As technology budgets become more constrained in capital markets, less work is carried out in-house and investment banks look to cheaper locations for development work, technologists in Western locations need to consider their options. London is positioning itself as a centre for tech start-ups and vendors servicing the financial sector are among those springing up in the ‘Silcon roundabout’ and Canary Wharf.
In the first of a series of articles looking at expanding financial technology start-ups, we’ve spoken to Kirk Wylie, founder and CEO of OpenGamma, which provides open source risk management technology to financial institutions. This year, the firm received $15m in funding by ICAP-led investment vehicle Euclid Opportunities, which is one of the reasons it’s hiring.
So, can you tell us a little about what your company does? Pitch it in three sentences.
To put it simply, we’ve taken the hardest stuff in all of finance (in terms of computational complexity and maths), built software around it, and released it via open source. Our flagship technology, the OpenGamma Platform, is an open source risk analytics system for handling the data management and computational requirements for front-office and risk teams in capital markets trading. It can scale up to the needs of the largest tier one financial institution, or scale down to an individual trader’s desktop.
Why do you think that financial services firms would want your product?
There are a few trends going in our favour at the moment. The first is an increased need for transparency, fuelled by demands from investors and regulators alike. A fully open source solution is a compelling alternative to traditional black boxes, allowing users to gain a much better understanding of the underlying calculations and their overall risk.
Secondly, the financial services industry has dramatically changed in the past five years. There’s simply no going back to 2007. Margins are down forever, and firms are looking for cost savings across the board. We’ve designed our technology to take care of ‘plumbing’, the parts of a firm’s infrastructure that bring no competitive advantage yet suck valuable development and maintenance resources that could be better utilised elsewhere.
How did you get to where you are today?
I started my career working for pure technology firms in Silicon Valley, and started my first venture-backed start-up at the ripe old age of 23. At the time, I had no idea what a derivative was, much less how to handle the complex calculation and data requirements for operating aggressively in capital markets.
When I was 28, I moved to London for personal reasons, and immediately started working in the financial services industry (even though I knew nothing about it at the time). I realised really early on that my team was building systems that to my outsider’s mind couldn’t possibly be that unique; it turned out I was right. When I ran front-office technology architecture for a derivatives trading firm, it was clear to me that there was way too much duplication of effort in this industry.
So OpenGamma is really the combination of both halves of my career: the Silicon Valley background showing me the disruptive power of open source, and the London background showing me how to apply that to the financial services industry.
Taking the entrepreneurial route is a brave move; why did you decide to do it?
Honestly? I had to. I think entrepreneurship is in my blood, and at the end of my time working customer-side I was really getting the itch again to start another company. The aftermath of 2008 provided the perfect time to start a company that I knew would take a few years to incubate so that we had the product offering ready when people started spending again.
If someone's considering going it alone, what advice would you give them?
You need to have a small team that has the optimism to take on a nearly impossible task with the realism to understand things are going to be far harder than you expect.
If you don’t have the optimism, you’ll never take on something meaningful. But the realism is just as important. Everything takes twice as long as you expect, even when you factor this in. The requirements customers put on an external vendor are higher than they put on internal resources. It can be maddening to your family if you’re walking away from the seemingly stable financial services pay cheques. And customers are often better at buying than you are at selling early on in your lifecycle.
How many people do you employ? Are there any plans to expand?
We currently employ 30 people. The majority of the team is based in London, with three people in New York. We are actively recruiting for both offices. We recently closed a third round of funding to allow us to meet increasing market demand, accelerate product development, and support our growing open source community.
2012 has been a time of fantastic results for us: the launch of 1.0, our first customers signing deals and going into production, winning awards, and closing a significant round of funding. We’re now in a mode where we’re hiring as fast as we can find qualified candidates across pretty much all areas of the business to take advantage of all the opportunities we’re seeing.
How can I persuade you to hire me?
The number one thing is to persuade the team that you’re going to be an asset to them. We have experts in pretty much every single thing you need to build a system like this. They’re smart, driven, and know what they’re doing backwards and forwards. So you need to convince them that you’re going to make their job better, and that they’re going to learn from you, just as you’re going to learn from them.
But the single best way is to grab the code on GitHub, pick an itch, submit some amazing code that shows what you’re capable of, and submit a pull request.
Do you want a coding king or a financial sector guru?
We want coding skills! Our employees actually come from a really wide range of backgrounds. Some have worked at hedge funds or investment banks before, whilst others have no financial services background whatsoever. We think this diversity helps us develop better software, and gives us a distinct advantage over our competitors. For example, most of our UI team has previously worked for large consumer websites, such as Hotels.com. Who says that risk management software should look boring and outdated? The end users of our software are still humans, and by drawing from insights from the consumer world we are able to create a much better user experience.
That being said, domain expertise helps quite a bit, and we often do have jobs (particularly on our quantitative team) that require it. Just don’t expect that having 10 years on a trading desk means we lower the bar in any other area.
What sort of personality does it take to work for a start-up? Can you give us three character traits?
To be successful in a start-up, you must be able to self-prioritize and self-motivate. There’s very little time for or interest in micro-management, so you’ll be given a lot of responsibility from the start. There aren’t six layers of management between you and the ultimate decision holders. There aren’t change committees and business analysts and all of that. You need to be able to ‘own’ an area and drive it along yourself. Therefore, the key character traits we look for are intellectual curiosity, confidence…and modesty.
How would you describe the culture of your firm?
Brilliant, driven, perfectionist, pragmatic, sociable, casual.
Sell your company to technologists working in the financial sector - why should they want to work for you?
We’ve built what I think is the best of all possible worlds, for the people who have what it takes to work for us, there are eight main benefits:
- You get to work on the coolest stuff in capital markets
- You get to work with some of the top minds in your industry
- You’re given the freedom to produce the best work of your career (and held accountable for doing it)
- Your work, with your name attached, is out there for the world to see
- You’re a profit centre, not a cost centre, and treated appropriately
- There’s no meaningless policy, bureaucracy, procedures, dress code, or politics
- You get to help change a $7.1bn a year industry
- We don’t expect you to take a salary cut (unlike most vendors)