“If you go to our website, you probably shouldn’t understand what we do,” says Kirk Wylie, who serves as both chief executive and chief technical officer of OpenGamma, a company selling open source software to the financial services industry.
“You see, we found the hardest stuff in all of finance, in terms of computational complexity and maths, and we’ve built software around that and released it open source. So unless you work at a hedge fund or for an investment bank, it probably looks like gibberish.”
Wylie isn’t exaggerating. To anyone unschooled in the vagaries of financial lingo, OpenGamma’s website is all but impenetrable. Clearly someone’s reading, though: the company just closed another round of funding, bringing the total amount they’ve raised to some $23 million.
That’s an impressive amount of money. So why haven’t we heard much about OpenGamma before? “We get ignored because we don’t go to all the Tech City stuff,” says Wylie.
I press him to elaborate. “You know, when the Tech City map came out, I was sort of annoyed. I asked someone involved in building it – who works for me now, oddly enough – why we weren’t on there and he said the code had a requirement that your postcode start with an E.
“I did once think about moving to Shoreditch. Half my staff threatened to quit.”
Equally challenging for Wylie, no doubt, is explaining his business to tech bloggers, few of whom are able to code a line of PHP, let alone comprehend complex financial software. If it’s not a glossy consumer play, it can be difficult to get coverage on the big blogs.
“I moved to the UK eight and a half years ago and went into finance, because, coming from Silicon Valley, the tech scene here was a little too nascent,” Wylie explains. “What I saw was incredible. There are tens of thousands of developers working in that sector, yet some of the systems were designed in the 1990s.
“There’s a ‘duct tape’ approach to this incredibly antiquated software that manages trillions of dollars. The same technology is being built over and over again. As an entrepreneur, I look at a situation like that and I see an opportunity.”
Put simply, OpenGamma is a LAMP stack for quantitative finance, providing for investment banks what, say, Ruby on Rails does for web app developers. The company is building secure databases that understand highly complex mathematics and market data feeds.
Because OpenGamma’s product is open source, everyone gets access to the same cutting-edge analytics and risk analysis technology.
It’s a deep vertical, and one that few start-ups are operating in. “That always surprises me,” says Wylie. “I mean, if you look at what’s going on in east London, that’s not really what the UK excels at.
“All the investment banks have left San Francisco. In New York, you have to compete with the West Coast for developer talent. Elsewhere in Europe, the guys that are smart enough have already moved to London. I could only have started this business here.”
The paucity of companies on OpenGamma’s playing field in the UK is partly thanks to over-cautious European investors. “You need very deep pockets to fund what we do. Right now, we have an office with eight computer science and maths PhDs in it, out of a total of 20 people on the payroll in London.
“And we raised $8 million just to get to version 1.0. That’s old enterprise software sort of money.”
But there are some venture capitalists out there willing to take the plunge. Accel Partners invested $2 million in OpenGamma’s first round, returned as an investor in a $6 million Series B in 2011 and returns again this time, taking a back seat to broker and services company ICAP, which led the round, together with Euclid Opportunities.
OpenGamma’s silent success is typical of many “under the radar” start-ups that, whether by accident of geography or the nature of their product, find it difficult to get a hearing in the press. It’s a continuing tragedy, made all the more inexplicable because Europe has such a lousy track record in consumer internet start-ups, but such a strong one in enterprise and e-commerce.
OpenGamma has raised more money and employs more people than the majority of the east London beauty parade start-ups that grace the pages of WIRED and TechCrunch every month, and it’s solving some of the hardest maths and engineering problems out there. Astonishing, really.