For all its innovation, there’s one corner of the European startup ecosystem that remains relatively antiquated: the software and platforms that VCs and private equity investors rely on to manage money and capitalise those in need of cash.
But a wave of capital markets fintechs is trying to upgrade the tech, which is used for things like sourcing and closing deals. Startups in the space are working on everything from automating the startup valuation process and opening up access to VC funds, to bringing messy financial data into one place and using software to help institutions build more efficient internal workflows.
The aim of these fintechs is to make the process of investing faster and cheaper — not only for VC investors and private equity firms, but also for broker dealers and buy-side firms, like asset managers and hedge funds.
The market need
VC is highly regulated, and this means that “trying to change anything is a disaster,” says Rana Yared, partner at Balderton. Everything associated with the fund admin process is “aged”, she adds, from record keeping to accounting systems. That’s a space capital markets fintechs can fill.
There’s also a demand for capital management systems that offer investors low-risk perks to make money work harder while it’s sitting in a bank since they can’t access savings accounts with favourable rates in the way consumers can.
Access to private markets is also restricted to institutions that can back VC funds with big bucks, meaning smaller groups or individuals miss out, says James Devlin, principal at Fidelity International Strategic Ventures. “To overcome this technological and operational challenge,” therefore, “there is scope to develop solutions that cater to the needs of small-scale investment clients,” he says.
Startups in the capital markets fintech space
- 73 Strings
73 Strings offers an AI-powered platform for financiers to speed up the laborious process of working out a startup’s valuation. It has two halves: a data collection platform that scrapes documents for essential company information, and an automated valuation tool that can be scaled according to the needs of different investors. It raised a $10m Series A in July, backed by Blackstone and FISV.
TreasurySpring is a platform for institutions with large cash balances, like VC firms and FTSE-listed companies, to diversify their risk and make short-dated cash investments. This could be in the form of a single secured bank loan or single investment-grade corporate loan, and it also helps financial institutions meet the regulatory requirements needed to invest their cash in banks. In June, it raised a £15m Series B led by Balderton.
Funding: £3.3m ($4.2m)
Sidekick targets retail investors aged 29-49 earning between £80k and £180k a year who want to grow their wealth, by providing active portfolio management, educational tools and the chance to invest in assets like crypto and private equity. In October last year, it raised £3.3m in pre-seed funding led by Octopus Ventures.
Further is essentially a crowdfunding platform for VC — more “ordinary” folk (who are “top decile earners, people who are adjacent to the startup space or who are aware of the potential of startup investing but have no access to it at the moment,” according to the founder) can invest upwards of £1,000 into funds that usually don’t accept small cheques.
Core software upgrades
Funding: £62m ($79m)
Finbourne offers global investment management, banking and capital market firms an interoperable approach to data management. Its platform provides a consolidated view of financial data across the front, middle and back office, through an API-first and cloud-native data approach, making it easier for users to simplify their approach to data management across their tech stack.
Zilo is a transfer agency software business that aims to provide higher operational efficiency for buy-side firms, like asset managers or hedge funds, by offering everything from registry and corporate actions to tax and data management on one platform. The team around Zilo has significant experience within the transfer agency, custody and asset management spaces, and is led by Phil Goffin, the cofounder of automation for investment funds startup Calastone.
Funding: Bootstrapped, according to Dealroom
Adaptive offers platform development software that helps capital and commodity market participants build tailored workflow management, trading platforms and other solutions to replace older legacy software.