There is a new world order coming to Wall Street.
Startups are taking on the financial sector. Some of the companies look to usurp traditional players, and others step into the gaps they have left behind.
Business Insider spoke to venture capitalists and banking veterans to put together a list of lesser-known start ups, some of which are just a couple of month old.
The list includes companies offering online payments, loan origination, wealth management software, cryptocurrency trading and behavioural analysis for financial clients.
Some are worth hundreds of millions, while others are bootstrapped.
Every one is trying to find their place alongside the biggest names on Wall Street.
Wall Street traders and banks are always on the lookout for top tools to sharpen their game. That's where Estimize comes in. Leigh Drogen's startup crunches data for hundreds of companies to get estimates to traders that might be ahead of the tape. One example is luxury brand Coach, according to Drogen, who told Business Insider: 'Our consensus is well below Wall Street and the stock has been correspondingly getting crushed on the lower real expectations.' Estimize closed a new funding round earlier this month, taking the total for money raised to more than $US6 million to date. The firm is up against established players like Thomson Reuters' First Call, among others.
The M&A process is one of the most secretive parts of the business of Wall Street. Slipping up and leaking details might disrupt a deal or publicly embarrass executives. Exitround's software allows companies to shop themselves anonymously to potential buyers. Its network includes 30,000 client companies and private equity firms and other investors, and uses more than one billion data points to help pair off companies up for sale with those looking to make an acquisition.
WealthFront CEO Adam Nash says that method of money management is outdated and inefficient. Wealth management units at the big banks are often bloated as there is a limit to the number of account money managers can control, which can be as few as six. 'It's a ratio that doesn't need to exist,' he says of the banks' personnel-heavy business model. 'There's only a few solutions to that problem.' Customers can sign up to WealthFront with as little as $US500, and the start-up doesn't charge them for the first $US10,000 it manages. As millenials save and inherit more, digital finance management tools could displace a huge revenue driver at banks.
Money.net calls itself the 'complete market information platform.' The company prides itself on melding news algorithms with equity research and chat functions, and it is among a number of startups attempting to de-throne Bloomberg, the ubiquitous data platform used across Wall Street. 'Our goal is to be a better product than Bloomberg at 1/20 the cost,' says founder and CEO Morgan Downey. Money.net has a chat function, but Downey doesn't care if users love it. They will also integrate other financial services chat platforms like Slack and Symphony.
Orchard Platform is an investing and analytics platform for institutional investors and loan originators. Its $US12 million Series A funding round attracted big names from the financial services sector like ex-Citigroup CEO Vikram Pandit, ex-chairman and CEO of Morgan Stanley John Mack and Tom Glocer, the former CEO of Thomson Reuters. The marketplace lending industry is a $US870 billion business, so Orchard and its competitors have plenty of room to grow.
TickerTags' business model centres on 'tagging' social media cues and pulling together a picture of how these trends impact companies over time. That could be companies impacted by the growing 'gluten-free' trend or 'lines at Disneyland.' There are 350,000 'tags' for traders to track and TickerTags processes about 50 million tweets daily to generate complex social profiles for users. 'You can see things bubbling up on the social web in real time,' says CEO Chris Camillo. It doesn't come cheap. TickerTags will cost traders $US10,000 a month. The company has raised $US800,000 from its founders and another $US1.5 million in a seed round. Another funding round could be on the way.
Digital Reasoning provides algorithmic searches and analysis of chatrooms and individuals' communications to hone in on potential insider trading and eliminate it. CEO Tim Estes recalls demoing his product to a bank using two traders as test cases. It turns out his startup spotted questionable behaviour, with the bank coming to realise that someone even more senior was colluding with the two traders. Digital Reasoning has clearly resonated with some of Wall Street's biggest companies. In late 2014, the company took on an investment from investors including Goldman Sachs and Credit Suisse for about $US24 million.
MyBankTracker sorts through thousands of banks based on your preference settings to identify the cheapest bank for a loan, the best rate on a savings account or simply find the bank that offers the best customer service. Co-founder Alex Matjanec said that the firm had been profitable from its first year, and that it wasn't looking for investor cash.
Startups across the globe are looking to earn money by helping people transfer it. TransferWise is based in the U.K. but is quickly expanding across the globe -- most recently through a big investment from investors including Andreessen Horowitz, which pumped nearly $US60 million into its coffers earlier this year. Now, the company is expanding in the U.S. and has some boldface disruptors on board with its product. The list includes Peter Thiel and Richard Branson.
AltX tracks everything from trading data to divorce information to put together behavioural profiles for hedge fund managers. The company has taken on about $US28 million from some big-name investors and it aims to complete a database of 100,000 hedge fund managers' by year-end. Mutual funds could soon be subject to the same analysis.
Payments startup Stripe helped solidify its place on this list in part thanks to its partnership with Apple Pay. The startup processes payments from major credit card companies and offers services to businesses to track and protect online payments.
Funding Circle is out to provide small businesses long term loans at competitive rates. Co-founder Sam Hodges points out that many business lenders focus on shorter-term loans that start at an eye-popping APR of 40% or more. Funding Circle offers longer-term loans for small business with rates ranging from 5.5% to 25%. The firm has taken on venture funding totaling more than $US270 million since it was founded in 2009. Hodges says he is avoiding taking on cash from a big bank, however, as he'd prefer to work with several rather than be tied to one.
Closir wants to close the gap between emerging markets companies and the investors they will one day do business with. Hence, the 'IR' portion of its name. 'We want to be LinkedIn for investor relations,' says CEO Michael Chojnacki. In the U.K. (where Closir is based) the investment research and corporate access business is worth $US4 billion annually. The company has only raised seed capital to date, though that will soon change. Closir is targeting regions like Vietnam, Russia and even Iran for its services.
Symphony is looking to usurp Bloomberg as Wall Street's most popular messaging tool. The firm will go live with its product later this year. Business Insider has had a preview trial of the messaging system, and will have a more detailed report on that coming soon. The firm has raised $US66 million from a roster of banks including Goldman Sachs. It this week fielded a request for information from The New York State Department of Financial Services. Symphony has said it is looking forward to explaining its platform to the regulators.
Digital Asset Holdings launched in March touting a new technology platform that facilitates secure settlement between digital and traditional currencies. The
cryptocurrency market has developed a reputation as being akin to the Wild West, making secure digital transaction processing paramount. One of the ways Digital Asset Holdings put distance between it and its competitors was by bringing
Blythe Masters, a big name former JPMorgan executive, into the fold in March to lead the company as CEO. In the time since, the distributed ledger startup has gone out to do two deals, buying Hyperledger and Bits of Proof.
Kabbage is targeting the small business borrower. The company processed $US350 million in loans to businesses last year and will hit $US1 billion in lending this year. Co-founder Rob Frohwein says his startup will hit more than $US2.5 billion in loans in 2016, and will likely raise funds in another equity round too. The firm has already raised $US500 million in debt and equity to date. Kabbage can process lending decisions in about 7 minutes, while the same process at a local bank will typically take a few weeks, according to Frohwein.
YieldStreet is another crowdfunding marketplace that is looking to step into the lending gap left behind by banks. The firm was set up earlier this year and will lend more than $US100 million before 2015 is out. Looking forward, in 2017 the company is aiming to lend more than $US1 billion. The marketplace helps connect investors with borrowers secured by sizeable assets. One loan was to an NBA Eastern Conference basketball player who had poor credit but had just signed a multi-million-dollar contract . Others went to companies building nursing homes in Florida and a livery cab company looking to buy more cars to work on Uber's platform. CEO and founder Milind Mehere says he'll announce a new seed round of funding before the end of 2015.
Startup Lootsie looks to 'gamify' the advertising process by allow developers to add reward programs to their mobile apps. The company has already established partnerships with brands like Fiji Water, and in January completed a seed round to bring its total capital to just under the $US5 million mark. A number of loyalty point startups have raised funding and gained traction, only to be scooped up early on via M&A.
Debt refinancing is a hot space right now as startups aim to swipe a lucrative business from big banks. SoFi (short for Social Finance) looks to provide refinancing options for student loans and mortgages. Chief executive Mike Cagney thinks SoFi can one day change the banking business by putting it all on a smartphone.
Banks have pulled back from export financing in emerging markets, leaving a gap the founders of TFM believe they can exploit by connecting exporters and investors. The firm developed its platform and technology at incubator Incubatrix, and hasn't yet taken on any venture funding. Founder Raj Uttamchandani told Business Insider that the firm had 'spotted a new market opportunity...for investors to achieve higher rates of return and to help exporters in emerging markets.'