Vest, a fintech company, is bound to shake up the financial services sector.
The company resides partly on the East Coast of the United States in Washington, D.C., conveniently close to all of the financial action of New York. The company is also partly based in Stockholm, Sweden as a member of the prized startup hub Sup46, which is abuzz with many outstanding startup companies.
The company was founded a little over 2 years ago and has four founders, Karan and Jeff, who have a financial background, and Daniel and Ben, who have a technical background. They essentially saw a niche in the market with people who wanted to take an active part in the stock market but were effectively scared away by the risk and volatility associated with it. Karan and Jeff had worked with structured notes, which is a method of investing that has historically been more readily available to high net worth individuals.
Opening investment for everybody
Structured notes have the ability to make a lot of money but it’s a very manual process that is handled by investment banks and is targeted mainly to clients with large sums of money available to invest. Vest sought a way to bridge the gap in an industry that cuts a large portion of the would-be-investing population out. They had the idea where they could effectively execute the same scenario using exchange rated options. They imitate structured notes, thus limiting investment losses by providing buffers against losses and caps on gains. This allows Vest to bring the price down on their fee. In doing so, they are able to lower the barriers to entry and widely offer a type of investing that has been virtually unknown to a vast majority of the investing population.
Bill and Daniel came along with their technical backgrounds, and wanted to apply technology to put this idea on an online platform, with a sleek and intuitive user interface (UI) that would make it very easy to utilise. With investing, since there are a lot of numbers, it is perceived that you have to acquire a large degree of sophistication to be successful, but it was very important to Vest that they have a UI that was easy to use and spoke for itself. One look at the Vest website and it’s clear that it is a combination of financial and technical insight. Since it’s finance and real money that they’re working with, people need to understand what it is they’re doing and Vest takes that notion very seriously.
There are many online trading platforms, and speaking with Daniel Roos, he was the first to mention that what they do at Vest is not something that is unknown in the investing world. Anyone can do what they do and execute the same scenarios if they have an account that trades online, an excel spreadsheet, and a few hours to do the maths. It’s quite a lot of work behind the scenes, but this is not something that is impossible to duplicate. They simply want to bring something that has typically been available to only a select group of investing individuals and make it something that is accessible to anyone who is interested in not only investing their money, but in understanding what and how they are investing. Typically, obtaining one of these protected investments is a very manual, high-touch process. Investment banks do it and you have very expensive people in the loop, which keeps costs up, thus limiting who may enter.
Fees in this area with different companies typically range between 2-5%. Vest charges only 0.5%. It’s a much more streamlined process, according to Daniel.
High level of finance talent in the Nordics
With the technical side located in Stockholm, they are able to utilise the strong fintech focus and great community, which helps provide a critical mass of jobs and employees. There is also a set of larger companies that develop software and provide sophisticated financial services. A large amount of experienced developers that also have a high degree of financial experience, is an extremely difficult combination to find. They are able to really leverage the Nordic technology competence with their strategic tech base in Sweden. This combination of skillsets make Stockholm a great opportunity for small startups to find partnerships, their first customers, and so on. Furthermore, Sweden’s Royal Technical Institute (KTH) is located right in Stockholm, which produces a pretty steady stream of graduates providing many opportunities for those who have just graduated to make technical use of their degrees and apply what they’ve learned in the real world.
Daniel left our meeting with words of wisdom to those seeking to launch a startup of their own, stating that there is a lot of advice out there with some being very good and a lot of it being generic. So it is of utmost importance to understand your industry very well, so that you can effectively choose between advice that is relevant for your company and sift out what you should ignore; understand your niche and choose the advice you take carefully.
It’s proved to be working exceptionally well for Vest. They are working hard to deliver on their key concept of stability and protection through derivatives to everyday investors, and in a simple-to-use manner for a low price. As Daniel so succinctly put it, "That’s the core of Vest."