Sramana Mitra: Can we do some examples?
Alexander Ross: Cloud Margin is a cloud-based capital management solution that I mentioned. It focuses on compliance, clearly, because it enables the end users to monitor transactions. Cost is also a factor. This solution is a multi-tenanted SaaS-based solution. It’s much cheaper to adopt as an organization and much cheaper to manage.
The cost comparison we see to the incumbents that are all deployed is a tenth of the price, which is significant. Compliance, cost, and capital are the three components that that particular solution touches on. Another example would be Privota. That’s a business that sits at the intersection of big data and cybersecurity. It sits on top of the new generation of data infrastructure. It enables differential privacy to the end user.
What does that mean? If I have very sensitive datasets across my organizations. This business will enable me to manage those risks but at the same time, be able to surface the insights from those sensitive datasets to the business analyst and extract that business intelligence. It masks and tokenizes the underlying data.
It can either do that in a static way or a dynamic way. You can either publish the underlying dataset in a way that aggregates it up to a point of granularity where it’s then difficult to reverse out, or in a dynamic basis. As you make a query, it can add noise to the dataset in a way that prevents you from identifying individuals’ data.
They recently signed a very significant contract with the UK’s National Health Service to manage across all of the entities so that data can be used in a way that doesn’t risk exposing individuals’ data. It wasn’t specifically capital-market focused but saw a huge application potential within capital markets and we helped them to zero in on that alongside the other opportunities they were focused on in telecoms and healthcare.
Sramana Mitra: What is the source of your deal flow? Are you seeing a lot of people from the finance industry starting up companies?
Alexander Ross: We were the first capital market-focused VC fund out there. Given the niche focus of the fund, the brand has become stronger and people refer quite a lot of opportunities to us. We get a lot of inbound. One of the components of the fund that I didn’t mention earlier is our strategic bank partnerships. This is more of an advisory relationship partly driven by the fact that banks tend to not be able to invest in private funds post the Dodd-Frank regulations.
Effectively, we get paid a small retainer to share our pipeline with a number of tier-one and tier-two banks primarily from an adoption perspective. We kiss the frogs as part of our investment process. Then we’ll go to the budget holders and problem owners within the banks and say, “These are the three or four solutions you should be looking at.”