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The 1M/1M Deal Radar 2014: Nirvana Systems, Austin, TX

Posted on Thursday, Mar 6th 2014

OmniVest, the flagship product of Nirvana Systems, is a fully automated user-driven investment/fund management system that provides a user with a portfolio of trading strategies and tools to evaluate historical performances and make informed investment decisions. OmniVest was released as a paid beta to its customer base in October 2012.

Nirvana Systems was founded by Ed Downs in 1987. Ed Downs graduated from the University of Texas with a bachelor’s degree in mechanical engineering and a master’s degree in electrical engineering specializing in design automation. After experimenting with stocks and options markets for two years, he decided to start Nirvana Systems to develop automated trading technology for individual investors.

Over the next 25 years, Nirvana created trading platforms and strategies such as OmniTrader, VisualTrader and a host of strategies that plug into them such as MarketScans. Some of its highly acclaimed strategies include the RTM7, the T3 Strategy Suite and the NSP-41 strategy, which have consistently beaten the market every year since 2000. Following the reduction in trader interest in the market during and after the 2008 market decline, their cost of sales went up dramatically, as brokers began promoting platforms that competed with their offerings. This led them to start re-inventing the company and develop the OmniVest product.

The main value proposition of OmniVest is that it is user-configurable, unlike a mutual fund. The users can also get increased diversification and maximum protection of assets, depending on how they configure OmniVest for their account. It provides a collection of trading strategies that can be aggregated into portfolios. These portfolios of strategies generate much higher returns and lower draw downs, because they are more diversified and are able to keep an account invested to a much higher degree than any single system can.

The top target segment for OmniVest is consumer investors including active traders, 401k participants, mutual fund investors, and investors with inactive broker accounts. It also targets brokers, such as Fidelity and Trade King as well as institutions and hedge funds.

Their competitors include Currensee, which provides ‘Mirror Trading’ in non-broker individual investor accounts. Other competitors include Collective2 and The Machine, companies that provide strategies for rent. The Machine is the only competitor that offers a portfolio of strategies.

OmniVest is available to individuals on a subscription fee of $49 per strategy per month. The revenue from individuals varies from $49 to $495. Over 400 customers bought the “lifetime” subscription offer for Omnivest since the launch, paying an average of $2,600 each. They sold over $1 million in subscriptions on this launch. Since the launch, $800,000 in subscriptions has been sold.
They are engaged in two primary efforts to generate sales – Google Adwords campaigns and Broker deals whereby they provide the OmniVest system to a broker, and earn transaction revenue for trades placed by OmniVest users to their broker through the Trade Processor.

OmniVest was completed as a “Minimum Viable Product” in March 2013 and they are now enhancing it with more strategies and other assets that further improve results. Their first broker deal was with Wizetrade – an MB Trading Company. They created a private-label web site for them and launched into the Wizetrade customer base with good success. Over 30% of those who tried the product bought it, generating about $300,000 in sales. They are now in the process of looking for additional brokerage partners who want to increase revenue from customers using their system.

Using the bottom-up approach, Ed says there are 1 million active traders and investors and about 50 million 401k plan participants in the US. In addition, global investors with net worth in excess of $1 million total 30 million according to their research.

Future growth strategy for OmniVest is to secure additional broker deals to generate commission revenue from their customers and to help individual investors secure more consistent returns by providing an alternative to mutual funds and other forms of managed accounts.

Ed says they have been a customer-financed company till date. In June 2013, they raised about $600,000 in a Regulation D equity sale from investors who are also customers.

They are now looking for a financial partner so that they can expand the OmniVest product and gain more visibility in the market. The ideal investor would be an angel who understands what they are doing, becomes an “evangelist” for it, and leads them to other financial contacts to promote the product.

Regarding exit, Ed says that at some point, they might exit to a large financial institution or private equity firm wanting to own OmniVest’s technology for its exclusivity and to leverage it with a large client or capital base.

 

This segment is a part in the series : The 1M/1M Deal Radar 2014


. Nirvana Systems, Austin, TX
. Happy Grasshopper, Safety Harbor, Florida

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