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Taking the risk out of risk analysis

25 May 2017

The article at a glance

AlgoDynamix is a pioneering portfolio risk analytics company. Its software tools identify disruptive events in international financial markets, giving investment bankers and …

AlgoDynamix is a pioneering portfolio risk analytics company. Its software tools identify disruptive events in international financial markets, giving investment bankers and asset managers advance warning of major directional market movements that could affect their holdings.

With a recent win for Best in Tech Innovation at the prestigious Cambridge Wireless Discovering Start-ups 2016 showcase, just one of a host of accolades from the fintech sector, AlgoDynamix is attracting a lot of attention. CEO Jeremy Sosabowski said, “We’ve out-performed our most optimistic projections and, in 2017, our focus is on growth.”

Jeremy Sosabowski

The idea for the business grew out of Jeremy’s frustration that, in the aftermath of the 2008 financial crisis, major financial institutions were still relying on the same inefficient backward-looking risk forecasting models that had so completely failed to alert them to the crash.
However, Jeremy admits: “telling companies that they were relying too heavily on outdated concepts was the worst sales pitch ever. We had a lot to learn about how to commercialise and market our technology.”

Since those early days at the end of 2013, Jeremy and co-founder and CTO Wei Teo (who joined from Merrill Lynch and previously Goldman Sachs), have moved fast to fill those gaps in their knowledge. AlgoDynamix clients include several top-tier investment banks and asset managers and at least one major Silicon Valley player. And the fast-growing AlgoDynamix team operate from offices in Cambridge and London’s Canary Wharf, Europe, the US, Hong Kong, Singapore, Australia and Japan.

Building on their risk forecasting expertise, and in response to customer feedback, the company has recently added a new product to their suite – portfolio optimisation software. Jeremy comments: “We developed this software in response to feedback, so we knew the demand was out there. Listening carefully to what our customers want is very much a part of our strategy.” It’s an approach that’s winning AlgoDynamix new customers not only from high-profile corporates, but also from a client-base that’s notoriously hard to reach – the ‘don’t call us, we’ll find you’ coterie of family offices and high net worth individuals.

With a first degree in Signals Processing and an engineering PhD from the University of Cambridge, Jeremy started life as an entrepreneur with more than ten peer-reviewed publications and an IP portfolio of several granted patents to his name. He’s the first to concede that his deep understanding of forecasting algorithms far outstripped his insight into the business imperatives he would face as a fintech CEO.
He admits:

I was very much out of my comfort zone. I was a Maths and tech geek. I had very little understanding of the commercial side.

Sanity, structure and framework

“Fortunately,” says Jeremy, “just as we started up in late 2013, we secured a place on the Accelerate Cambridge programme run by the Entrepreneurship Centre at Cambridge Judge. In those early days, Accelerate Cambridge gave us three critical things: sanity, structure and a framework.” As one example of how the practical support and expertise of the programme’s coaches and mentors significantly impacted the company’s commercial development, Jeremy points to the coaches’ stress on understanding the value of disruption from the client’s perspective. “Although our deep dive algorithms are themselves innovative and disruptive, we quickly learnt that disruption can only go so far. Clients aren’t going to ditch existing systems and start again. Our products have to add value and bolt-on to what’s already in place.”

Jeremy also feels the company benefited from pressure to move out from the relative comfort of the software development phase and get that first AlgoDynamix product out into the market. “That pressure to sell has been critical,” he says. “Making sales is a brutal reality. It’s not been easy and, because we’re doing what’s never been done, there is no rulebook. But the Accelerate Cambridge coaches, led by Director Hanadi Jabado, put their expertise, experience and their networks at our disposal.”

Securing investment was another challenge that was eased by being part of Accelerate Cambridge. “At the beginning I remember a feeling of complete asymmetry with investors – it seemed like we were a total mismatch.” Jeremy admits. The Accelerate Cambridge programme places great emphasis on helping entrepreneurs develop ways to communicate their value proposition effectively, promoting the best possible fit between ventures, clients and investors. Now Jeremy is in considerable demand as a speaker, but, in those early days, networking and pitching for his company was quite a challenge for this former mathematician turned CEO: “Of necessity, my role has evolved from technical to client facing. It’s a personal and professional stretch that’s been very positive for me and for the company.”

By 2015 Jeremy and Wei had positioned AlgoDynamix to win backing from Cambridge–based Amadeus Capital Partners. Jeremy remembers:

Our product was still at a very early stage, but we had learnt from the Accelerate Cambridge programme how to communicate our technology and our business model in such a way that the investors had confidence in us and our expertise.

Investors also very much appreciated the company’s involvement with the Accelerate Cambridge programme. Jeremy is convinced that investors see the programme as a sort of pre-selection and validation. In addition to the endorsement that comes with Accelerate Cambridge, Jeremy also values the considerable practical support coaches offered during early investment rounds: “Accelerate Cambridge walked alongside us every step of the way, helping us to identify the right investors and to value ourselves realistically and robustly.”

Players in a premium market

Three years after joining the Accelerate Cambridge programme, AlgoDynamix is on course to out-perform its early hockey stick growth projections. Jeremy is recruiting employees at the same time as he builds sales and client support partnerships across the globe. With growth as the company’s priority for the foreseeable future, Jeremy’s 2017 commitments already feature pitching AlgoDynamix to financial institutions and high net-worth citizens in New York and Paris: “AlgoDynamix is now operating in a premium market where the price tag is irrelevant. That’s a good place to be.”