
Losses Mount at Fixed Income Startup Algomi – Financial News
April 14, 2016 \
37 Comments
Full Article: Financial News
The London-headquartered company incurred losses of £8.8m in the 12 months to the end of June 2015. Since it was founded in 2012, the company’s total losses amount to £13.6 million, according to its latest accounts filed with Companies House.
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37 Comments on "Losses Mount at Fixed Income Startup Algomi – Financial News"
A buy-side product is more scalable then a sell-side product for Algomi. This is because many dealers already have order / inquiry matching solutions (built in-house or from Algomi competitors such as Code Street, Xios, Bloomberg, etc…) In addition, there are more buy-side accounts than sell-side. I understand that Algomi’s Honeycomb product enables the buy-side to heat map dealer interest in their trading schemes. This solution is only viable if a critical mass of dealers integrate Algomi. Many challenges here. I think they should hire people from the Human Genome Project.
It doesn’t matter that they get disclosed dealer trades (and more) via their technology connections if they don’t have a critical mass of dealers providing that information. They clearly have not figured out the right model yet or we would have already seen the major dealers signed up and onboarded.
Never underestimate VCs’ inability to understand capital markets. I suspect Algomi must show clear signs of consistent adoption/turnover/other metric for VC support else it’s strategic investors.
It’s very sad the barriers of entry to solve wholesale market problems are not decreasing but rising.
Fixed Income really is not a VC environment. The time frames are too long, client acquisition cost is too high and revenues are scarce until an unknown critical mass is achieved. The dominant existing platforms are or were all owned/sponsored by the dealers to provide solutions for dealers. I would suggest industry partnership is a better source of capital.
Hi T&F–
Why is a lack of all-to-all a gap? This creates a heavier lift as it changes market structure and is predicated on a large network. It also remains to be seen whether all-to-all will actually have value in the market outside liquid bonds.
You may have revealed a conflicted revenue model as well. Like I said before, all of this is solvable and algomi has no shortage of smart people.
Sorry, bit these are not issues that arose since Algomi launched but well before. One thing for a start-up, is getting unlucky somewhere along the way (market conditions, regulatory changes, delays) another is fleeing forward and hoping for the best. By the way, by ‘no shortage of smart people’ do you mean the abundance of super advisers Algomi has on board?
You are correct in that it’s not surprising that a startup is operating at a net loss. It is, however, interesting and newsworthy that a startup is operating at such a large loss without having figured a lot of things out.
In other industries, traditional software companies operate very differently than we do in FI tech. I wonder if the results we see are a function of our industry or if we don’t operate/execute properly. My gut tells me it’s the latter.
The vested interests both deliberate and unintended, such as compliance creates such a large barrier to entry in capital markets, that it is hard to compare our industry to typical start-ups. So what will it take for profitability? £50-60MM if so is it worth it? This is one of the bigger opportunities and problems we suffer. We wonder why so little changes.
Cougar: Compliance is definitely a barrier, but the same could be said of any regulated market. Still seems like we are much further behind the curve in FI and the approach is different in those as well.
All my experience points to one thing. Concentrate down and focus hard on one objective: getting my clients to do more trades with me (a sell-side, salesperson).
Drop the advisors, cut the workforce to 30% and concentrate on that single core objective. Advisors gone, PR gone, secretaries gone. Success is its own beacon. Executing trades will be one hell of a beacon the market will see. If that seems impossible then so is the business however wide it’s spread.
If Algomi starts getting product right in a time horizon short enough to fund themselves, there is no doubt that they will be the 800lb gorilla in the space. They are by far, taking the most risks and connecting many dots that have never been thought possible. As has been said prior, getting 170 buyside accounts is no easy feat.
For years, Amazon.com was ridiculed. They’ve killed many brick and mortar businesses. They had the vision, tenacity and funding to do so. If Algomi starts delivering real value, they will be hard to beat.
Does the FNL community have any clarity on what “170 buy side clients” means? Is it just signed paperwork, are they just connected in production to Honeycomb, are 170 clients interacting with the dealers that are in production on the other side? Clarification would be most helpful in evaluation.
So in Europe there is Neptune which again for free & many big buysides have signed to along with Algomi too. Whats common amongst these is that free does not mean any commitment especially when there is no live delivery.
Neptune is way cheaper for dealers to participate with and is much more aligned with how they wish to continue to run their business. There has been little friction with Neptune’s model and the community. Algomi on the other hand….
I wonder what Neptune thinks of all the software providers in the space. Are they looking to just be a free utility or are there aspirations to do something interesting with the data? Or will this be up to dealers and buyside to build/buy tools on top of?
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