IVCA, ITA Showcase Successes in Financial Technology Investing

IVCA, ITA Showcase Successes in Financial Technology Investing

September 25, 2007

CHICAGO - “ On Sept. 20, the Illinois Venture Capital Association and the Illinois Information Technology Association collaborated to present - œFinancial Technology Investing: Chicago's Home-Grown Successes- . The event was sponsored by William Blair & Co. and cohesiveIT.

To start things off, William Blair principal, Rob Metzger, presented a study that tracked the growth of the financial technology sector.

Noting companies including optionsXpress, Morningstar, TransUnion and several others, Metzger concluded that - œpeople view Chicago as less technology enabled than other centers. If you show them [a list of notable examples], though, they would be amazed.- 

Following Metzger's presentation, founders and CEOs of leading and aspiring Chicago-area financial technology companies shared their insights and experiences with raising venture capital and private equity during a panel conversation. The panel was moderated by Devin Mathews of Baird Venture Partners.

Local companies represented included thinkorswim, AmbironTrustWave, Arroweye Solutions and Firm58.

- œYou can let people battle out the Facebooks and the YouTubes all they want,-  said Mathews, whose firm's global private equity group has raised and managed more than $1.2 billion in capital. - œ[This industry] is going to be here for a while. For the next 25 years, you are going to want to be in Chicago.- 

Because Chicago has a generations-old infrastructure supporting financial marketplaces along with the presence of the CME Group (the merged entity of the Chicago Mercantile Exchange and the Chicago Board of Trade), the underlying theme of the panel stressed that technology start-ups seeking to service the space are best located in or near the Windy City.

Knowledge of the industry and close proximity to customers can trump advantages competitors might have recruiting technology talent on the coasts. All presenting panelists showcased an ability today to raise venture capital or later-stage private equity to fund their businesses.

- œYou can't be anywhere else because the talent pool is here,-  said thinkorswim founder Tom Sosnoff. That company is an online brokerage that was founded in 1999. In Sept. 2006, thinkorswim was acquired for approximately $340 million by INVESTools.

The company had raised $22.5 million in 2004 from Palo Alto, Calif.-based Technology Crossover Ventures. Sosnoff added: - œIt's a much more manageable town to build a small business. When building a financial technology company, you need to be around your domain and intellectual property.- 

Same Mele, the CEO of Chicago-based software company Firm58, says that while - œChicago is the risk capital market of the world,-  he cautioned the audience of mostly venture capital and private equity investors that the city - œwill lose more investment opportunities unless this room takes more chances and acts more like [investors] on the coasts- .

To date, Firm58 has raised about $6.2 million in angel and venture capital financing. Earlier in 2007, the company closed a $3.7 million venture capital round led by Evanston, Ill.-based New World Ventures. In July, the 15-person company inked a deal with the Chicago Board Options Exchange.

Ajay Singhvi, the co-founder and CTO of Arroweye Solutions, recently raised money from Baird Venture Partners to fund his company, which develops technology to customize gift cards. While Arroweye was founded in Santa Barbara, Calif. and later moved to Las Vegas, it ultimately relocated to Chicago because he says - œthe customers are here- .

AmbironTrustWave is backed by San Francisco-based FTVentures and is headquartered in Chicago. The company develops subscription-based compliance management software for banks, credit card processors and financial services companies. For CEO Robert McCullen, Chicago offers geographic advantages in addition to proximity to financial markets.

- œIt is the easiest place to get to anywhere in the world,-  McCullen said.