to get access to that.” Chu gave the example of game developers waiting on payments from Apple and Google who need short-term loans to cover costs.

In addition to Revel, other investors in the seed round included Morgan Creek Digital, Nimble Ventures, Argo, Tuesday Capital, Manatt, and Recharge Capital. R&R Venture Partners, a joint VC firm of former Citi chairman Richard D. Parsons and Clinique chairman Ronald S. Lauder, also participated.

Atom Finance’s free Bloomberg Terminal rival raises $12M

Published December 12, 2019

If you want to win on Wall Street, Yahoo Finance is insufficient but Bloomberg Terminal costs a whopping $24,000 per year. That’s why Atom Finance built a free tool designed to democratize access to professional investor research. If Robinhood made it cost $0 to trade stocks, Atom Finance makes it cost $0 to know which to buy.

Today Atom launches its mobile app with access to its financial modeling, portfolio tracking, news analysis, benchmarking and discussion tools. It’s the consumerization of finance, similar to what we’ve seen in enterprise SaaS. “Investment research tools are too important to the financial well-being of consumers to lack the same cycles of product innovation and accessibility that we have experienced in other verticals,” CEO Eric Shoykhet tells me.

In its first press interview, Atom Finance today revealed to TechCrunch that it has raised a $10.6 million Series A led by General Catalyst to build on its quiet $1.9 million seed round. The cash will help the startup eventually monetize by launching premium tiers with even more hardcore research tools.

Atom Finance already has 100,000 users and $400 million in assets it’s helping steer since soft-launching in June. “Atom fundamentally changes the game for how financial news media and reporting is consumed. I could not live without it,” says The Twenty Minute VC podcast founder and Atom investor Harry Stebbings.

Individual investors are already at a disadvantage compared to big firms equipped with artificial intelligence, the priciest research and legions of traders glued to the markets. Yet it’s becoming increasingly clear that investing is critical to long-term financial mobility, especially in an age of rampant student debt and automation threatening employment.

“Our mission is two-fold,” Shoykhet says. “To modernize investment research tools through an intuitive platform that’s easily accessible across all devices, while democratizing access to institutional-quality investing tools that were once only available to Wall Street professionals.”

Leveling the trading floor

Shoykhet saw the gap between amateur and expert research platforms firsthand as an investor at Blackstone and Governors Lane. Yet even the supposedly best-in-class software was lacking the usability we’ve come to expect from consumer mobile apps. Atom Finance claims that “for example, Bloomberg hasn’t made a significant change to its central product offering since 1982.”

The Atom Finance team

So a year ago, Shoykhet founded Atom Finance in Brooklyn to fill the void. Its web, iOS and Android apps offer five products that combine to guide users’ investing decisions without drowning them in complexity:

Sandbox – Instant financial modeling with pre-populated consensus projections that automatically update and are recalculated over time
Portfolio – Track your linked investment accounts to monitor overarching stats, real-time profit and loss statements and diversification
X-Ray – A financial research search engine for compiling news, SEC filings, transcripts and analysis
Compare – Benchmarking tables for comparing companies and sectors
Collaborate – Discussion boards and group chat for sharing insights with fellow investors

“Our Sandbox feature allows users to create simple financial models directly within our platform, without having to export data to a spreadsheet,” Shoykhet says. “This saves our users time and prevents them from having to manually refresh the inputs to their model when there is new information.”

Shoykhet positions Atom Finance in the middle of the market, saying, “Existing solutions are either too rudimentary for rigorous analysis (Yahoo Finance, Google Finance) or too expensive for individual investors (Bloomberg, CapIQ, Factset).”

With both its free and forthcoming paid tiers, Atom hopes to undercut Sentieo, a more AI-focused financial research platform that charges $500 to $1,000 per month and raised $19 million a year ago. Cheaper tools like BamSEC and WallMine are often limited to just pulling in earnings transcripts and filings. Robinhood has its own in-app research tools, which could make it a looming competitor or a potential acquirer for Atom Finance.

Shoykhet admits his startup will face stiff competition from well-entrenched tools like Bloomberg. “Incumbent solutions have significant brand equity with our target market, and especially with professional investors. We will have to continue iterating and deliver an unmatched user experience to gain the trust/loyalty of these users,” he says. Additionally, Atom Finance’s access to users’ sensitive data means flawless privacy, security, and accuracy will be essential.

The $12.5 million from General Catalyst, Greenoaks, Global Founders Capital, Untitled Investments, Day One Ventures and a slew of angels gives Atom runway to rev up its freemium model. Robinhood has found great success converting unpaid users to its subscription tier where they can borrow money to trade. By similarly starting out free, Atom’s eight-person team hailing from SoFi, Silver Lake, Blackstone and Citi could build a giant funnel to feed its premium tiers.

Fintech can feel dry and ruthlessly capitalistic at times. But Shoykhet insists he’s in it to equip a new generation with methods of wealth creation. “I think we’ve gone long enough without seeing real innovation in this space. We can’t be complacent with something so important. It’s crucial that we democratize access to these tools and educate consumers . . . to improve their investment well-being.”

The startups creating the future of RegTech and financial services

Published July 8, 2019

Marc Gilman
Contributor

Marc Gilman is General Counsel and VP of Compliance at Theta Lake. He is also an Adjunct Professor at Fordham University School of Law.

Technology has been used to manage regulatory risk since the advent of the ledger book (or the Bloomberg terminal, depending on your reference point). However, the cost-consciousness internalized by banks during the 2008 financial crisis combined with more robust methods of analyzing large datasets has spurred innovation and increased efficiency by automating tasks that previously required manual reviews and other labor-intensive efforts.

So even if RegTech wasn’t born during the financial crisis, it was probably old enough to drive a car by 2008. The intervening 11 years have seen RegTech’s scope and influence grow.

RegTech startups targeting financial services, or FinServ for short, require very different growth strategies — even compared to other enterprise software companies. From a practical perspective, everything from the security requirements influencing software architecture and development to the sales process are substantially different for FinServ RegTechs.

The most successful RegTechs are those that draw on expertise from security-minded engineers, FinServ-savvy sales staff as well as legal and compliance professionals from the industry. FinServ RegTechs have emerged in a number of areas due to the increasing directives emanating from financial regulators.

This new crop of startups performs sophisticated background checks and transaction monitoring for anti-money laundering purposes pursuant to the Bank Secrecy Act, the Office of Foreign Asset Control (OFAC) and FINRA rules; tracks supervision requirements and retention for electronic communications under FINRA, SEC, and CFTC regulations; as well as monitors information security and privacy laws from the EU, SEC, and several US state regulators such as the New York Department of Financial Services (“NYDFS”).

In this article, we’ll examine RegTech startups in these three fields to determine how solutions have been structured to meet regulatory demand as well as some of the operational and regulatory challenges they face.

Know Your Customer and Anti-Money Laundering

OpenFin raises $17 million for its OS for finance

Published May 16, 2019

OpenFin, the company looking to provide the operating system for the financial services industry, has raised $17 million in funding through a Series C round led by Wells Fargo, with participation from Barclays and existing investors including Bain Capital Ventures, J.P. Morgan and Pivot Investment Partners. Previous investors in OpenFin also include DRW Venture Capital, Euclid Opportunities and NYCA Partners.

Likening itself to “the OS of finance,” OpenFin seeks to be the operating layer on which applications used by financial services companies are built and launched, akin to iOS or Android for your smartphone.

OpenFin’s operating system provides three key solutions which, while present on your mobile phone, has previously been absent in the financial services industry: easier deployment of apps to end users, fast security assurances for applications and interoperability.

Traders, analysts and other financial service employees often find themselves using several separate platforms simultaneously, as they try to source information and quickly execute multiple transactions. Yet historically, the desktop applications used by financial services firms — like trading platforms, data solutions or risk analytics — haven’t communicated with one another, with functions performed in one application not recognized or reflected in external applications.

“On my phone, I can be in my calendar app and tap an address, which opens up Google Maps. From Google Maps, maybe I book an Uber . From Uber, I’ll share my real-time location on messages with my friends. That’s four different apps working together on my phone,” OpenFin CEO and co-founder Mazy Dar explained to TechCrunch. That cross-functionality has long been missing in financial services.

As a result, employees can find themselves losing precious time — which in the world of financial services can often mean losing money — as they juggle multiple screens and perform repetitive processes across different applications.

Additionally, major banks, institutional investors and other financial firms have traditionally deployed natively installed applications in lengthy processes that can often take months, going through long vendor packaging and security reviews that ultimately don’t prevent the software from actually accessing the local system.

OpenFin CEO and co-founder Mazy Dar (Image via OpenFin)

As former analysts and traders at major financial institutions, Dar and his co-founder Chuck Doerr (now president & COO of OpenFin) recognized these major pain points and decided to build a common platform that would enable cross-functionality and instant deployment. And since apps on OpenFin are unable to access local file systems, banks can better ensure security and avoid prolonged yet ineffective security review processes.

And the value proposition offered by OpenFin seems to be quite compelling. OpenFin boasts an impressive roster of customers using its platform, including more than 1,500 major financial firms, almost 40 leading vendors and 15 of the world’s 20 largest banks.

More than 1,000 applications have been built on the OS, with OpenFin now deployed on more than 200,000 desktops — a noteworthy milestone given that the ever-popular Bloomberg Terminal, which is ubiquitously used across financial institutions and investment firms, is deployed on roughly 300,000 desktops.

Since raising their Series B in February 2017, OpenFin’s deployments have more than doubled. The company’s headcount has also doubled and its European presence has tripled. Earlier this year, OpenFin also launched it’s OpenFin Cloud Services platform, which allows financial firms to launch their own private local app stores for employees and customers without writing a single line of code.

To date, OpenFin has raised a total of $40 million in venture funding and plans to use the capital from its latest round for additional hiring and to expand its footprint onto more desktops around the world. In the long run, OpenFin hopes to become the vital operating infrastructure upon which all developers of financial applications are innovating.

“Apple and Google’s mobile operating systems and app stores have enabled more than a million apps that have fundamentally changed how we live,” said Dar. “OpenFin OS and our new app store services enable the next generation of desktop apps that are transforming how we work in financial services.”

Sentieo raises $19M to be the AI-powered Bloomberg Terminal

Published October 30, 2018

To get an edge on the market, investors must look beyond traditional financial info like revenue and profits. Our every online activity generates data exhaust, like web traffic, Twitter mentions, app downloads and search trends. It’s the ability to overlay the old and new data sets to spot surprising trends that will set the best traders apart. Sentieo wants to be their tool.

Sentieo is an investment research software suite that uses AI to scan financial documents, analyze alternative data sets and create visualizations. The fintech SAAS startup now has 700 customers, including top hedge funds plus mutual funds, Fortune 500s and investment banks that pay around $500 to $1,000 per month per license. That’s a lot cheaper than a $21,000 yearly Bloomberg Terminal subscription. [Correction: Sentieo charges $500 to $1000 per month, not per year.]

Now Sentieo is ready to crank up its name recognition with a sales and marketing blitz fueled by a new $19 million Series A round led by Centana, a $250 million growth equity firm focused on fintech SAAS. Now with $30 million in total funding, the 160-person startup plans to “Educate [traders] that ‘hey, this product is built by people who sat in your seats,’” says CEO Alap Shah.

Sentieo charts Search Trends data and Sentieo Index data on Facebook versus the social network’s revenue.

Ten years ago, Shah was making the Wall Street rounds after graduating from Harvard in economics. He was an analyst in consulting at Novantas, private equity at Castanea, and worked for hedge funds Viking Global and Citadel. “It became clear that there were some really big holes in my process where software wasn’t meeting my needs. Importantly, there was a hole around search,” Shah tells me. “We’ve grown accustomed to going to Google. But unfortunately that’s just not the way the old-school financial data programs are structured.”

Sentieo co-founder and CEO Alap Shah

So he built his own. “I used all the financial tools out there: Capital IQ, FactSet, Bloomberg — each had their strengths and weaknesses. But they were all over 20 years old, so they pre-date the cloud, pre-date SAAS, pre-date mobile!” With Sentieo, he wanted to develop a tool that could understand the nuances of business momentum before it showed up in the balance sheets.

Sentieo does have a traditional financial equity data terminal with real-time pricing. But there’s also a machine learning and natural language processing-powered document search tool that can sort through SEC documents, earnings call transcripts, press releases and more. It taps Alexa web traffic data, Apptopia app download rates and Twitter chatter, as well as Thomson Reuters analyst estimates and fundamentals. Customers can annotate files, organize ideas, generate visualizations and share their insights through Sentieo’s Notebook.

For example, Sentieo could look through all of Tesla’s earnings calls and financial documents for mentions of guidance on Model 3 production volume. It could highlight them all, analyze the sentiment of those mentions and chart them against Tesla’s share price. Or you could search for all the companies starting to list President Trump as a risk factor for their business, which would surface how the medical cannabis companies are concerned about Attorney General Jeff Sessions’ stance on legalization.

Sentieo’s synonym library allows it to hunt down different ways of saying the same thing with the goal of not forcing investors — or their dutiful analysts — to read through 100-page 10-Q documents manually. “You can get the same information at 10x the speed with something like Sentieo,” Shah claims. It wants to a be a “research management system,” like a Salesforce CRM for tracking investment ideas.

But Sentieo’s 65-person India-based engineering must keep data from all 50 feeds, 25 million documents and 64,000 equities flowing to keep customers satisfied. There are a ton of moving parts, and Sentieo is competing with much bigger companies. Beyond Bloomberg, there are lots of alternative data providers out there. And Microsoft’s software suite also has plenty of info management tools.

Sentieo’s hope is to emerge as an aggregator of information sources and an annotation tool that benefits from being purposefully designed for what analysts need. If Robinhood is on one side of the spectrum making investing easy for novice traders, Sentieo is on the other end making investing smarter for experts. “It’s really at the bleeding edge of how you get the data today,” Shah concludes. “For every company driven by consumer demand, there are all these little breadcrumbs being left all over the internet.”

[Disclosure: I briefly rented a room in an apartment where Shah lived five years ago and I know him from the San Francisco social scene frequented by many Silicon Valley figures.]