Why this UBS MD left a seven-figure salary to start a fintech firm
When Stu Taylor decided to quit his job at UBS to start his own business in 2012, he was giving up a seven-figure salary and a managing director role leading a team globally.
“It was a big gamble, I’ll admit, but investment banks were implementing wave after wave of lay offs and six months after I left, UBS unveiled a huge round of redundancies and pulled out of some fixed income businesses,” he says. “But I was convinced by the idea, that it was the right move for my career and I was in control of my own destiny.”
Taylor was global head for match principal trading at UBS and admits that he was in a “good position” to see how the investment banking trading floors were developing. “Trading businesses were not making as much money and bonuses were shrinking as base salaries increased dramatically, particularly at the senior level. It didn't take much of a crystal ball to see that this was unsustainable,” he says.
To some extent, however, the venture he launched on his exit from investment banking, Algomi, relies on the survival of the human trader. It is a fintech start up that is designed to provide access to a huge amount of data on the fixed income markets to both the sell-side and buy-side to help them make the right decisions when buying and selling bonds.
The changing fixed income market
“Coming from an e-trading background allows me to see the limits of electronic execution and the bond markets are too broad and complex for this,” he says. “We digitise the information to allow investment banks’ sales and traders access to the broadest range of opportunities and offer products that their clients might not even realise they want. But there remains a need for human intervention in the execution.”
Now that fund managers are being brokered by the investment banks in the bond markets, Algomi’s software aims to provide buy-side firms with enough information to chose the right firm. It collects and analyses trade history and data to enable asset managers to direct their orders towards the best banks.
Algomi was set up by Taylor (who is CEO) and two other UBS executives in 2012. Michael Schmidt, a former MD in fixed income, is its chairman and Usman Khan, who worked on its fixed income e-trading business, is its chief technology officer.
Khan left UBS in 2009 and ran consultancy CapXD along with Robert Howes, a former UBS executive director who is now COO at Algomi. CapXD developed the algorithm that lies at the core of the Algomi's product. This, says Taylor, allowed them to get the Algomi off the ground more quickly than if they'd had to develop the product from scratch.
An entrepreneurial culture
In the past 12 months Algomi's expansion has been rapid. It began 2014 with around 55 employees and now has 125. Offices have been launched in both Asia and the US.
“We have a broad range of employees – former sales professionals and traders looking for a change of scene, but on the tech side people have worked for social networks, games companies or some of the banks’ IT teams,” says Taylor. “Now that we’re getting larger, the challenge is to remain entrepreneurial and not turn into a lumbering bureaucratic organisation. We don’t want to become a bank, which are a series of small fiefdoms with a lot of office politics.”
Taylor admits that years of high pay in banking allowed him to get Algomi started. For the first six months it was entirely self-funded: “The idea was to take a pay cut and sacrifice money for a better work-life balance. That hasn’t really worked out – I’m working even harder now.”
Having the funding, and ability to support the venture until revenues start to roll in is incredibly important, admits Taylor. Algomi only sought external funding after securing its first investment banking client – an investment amounting to tens of millions of dollars from venture capital firm Lakestar.
“My main piece of advice to anyone starting their own business is to seek funding as late as possible,” says Taylor. “When we received VC backing, we had a product and we had clients. This puts you in a much stronger negotiating position – without it, it’s possible we could have sacrificed 60-70% of our business. As soon as you secure revenue, the dynamics of conversations with VC firms change entirely.”