Calling All Fintech Entrepreneurs

Comments (Archived):

1. Wow. London needs something like this.

   1. do you have an organizing entity like The New York City Partnership in London?

      1. London’s just about got running water and sanitation.

         1. that’s a bit harsh we’ve got businesslink…but maybe that’s the sanitation system you are talking about…

            1. BusinessLink is a very different proposition, though. The New York City Partnership seems like a very interesting idea and I can think of a ton of “locally patriotic” companies and people that would love to participate in an organization like that.

            2. a different proposition indeed! It was my poor attempt at humour Max

            3. Sorry, I was being a bit obtuse then 🙂

         2. yeah…but you’ve got really effective transport from heathrow to the city.

            1. Yes but if it snows Arnold you can’t fly in or out of Heathrow anyway

            2. True…and there is a storm coming into NYC and I need to get to SF tonight 😉

2. I’m still reeling from the use of Tech by the Quants during the 08 crisis. I hope we have reflected enough before moving ahead with new products.

   1. tech in the wrong hands can be dangerousbut not every hand is the wrong hand

3. I expect more founders and investments in disrupting support of current financial tech, not propping it up a little longer. Fintech support is like building a better newspaper to support old media four years ago.Not sure how long it will take or which paths it will follow, but I don’t see legacy financial systems being the way forward. We’ll see identity and personal finance solutions replacing too big to fail institutions in the next decade.It’s fun make bold claims without supporting evidence. Seriously none of us know what’s coming in finance, but it has to change.

   1. +1….couldn’t agree more

   2. Totally agree. This is going to be difficult, though, since the major banks seem to have so much influence and so much [of our] cash. But, hey, look at what Skype in the telecom space.

4. wow, that is so cool that there is a fund that meant to create apps for bankofamerica, jp morgan, and goldman sachs. i’m glad we learned our lesson from the financial crisis of 2008 and are investing in cool, morally sound companies dedicated to leaving the world better than they found it. i’m glad we’re not investing in propping up the key stakeholders in the old, parasitic system that plays such a vital role in creating bubbles and transferring wealth from lower classes to the finance class via monetary policy.you can cling the wall st overlords if you’d like, but the system is dying. ignorance is futile. only the truth can set us free.9/11 was an inside job,kid mercury

   1. It may be broken but it’s not going anywhere.So, some infiltration by the tech crowd can be a good thing.Meanwhile, more investment in tech training and development which serves the larger good and, my guess, filters back to the startup ecosystem.Plus:Disruption can be an inside job.

      1. “disruption can be an inside job”that’s the best line of this comment thread!!!

         1. Thanks, Fred.Kinda liked that one myself.Although, it is a short thread. ;-)Funny, how Kid inspires me.

            1. the sand in the oyster creates the pearl

   2. Honestly, one of the biggest lessons I learned from “The Big Short” was how much information is hidden from Average people. There is plenty of room for startups to work with commercial banking to clean up the system so that you and I understand our accounts.

      1. yup

         1. Fred,I’m guessing you know this already, but the CEO of Covestor is on Bloomberg TV right now. He just mentioned that opthamologist-investor you blogged about before.

            1. awesome. i had no idea. i didn’t even know Bloomberg has a TV channel

      2. That is true but that lack of transparency is one of the key ways that large players make money in the markets – better and more timely information. That being said better technology will enable innovative business models that coupled with a supportive regulatory environment will lead to the same sort of “perfecting” of the financial markets that Internet retailers like Amazon have bought to consumer goods, which has benefited consumers world wide. This article highlights how the GAO was hampered by a lack of technology in preventing the mortgage crisis. Hat tip to my partner in crime Mary Ludloff for this post that led me to the article.

5. “The goal of my company is to put all of you out of business. You may invest using SwanBucks. That is all.”

   1. sounds like a good idea to me….i may have to exchange some of my mercbucks for swanbucks

   2. I like the style of your pitch. No bullshitting, just “I’m here to remove you”

   3. Problem is they never allow you to put them out of business, they may make you part of the business and for the right price you agree to do so… 🙂

      1. Good point….a Faustian bargain is difficult to resist.

   4. Depends on the type of financial startup. Obviously something like BankSimple, Covestor(which USV invested in), and SecondMarket disrupt those companies directly. But, there are startups in big data that see these as a great set of potential clients in addition to investors. Could be a great way to meet them. These startups are more likely disrupting Moody’s, S&P, and other ratings agencies, and possibly bigger players like Oracle that see these firms as clients.

      1. After a certain Debacle involving Jp Morgan Chase, I’m actually surprised that MongoDB is not seen in that light.(JP Morgan had some database issues in 2010. It caused outages. Granted, they are a bank that also doesn’t like Chrome….)

         1. so true. in my first meeting with this esteemed group of CTOs and CIOs, i was pitching them on Mongo and nosql

            1. It actually makes me very very nervous to bank with JP Morgan. I know that Jamie Dimon is being hailed as a new Jack Welch, but I keep thinking if they are missing something as simple as safeguarding data, they are literally missing what can and will be their undoing. That, and I have one or two friendlies that I think are missing parts of how their business model works especially involving the technology side of it. I’ve wanted to write a post about this for a while – I think I would be slammed for calling out that long term, a lot of banking institutions are rotten to the core when it comes to understanding how their business runs on this stuff. It is their reputation on the line long term, if they choose not to embrace what will safeguard the sacred duty of banking – safeguarding money and the monetary system.Right now I am with citi (they were on campus, and they have ATMs in NY) but I would gladly switch to someone I knew was datacentric and was using these modern database systems (among other things) to strengthen their banking enterprises. From there any bank can go and make it pretty – but in the meantime, I want to know there are strong bones holding the damn thing up.

   5. sounds like dr paul is interested in swanbucks as well. below is an excerpt from his blog post from yesterday (emphasis mine):It is nothing short of cruel and criminal for Congress to stand idly by while the life savings of Americans are inflated away to nothing. It is high time Congress insist on getting complete information on what the Fed has been doing, and for whom. My hope is that exposing the truth will demonstrate the insanity of the status quo and more people will call for sensible changes, such as legalizing competing currencies.

      1. Ah Congress is in the bag of the Financial Services, you have in Bill Daley the White House Chief of Staff a tried and trusted lieutenant of Wall Street and the Telco’s.As much as Mr.Wilson likes to be for the proletariat I doub’t he would like to see changes to the status quo that could affect USV in any way and rightly so, if I had the same amount of wealth I’d want to protect it too.The Federal reserve , the congress and the executive branch along with the judiciary have been usurped by a chosen few and most of the people are just lamb. Unfortunately Dr.Paul also expresses extreme views and thus does not necessarily have a progressive mindset.We in the country have lost capitalism to a cold calculating oligopoly in most core industries and thus there is no real competition and thus you have what we have be in banking, airlines, telcos, autos, consumer products group, education and others…When we wake up it will be late.

         1. wrongi have advocated for policies that would be hurtful to me and USV on this blog a number of times over the years. here is one examplehttp://www.avc.com/a_vc/201…

6. Thank you for the post.

7. Based on recent financial performance of many of those companies, is a CTO from there really the right mentor? I mean seriously, this isn’t about little tech gizmos this is about things that are the grease that runs our economy (or will make it stop completely!).Wouldn’t a business guy who leveraged technology for a business purpose, led data standard transformation, migrated client communications to real time while being a member of BlackRock during the 80 to 800 phase be a much better advisor and potential management team member of the ones that make sense? I think so, please give me a shout, number is on my site to discuss. Thanks.http://www.daviddalka.com/P.S. This comment thread is awesome. Props to you all….

   1. they also get mentoring from a group of local VCs

8. This is just fantastic given a lot of the sector-specific complexities / old piping in the payments ecosystem. There is a lot of room for disruption, and so much entrepreneurs can learn from people who have been in the industry for quite some time. Likewise, there is certainly a lot these execs can learn from the fresh thinking and perspectives of entrepreneurs new to the payments industry. It will inevitably help both parties (entrepreneurs and these big banks) identify and bring new products/technology to market. Bank of America had done something similar with a payments innovation lab at MIT, but it seems to have completely lost steam. Great seeing this post, and incidentally was minutes just after I published a story covering 6 promising payment startups working to put Boston on the map for the future of payments (http://bostinnovation.com/2…. Thanks for sharing news of the accelerator program.

9. The Financial services companies are the most insular and closed companies in the world. They want free markets for every other industry sector but when it comes to their industry they want regulations to protect their turfs.In 2006 a group of us ( previous quants) decided we would like to create a open source model for High frequency trading, with a set of algorithms to go along with it and sell it to the many day traders who could compete with the proprietary trading desks of the big banks. The goal was to build out the platform and let many other quants write algorithms that would be used by independent traders.Unfortunately we could not get it off beyond the prototype phase as Dow Jones refused to sell us the data that we needed. This is before they started offering “Lexicon” for the high frequency trading systems that have become par for the course for most of these institutions.I believe that Financial Institutions will always find ways to protect their turf.Square that is trying to dismantle the payment systems of the established players, will likely sell out for the right price to one of them and it will remain a protected area for the entrenched entities.The notion that capitalism is alive and well in this industry is a misnomer, it is a Oligopoly.If there are startups that look at offering applications to the institutions most of them get bought out by the banks. So I am not sure if the idea is to build a startup to offer products and services to the Oligopoly or is it more for entrepreneurs to build some stuff to be paid for by the highest bidders.I have some personal experiences that make me not want to deal with this industry as much as possible.But good luck to all those who participate in this fanfare, maybe they will come up with ways to usurp the usury laws and offer ways for people to get the best possible rates reserved for the high net worth individuals ( who really don’t need them)..

   1. I have a hard time understanding how high frequency trading benefits any market participants other than high frequency traders. Had you been successful in your venture, you would have expanded the use of it to some independent traders, but it would still have been a tiny minority of HF traders scalping everyone else, no? Maybe I’m missing something, and HFT really does increase liquidity or reduce spreads; if so, feel free to educate me.Re your last sentence, it’s true that high net worth individuals get better lending rates. But isn’t that because they tend to be better credit risks and have collateral? In any lending business, you have to take your expected default rate into account when setting loan rates.

      1. I just finished shovelling snow( it is gorgeous outside) yes.. I do that for the building, I get some $$ off my rent and I feel good…As for benefiting a few traders, well if you as an individual trader had the same abilities as proprietary trading desks do you would be able to level the playing field in some ways, not necessarily in terms of total $$ side of a individual trade but in every other way you could level the field.The goal of the venture had always been to provide that platform that individual traders could use and compete with the big guys in the ocean.HFT does not increase or reduce spreads those things it does but it is more a marginal cost than aything else.The transaction costs especially if you can give a pre transaction cost analysis is what makes the big difference.Witht he tools we had built we could give that analysis for a trader to route their trades accordingly.These tools are something that proprietary tradings desks have and take advantage of/They also benefit from having a large technology platform to run the various algorithms and take advantage of the market where others are unable to do so.There is a tighter spread and the liquidity is pretty fragmented and intermittent. But smart hedge funds and the Goldman Sachs have pre transaction cost analysis tools that most individual traders don’t have and thus loose out big time.Our goal had been to not just offer the HFT platform, but a set of algorithms, allow for others to buidl and license their algorithms for ( fees) and to offer a set of pre transactional tools that would in some sense level the playing field but we never got there, why because that would be competition that entrenched players can’t stand ( they like that for others)…As for lending rates, sure I understand the logic and the basis of the reasoning, but generally those who need loans are the ones who can’t afford high interest rates. It is for this basic fundamental reason I feel that we have to have the Government step in and provide low interest rates and take on the role of guarantor.In India until1970 or so, banks were private and they charge exorbitant interest rates to the public, it led the government to nationalize all the banks in one swell swoop and provide the low interest loans to the poor farmer and small businesses. Many who are capitalists and come from the Chicago school of economics ( Milton Friedman and et al) will say that was wrong and say it is perfectly ok as thats what the market will dictate. Unfortunately when you don’t have a fair play involved you have to have the ability to step in and make it fair. So that experiment faired well for a while, then it got out of hand as many of the loans had to be written off and the pendulum has swung the other way and since 1995 things have changed but still usury laws have been strict.I just think those who make arguments for the Financial services being gold, I think they are golden not gold. They for the most part are unscrupulous and push the envelope and test the boundaries on a daily basis. I just think that if given a chance they will whore not themselves out but for the right price they will whore their mothers and sisters too… If there are exceptions to that they are rare and if you know them hold on to them…

         1. I see your point re the venture you had in mind, but I wonder if we’d all be better off if the government just legislated against HFT (one idea I’ve heard mooted would be to require bids to stay open at least one second). That’s a meta-issue though.Re lending, I’m not Friedman absolutist (I actually wasted an hour or two debating a posse of them Sunday). I was just making a point about the economics of it: high default rates + lack of collateral + higher admin costs of lots of small loans = higher interest rates, if you want to break even or make a profit. If low interest loans are effective at alleviating poverty then maybe it’s in the government’s interest to run that sort of program at a loss. That’s another meta-issue.

      2. I did not full address your question, but I would gladly be willing to do so over a beer sometime… if you are in NYC…

         1. Just white-knuckled it back from NYC. My inamorata is taking a programming class Tuesday nights this month, so we met at The Meatball Shop afterwords. You’re welcome to meet us there next Tuesday night if you want (as is anyone else in Fredland). They’ve got a couple of good beers on tap, and some great eats to go with them.

            1. And once again I had to go to the dictionary to understand one of your comments…”inamorata” — I like that…and how smart of you to align with someone who can or will soon be able to code…My male version can’t code, but he plays guitar. That counts for something.

            2. That counts for a lot.

            3. Hey Dave, is Meatball Shop still go? I might want to take you up on this.

10. Fred – not related to this post at all, but just saw Dens tweet out he’s at USV for a board meeting. Got me thinking, what goes down at a board meeting? You’ve written a bit about board meetings, but what’s the general outline.. and discussion? Possible post idea for you.

    1. they drink a lot of waterhttp://foursquare.com/dens/…i hope you can access that URL

       1. No dice on that URL.. but his photo checkin said all the water you can drink! http://foursquare.com/dens/…

11. If anyone’s interested in partnering to apply for this, send me a note.

12. Fintech. I like the term. Too big to fail was always an offensive term.

13. Fred,You should check out what Braxton McKee is doing at Broad Street Analytics. It’s a big data play in the space. Could be an interesting fit. http://broadstreetanalytics…Best,Jennifer

    1. thanks

14. Shame on yo’all picking on FinTech, just because the customers for this space are the large players in capital markets. Never mind the argument that its due to the liquidity afforded by those firms that companies (like yours!) get funded, loaned money, etc.It also happens to be that some of the largest FinTech customers today are electronic (global) markets that actually counteract the challenges posed by the tight monetary control of the big banks.I work in FinTech by the way, and while I don’t enjoy shell programming and C code (it’s not nearly as sexy as Facebook apps and geolocation based marketing, I admit), it so happens that this space does a lot for advancing technology, especially network architecture, which ultimately every other layer depends on.An of course – NYC Investment Fund is probably one of the best things that can happen for creating new wealth in NYC. A model that should absolutely be scaled nationally, if not globally.Thanks again, Fred.

    1. I get this. Some of the work that needs to be done in FinTech is mostly conceptual. I’m hitting this wall right now….

15. We do the same thing on the West Coast. In San Jose, the US Market Access Center (www.usmarketaccess.com) does the exact same thing with overseas emerging technology companies that are seeking to enter the US market. They’re provided with the usual accelerator amenities, as well as access to a group of handpicked mentors and professionals, including some of the Valley’s best-known law firms, around forty experts in various tech domains (nanotech, mobile, etc.), help with preparing pitches and, if appropriate/needed, introductions to VCs. This program has been in place since 1995, and has worked with over eight hundred companies from over fifty countries.

16. The next transformation is likely to be around navigating the web by giving the natural language commands. What’s needed is a startup accelerator for natural language companies.

17. Hello Fred,Big fan. Long ago I was the guy who pioneered online stock trading on the internet. If I may be of help in any way, pls advise.Eric

18. Of course – NYC Investment Fund, is probably one of the best things that can happen in New York on the creation of new wealth. The model should definitely be scaled nationally or even worldwide.Motorcycle Parts

19. I’m surprised NYCIF does not participate in the CDFI Fund’s New Market’s program (http://bit.ly/cdfinmtc). Even I have a CDE. 🙂

20. Oops