Founded in the fall of 2011, Algofast has created a disruptive technology that provides an event-based trading software for retail investors and an upscale version for professional traders. The trading software brings parity to retail investors versus Wall Street banks and professional trading firms by executing trades at speeds up to 100 microseconds (one-tenth of a millisecond). Their proprietary algorithms automatically trigger trades in response to a wide array of economic news, events, and corporate indicators. AlgoFast simplifies algorithmic trading, makes it cost-effective, and provides more profitable trading opportunities for a wide range of users.
PRODUCT/SERVICE: Users choose one or more economic numbers to trade off, set the parameters for each number, select the product to trade, and enter price and quantity. The price and quantity of an order can change based on the significance of the news and the divergence between the expected economic number or consensus and the actual number. Trading strategies can be based on more than 1200 different corporate and economic indicators such as the release of earnings, changes in Federal Reserve policy, unemployment figures, crop reports, natural disasters, etc. The software integrates multiple news feeds with trading parameters set by the user and executes trades within 100 microseconds upon the release of economic data from such sources as Dow Jones.
VALUE PROPOSITION: AlgoFast offers the following value propositions: retail investors and financial advisors can execute orders as quickly as professional traders and receive superior pricing; retail investors and financial advisors can set trading parameters and use defensive strategies to protect portfolios from adverse news and events; professional traders can profitably trade the release of impactful news whereas before they remained on the sidelines due to volatility; users can trade off multiple indicators simultaneously and prevent conflicting data from initiating an opposite trade; traders can automatically scale and buy or sell more contracts depending on the strength or weakness of the economic news; a major piece of economic news can affect multiple markets simultaneously and create numerous trading opportunities.
MARKET SIZE: AlgoFast is targeting 3 markets–retail investors, financial advisors, and professional traders. According to market research, there are close to 40 million investors with online brokerage accounts, 240,000 financial advisors, and 3500 professional trading firms. In the online retail market, the major brokerage firms have approximately the following number of customers: TD Ameritrade–6 million, Charles Schwab–8 million, and E-Trade–4 million. Each of these brokers has significant Daily Average Revenue Trading Volume (DART). 1.6 million customers are classified as active traders who make a minimum of 10 trades per month and 16 million customers are classified as active investors who make an average of 3-10 trades per month. AlgoFast estimates its Total Addressable Market (TAM) at $975 million for online brokerage firms, $900 million for financial advisors, and $50 million for professional traders.
REVENUE MODEL: AlgoFast plans to charge $10-$15 to enter a trade strategy on their servers with online brokerage and financial advisor platforms. The version offered to professional trading firms will charge per trade or a monthly subscription fee. Other sources of revenue: historical trading data, an event-based alert system to protect investor holdings, and interactive investing tools. The company can easily scale and achieve rapid growth with minimal incremental cost.
MANAGEMENT TEAM: Justin Bouchard, Chairman/CEO, is the founder of Bouchard Trading, a futures trading firm in Chicago which executes millions of contracts per year. He is a member of AT9000 which sets standards and guidelines for the automated trading industry. Jitesh Thakkar, Chief Senior Architect, is the owner of Edge Financial Technologies, a specialist in the development of black box and algorithmic trading systems. Previously, he was a senior software engineer with Trading Technologies, TD Ameritrade, and UBS. Jitesh is a member of the high frequency trading regulatory board at the Commodity Futures Trading Commission (CFTC). John Gage, VP of Sales, traded Eurodollars in the early part of his career at the CME. Subsequently, he acquired extensive sales experience at Thomson Reuters and CQG. Michael Hendrie, VP of Corporate Strategy and Business Development, is the founder of Expedition Capital Partners, a Chicago-based private equity firm. Previously, he worked in private equity at CHS Capital, as an investment banker at Goldman Sachs, and acquired software experience as a consultant with Manhattan Associates. Dean Dussias, Senior Advisor, is the former COO of Magnetar Investment Management. Previously, he was the CEO of Exxceed, a software firm servicing Fortune 1000 companies. Prior to Exxceed, Dean was the CFO/ COO of NumeriX, a global leader in software serving large commercial banks, investment banks, insurance companies, investment funds, and public accounting firms.
COMPETITIVE ADVANTAGE: AlgoFast has the following competitive advantages: Three patents were published in January 2013 and are pending in the U.S. and abroad; the software has several unique features including text that clearly spells out the parameters of the entered trade; the ability to trigger trades based on multiple indicators, the ability to prevent trades based on multiple indicators that contradict one another, the ability to automatically scale trades, and a warning system for trade parameters that are illogical; no competitor offers event-based trading to retail traders and only select proprietary trading firms offer such capabilities internally to their professional traders.
PROOF OF CONCEPT: The product is ready to go to market. AlgoFast Event Trader will be sold through online brokers to retail investors. AlgoFast Pro is designed for financial advisors and professional trading firms. AlgoFast was nominated for “Best Algorithmic Trading Technology” at the UK Forex Awards in 2012. Futures Magazine wants to demo their software and write a review.
CUSTOMERS/USERS: AlgoFast generated its first revenue the week of 2/11/2013 with a professional trading firm and expects to generate significantly more revenue beginning in July 2013. They are in the late stages of negotiating an agreement to operate their retail platform on the website of a major online broker and are currently working on integrating the respective APIs.
STRATEGIC PARTNERS: AlgoFast has established numerous strategic partnerships with major players in the trading space: they are the only company with event-based trading technology to be approved by the CME as an official independent software vendor (ISV); they are the only software vendor to partner with Dow Jones Newswires; they were accepted into Interactive Broker’s Marketplace Program; they wrote an API for CGG which has the largest customer base of professional traders in the industry; they have an informal joint marketing agreement with Advantage Futures; they partnered with financial-software staffing firm Edge Financial Technologies which will facilitate the hiring of key employees once funding is acquired; AlgoFast continues to test its software in pilot programs with several trading firms in the U.S. and overseas.
FUNDING: The founders have invested $1 million to develop the software, apply for patents, and build a world-class management team. The company seeks an additional $3 million from VC’s who can help them find talent and scale. They want to hire 9 software developers and 3 salesmen and need capital for servers, news feeds, connectivity, historical economic data, marketing, and legal. The current valuation is $9 million. They need $2 million to build infrastructure and complete the management team. AlgoFast needs to execute quickly and flawlessly and an additional $1 million will ensure a smooth rollout of their products.
SUMMARY: Algofast has created a potentially disruptive trading technology that has the ability to scale with minimum costs. The product is ready to go to market and 2013 will be a critical year to validate demand and generate revenue.