With Wall Street undergoing enormous change, the hottest fintechs in finance are using novel software and data to reinvent how firms manage their risks and trade assets. Some are even beginning to open opaque private markets to global investors.
The biggest companies in finance like JPMorgan, Goldman Sachs and Blackstone Group collectively spend billions a year on technology, but fintechs have seen major success in targeting the corners of Wall Street most resistant to change. List members this year include firms that are helping to push bond trading onto electronic marketplaces, a shift that’s been decades in the making, and in organizing private assets on data platforms that can feed into users own systems. At the largest investment banks, rogue traders and employees engaging in market manipulation, or other illegal activity, continue to be a greater risk for firms than volatile financial markets. Fintechs are helping them better monitor staff at a time when exploding communications data makes it harder than ever to uncover violations.
These fintech firms don’t get the hype of red hot consumer facing unicorns in payments, lending and cryptocurrencies, but there is a well-trod path of wonky technology upstarts becoming financial powerhouses over time. Prior eras of innovation in finance, which took trading onto electronic markets or made breakthroughs in compliance, yielded $10 billion-plus public firms like Nasdaq, IntercontinentalExchange, MarketAxess, TradeWeb and NiceActimize.
Startups that made the list this year were either holdovers or returners like bond trading platform Trumid, which saw enormous business momentum to close 2019.
Trumid, founded in 2014 by bond trading veterans from Citigroup and Lehman Brothers, initially launched as a platform where dealers of bonds and portfolio managers could anonymously place bids and asks on large corporate bond trades to the entire marketplace. Soon after starting, Trumid’s platform became a venue for billions of dollars-a-month in anonymously-negotiated block trades. In 2019, Trumid made a big breakthrough by adding a way for traders to use its platform to initially place bids anonymously, but then negotiate trades directly with credible offers. This so-called attributed trading, launched in the fall, yielded a record year for Trumid and enormous growth to start 2020. In January, an average of $761 million in bonds were traded on the platform daily, a 325% increase versus the prior year. Some 500 traders took to Trumid to execute trades, which were on average $6 million in size, during the month. With a recent $60 million funding round headed by Hillhouse Capital, Trumid is starting to see solid network effects. Nearly 500 institutions including large banks like Citigroup and some of the world’s biggest debt funds now trade on Trumid, up 15% from the year before.
Another fintech on our list that has big momentum entering 2020 is Carta, which tracks the capital tables of over 13,000 private and public companies, owned by 800,000-plus investors, and worth over a half-trillion-dollars. Its platform of information is becoming a Bloomberg Terminal of sorts for private company equity, both for venture and PE-backed companies. Its capital table and options tracking data is cited in the securities filings of public companies like Peloton Interactive, SailPoint Technologies, Black Diamond Therapeutics and Veeva Systems, and it counts private unicorns like Affirm, Acorns, Stripe, Coinbase and Robinhood as customers. In 2019, a $447 million funding round brought Carta to a $1.7 billion valuation. Now co-founder and CEO Henry Ward is pushing the company to begin exploring how it can use its cap table data to create new secondary markets for private companies, allowing employees or investors to buy or sell stakes.
There are also emerging entrepreneurs on our list, including Kyrgyzstan-born Erkin Adylov, who has built Behavox into a fast-growing compliance platform used by many of Wall Street’s biggest banks, hedge funds and private equity investors. Six years ago, Adylov left a lucrative job as a portfolio manager at hedge fund GLG Partners to build an A.I. compliance stack for financial firms. Now his firm manages natural language processing algorithms and data lakes, which track and store email and voice communications for large banks. Dubbed a “behavioral operating system” by Adylov, Behavox’s technology is even beginning to help buyside firms keep track of research commissions and asset inventories.
Here are the companies serving Wall Street’s biggest firms that made the Forbes Fintech 50 in 2020, including a brief description of what they do, who their users are and how much they’re worth.
Headquarters: Mountain View, California
Cloud-based software used by Morgan Stanley, Fidelity and hundreds of other firms; allows financial advisors, family offices and private banks to track and analyze clients’ holdings.
Funding: $240 million; latest valuation of $500 million
Bona fides: Assets tracked on platform now stand at $1.7 trillion, up 30% from 2018
Cofounder & executive chairman: Joe Lonsdale, 37, also a cofounder of Palantir Technologies
CEO: Eric Poirier, 37
Headquarters: New York City
Sells system used to monitor traders for insider trading and market manipulation. Its algorithms screen email and chat data, while its voice biometrics track phone calls on loud trading desks.
Funding: $20 million; latest valuation of about $300 million
Bona fides: Used by more than 30 companies; revenues grew 130% in 2019
Founder & CEO:Erkin Adylov, 36, a Kyrgyzstan-born former Goldman Sachs analyst and hedge fund portfolio manager
Headquarters: San Francisco
Tracks capital tables (shares, ownership, value, dilution and options) for private companies, their investors and employees in the cloud. Plans to build a secondary marketplace that will allow workers at unicorns to sell their shares to investors.
Funding: $447 million; latest valuation of $1.7 billion
Bona fides: Now managing cap tables for 13,000 companies (including most valuable fintechs Stripe and Coinbase) worth a collective $575 billion, with 800,000 investors
Cofounder & CEO:Henry Ward, 44, started Carta as eShares in 2012
Headquarters: New York City
Electronic bond-trading platform for investment grade and junk bonds. Once only facilitating anonymous block trades, Trumid now allows traders to anonymously post bids and asks, then connects them to negotiate privately.
Funding: $200 million
Bona fides:Used by nearly 500 firms including Citigroup and other big banks. Since launch of new feature, volumes have jumped to $15 billion a month.
Founder & CEO: Ronnie Mateo, 46, who worked in the credit markets, including at Salomon Brothers/Citibank for 18 years before founding Trumid in 2014