Point72 seeds Quantopian-backed fund with up to $250mm
Posted: Fri Jul 29, 2016 4:56 pm
That's pretty funny. (It's starting to seem that to these SV types, everything is starting to look like a nail.)
But really, does anybody know how Quantopian actually makes money?
I'm really insistent on trying to piece this one together.
My thoughts:
I can't imagine it has any serious edge in the world it lives in, particularly now that some of their direct competitors can (probably) see exactly what they're doing. (Another thought: I'm currently reading the biography of Rockefeller, "Titan," and it's interesting how such an effective strategy for 150+ years has been to find your most formidable potential competition, convince them you're an ally and create a partnership of whatever form, any form will do, and keep them under your indirect watch/control so they never get a true edge. Seeing this lots with fintech as well; JPM is doing it.)
I see a few business models, not necessarily mutually exclusive.
1. When I visit a forum like HackerNews, it's clear to me there is a very large population of otherwise very intelligent and talented compsci types who think they can eke out an edge in the markets by using their brainpower. (Note: don't read the finance/markets related threads on HN unless you want an aneurism.) Quantopian basically becomes the ThinkOrSwim, eTrade, whatever, for that population. The platform that convinces generally "intelligent" retail traders that they, too, can make a lot of money, and that this new platform gives them all the tools they need. I admit the structure is a bit different this time around, but it was mentioned by jslade that they may be using this platform as a sales distribution channel. There was a BCG report out recently that I actually somewhat agreed with, even if it's obvious to some: it basically forecasts the AM industry ends up with 4 buckets of companies that survive: specialized alpha shops, beta factories, solution providers, and distribution powerhouses. Put simply - Quantopian markets itself to retail traders as a "specialized alpha shop" that you, too, can be a part of. In reality it's a bit of a combo between a solution provider and a distribution powerhouse. It aggregates lots of wannabe algo traders with cash to blow, and ultimately sells them solutions, both of their own creation and 3rd party solutions. ("But we're also helping some of you make money, see?!")
2. It genuinely does run these algo's, and in the same vein as jslade's friend: by raising money from other SV VC types who will love this type of idea, rather than from your traditional HF fundraising sources (capital introduction, personal connections, another financial company or fund, whatever), it can run outside money, gain if it works, and walk away if not. Basically, a traditional and rather unsophisticated HF that is going after an easier source of funding.
3. ???
But really, does anybody know how Quantopian actually makes money?
I'm really insistent on trying to piece this one together.
My thoughts:
I can't imagine it has any serious edge in the world it lives in, particularly now that some of their direct competitors can (probably) see exactly what they're doing. (Another thought: I'm currently reading the biography of Rockefeller, "Titan," and it's interesting how such an effective strategy for 150+ years has been to find your most formidable potential competition, convince them you're an ally and create a partnership of whatever form, any form will do, and keep them under your indirect watch/control so they never get a true edge. Seeing this lots with fintech as well; JPM is doing it.)
I see a few business models, not necessarily mutually exclusive.
1. When I visit a forum like HackerNews, it's clear to me there is a very large population of otherwise very intelligent and talented compsci types who think they can eke out an edge in the markets by using their brainpower. (Note: don't read the finance/markets related threads on HN unless you want an aneurism.) Quantopian basically becomes the ThinkOrSwim, eTrade, whatever, for that population. The platform that convinces generally "intelligent" retail traders that they, too, can make a lot of money, and that this new platform gives them all the tools they need. I admit the structure is a bit different this time around, but it was mentioned by jslade that they may be using this platform as a sales distribution channel. There was a BCG report out recently that I actually somewhat agreed with, even if it's obvious to some: it basically forecasts the AM industry ends up with 4 buckets of companies that survive: specialized alpha shops, beta factories, solution providers, and distribution powerhouses. Put simply - Quantopian markets itself to retail traders as a "specialized alpha shop" that you, too, can be a part of. In reality it's a bit of a combo between a solution provider and a distribution powerhouse. It aggregates lots of wannabe algo traders with cash to blow, and ultimately sells them solutions, both of their own creation and 3rd party solutions. ("But we're also helping some of you make money, see?!")
2. It genuinely does run these algo's, and in the same vein as jslade's friend: by raising money from other SV VC types who will love this type of idea, rather than from your traditional HF fundraising sources (capital introduction, personal connections, another financial company or fund, whatever), it can run outside money, gain if it works, and walk away if not. Basically, a traditional and rather unsophisticated HF that is going after an easier source of funding.
3. ???