I’ve been asked many times why I started Firm58. The simple answer is that I saw a huge opportunity to improve post-trade processing which were confirmed by my experiences and helped along by friendships. I also cannot deny that I thrive on the excitement and fun that comes with developing an idea, building a team and a product, and seeing it grow. I’m also lucky to have a family that supports the lifestyle.
I’ve been developing both pre-trade and post-trade software for the financial industry for many years. I saw the advent of modern trading systems in the early 1990s, the explosion of ECNs in late 1990s and was activated by how they transformed the industry. These changes not only provided everyone (you and I) with the ability to trade virtually any stock any time, but they also brought a new level of competition which drove down the cost of trading. When I got out of college in the mid 80s, my dad set me up with his broker so I could invest my newfound money. I called the broker and bought LTV steel. At that time, I paid $200 in broker fees. Today I could do the same thing, by simply logging onto my computer at 1am and placing an order for $10.
In the late 1990s I began working with financial firms that were increasingly frustrated by their post-trade operations, be it their internally managed middle- and back-office systems, or their back-office service providers (e.g. clearing firm). For these firms, inefficient post-trade operations limited their businesses opportunities and slowed them down. Financial firms struggled to expand their customer base because they typically had the burden of integrating their trading systems, offering new products (equity, options, futures, etc) was difficult because their system and/or service providers may not support it, and finally the lack of competition in post trade processing meant high costs.
One of Wall Street’s favorite companies in the dotcom era was Ariba. I was familiar with ERP and CRM applications from my days at Oracle and Siebel, but Ariba was talking about something new, a supply chain from buyers to sellers. With their software application, they improved the supply chain by linking buyers and sellers through a network much like the internet. I began to think about the supply chain in the financial industry.
My friend and founding partner, Sam Mele, worked at Ariba for many years. We’d been friends for many years, having met while working together at Oracle. Though we no longer worked together, we often golfed together and shared ideas. The confluence of his knowledge of supply chains and network models and my experience with ECN’s and post trade processing was strong. We found similarities between the supply chain concepts offered by Ariba and the way ECNs connected buyers and sellers to marketplaces. We took these concepts and applied them to post-trade processing in the financial industry and found compelling solution. We road tested the idea with large and small financial companies and received positive feedback.
From there, it was full speed ahead. In December 2004 we secured our first round of financing and officially started the company in February 2005. Today we have nearly 40 employees and a list of impressive customers both large and small.