Driving Innovation in Investment Management with Vestr

Speaker A: Welcome to a new episode of the Elevator Ventures podcast. I'm Mara Ene, the PRN Marketing Manager at EV and I'm excited to be your host in our journey through venture capital and innovation. From Vienna, right in the heart of Europe, we elevate your growth. Today's spotlight is on Vestre, one of our portfolio companies and a market leader in the fintech space. Vestre is dedicated to change the world of investment management, making it simpler than more efficient and remarkably transparent. Discover how their software solution evolved to serve any type of actively managed products and where they are heading now. Let's dive in.

Speaker B: Thank you Rico really for joining us. We really appreciate it. Um, obviously we've been working together now for a bit more than two years, so actually if you consider the negotiation stage as well, then it's uh, almost three years that we have been engaged together. So a pleasure having the work with you guys as Elevator Ventures. But also on a personal level it is uh, definitely first of all educational, um, working with a professional and very, very uh, knowledgeable team. But at the same time it is definitely a pleasure working with all of you and seeing how Vestre is becoming, uh, more and more successful with every passing month and every passing year. We actually would like to ask you if you can maybe give us a bit of a background in a sense that, well, what is your story? What led you to start Crystal? What was the instigator behind this?

Speaker C: Well, first of all, thank you very much for having me on and thanks for the glowing intro. Much appreciated. And of course the feeling is mutual. Um, uh, we really like working with you. Um, and it's been a very nice and ah, successful journey thus far and we're hoping to continue on that path. In terms of our story. Well, all of the founders of Vestre have a very quantitative background. Um, so for example, one of my co founders, Simon, he won a medal at the Math Olympiad. Tim earned a PhD in physics and believe it or not, quantum cryptography. And I did my PhD in machine learning and statistics. And so we all share a common interest in finance and um, we had worked at different international banks and related consulting firms. And our path really crossed at a Swiss investment bank where I was responsible for a multi billion structured products portfolio. And my colleagues worked as traders and quantitative analysts in related areas. And so because of our quantitative background, we got along very well from the start and we all observed market opportunities with a mathematical eye. And so in doing so we realized that we had a very promising product on our books at the time, uh, which was called actively managed certificates, um, but that the technology infrastructure to manage this product was inadequate. And so that's really how it all started.

Speaker B: This is maybe one of the main reasons why we, um, were very impressed with you and the team is that the background itself was impressive and then obviously the product of the background, which is vestor. And if you, I mean, if you can maybe build on that and just maybe share a bit more. What, what was the vision when you started and what do you think, uh, how far are you from it today? Where, where, how much did you evolve? How much investor evolved since you started?

Speaker C: Yeah, it's a very good question because our initial vision was just to become the first pure play technology provider to support the growth of the nascent market for actively managed certificates that I was just mentioning. But we quickly realized, um, that none of the banks we knew at the time had the right kind of system, uh, to manage these products efficiently. And so that led to a lot of manual work and overhead and so on. Um, so in other words, we knew from firsthand experience that we had this growing trillion dollar market that nobody outside of finance had ever heard of and that nobody properly addressed. And so this realization ultimately led us to start Vestor. You know, it's always good to know about a market that, that is big and no one has ever heard of, right? And so we, we, we didn't fear competition from, you know, um, MIT graduates because we knew that even even though they're technically very proficient, they didn't know about this market. So this is very nice kind of niche play. So in terms of our vision, the goal was to stay completely neutral in that we didn't want to compete in issuing or marketing these products. But instead, um, we just wanted everyone to move away from spreadsheets and onto our, what we think is a very capable cloud platform. It turned out that our vision was very timely because the market developed a lot since these early days and has actually doubled in size in the past five years or so. In retrospect, you could probably say we were at the right place at the right time. But in the meantime, um, it goes well beyond that because we realized that the same type of technology we initially built for actively managed certificates is also very useful for related areas, including managed accounts, SMAs, special, uh, purpose vehicles or entities, total return swaps, and even some crypto products. And so as a consequence of that, we significantly broadened our vision to being the premier solution provider for all of these areas, meaning, uh, for all actively managed products, not just AMCs. And this is actually what is guiding us now.

Speaker B: That's amazing. And that's actually a good segue into, I mean, thank you. You already gave a view of the product range and maybe it's a good segue of um, if you can maybe share a bit more on the use cases of AMCs. And how basically have you been capable of basically offering the product to issuers and also to buy side uh, participants. And what evolved in that, what new branching uh, happened in the product? How did you build on top of it of the basic product as well?

Speaker C: Yeah, sure. So at the core of it we've built a highly customizable white label platform that quite a few banks are using by now. In fact some of our customers include really global banking powerhouses. Um, and so when an internal or maybe more commonly external portfolio manager accesses the bank systems uh, to monitor and manage their investment products, they typically use our software without even knowing that they are. So they think they're connecting to a system that was developed by the bank they're using while in reality they're actually using a customized and branded version of our offering. And so maybe just to give you a few insights into the kinds of things our platform does. On our platform, asset managers can monitor and manage their investment products. And this includes for example things like managing corporate actions, providing rebalancing instructions, generating reports that they can then hand to their customers, um, managing fees and so on. So it's really an all in one solution uh, for actively managed investment products.

Speaker B: This is actually very helpful and maybe if you don't mind also telling us more about um, I mean if you want to let's say combine the two, one is where are you taking the product, what new lines are you offering, what are you, where are you headed with it? But then also where is that taking vestor in the future? Mhm.

Speaker C: Yeah. Um, I think the most exciting product we're currently working on, or project I should say is we're working with a global bank to roll out an end to end platform to manage customizable total return swaps. And I can't really say too much more at this point. Uh, but it's going to be really amaz, really happy with the progress and um, it's, it's really going to be quite big for us. Um, we also made some important progress on the crypto front. Um, but we'll only announce that at a later date. Um, at the moment we're, we're collaborating with some good names in the industry to make that happen and it's Quite exciting. Um, especially looking at where the crypto markets are currently heading and how we can facilitate tools to make this experience even better.

Speaker B: Yeah, that's actually quite exciting. We also look forward to that. Uh, we have bits and pieces over the months about that. But then, as you rightly said, the markets are moving in, let's say, with momentum in some directions. So I think, uh, you hopefully are in the best position to capitalize on that. I mean, basically, before we kind of wrap up around Vesta, I want just to ask you a couple of questions about, uh, yourself, about yourself and the company and how you've been managing it. Uh, and as a founder, we would love to try and reflect a bit on a couple of points that maybe could help other founders, but also highlight, um, the journey that you actually go through. Um, and here one of the questions that, uh, we always ask especially, and we ask and we hear it also from budding entrepreneurs, is there is a certain point or moment where you kind of know that you have hit product market fit. You kind of get a feeling that, okay, now my product is what a client wants, or multiple clients hopefully will want. Uh, what was that moment for you with Vespa? When was it? What was Basically the realization, and if you can share more about it.

Speaker C: Yeah, I would say probably when clients had onboarded the first 5 billion in assets on our platform. That's when I knew we were onto something. By now, it's significantly more. But seeing that, you know, all of these different customers from different countries and with different underlying products are trusting us, um, to handle, you know, to provide that solution to them, um, and then seeing the assets grow very rapidly, I think that was the moment we knew we had struck a nerve. So I think that was the time when, when, when we knew we had a proper, uh, product market fit.

Speaker B: That's very nice. That's very nice. And maybe it's just building on that because obviously, until you got there, you definitely have consulted with a lot of bright people, different, uh, subject matter experts, people that guided you there. Can you maybe highlight one of the, let's say, top advices that, you know, kind of click? It can be simple, obviously, you know, it has most of wisdom, is simple anyway. But I'm just curious if there was one or two or, uh, how many? How many? Much you want to share. But if there was one advice that kind of lit a bulb, lit a light bulb on top of your head and gave you some good direction that you still remember to this day, I

Speaker C: would say it was less something that I experienced during the course of providing the solution. But sort of the two, there are two sayings that I kind of live by. Um, one of them is it's better to solve the right problem approximately than to solve the wrong problem. Exactly. Which I think is a very, it's a very nice line, but it's actually very deep. And I think when we started the company, we were very careful to focus, to really try to find out where are people spending their time, what are the things that really need to be automated and how can we best assist them in this process. Um, and initially we actually had this vision that customers should completely automate the workflow end to end. And then we realized that actually it's better to give them options and to be more flexible and yeah, in some cases to provide approximate solutions to, to, to the real problem that they're having rather than a, uh, polished solution that doesn't address all the needs. Because you have to know that, you know, in investment management there are a lot of things that can go wrong or that you have to correct after the fact. Things, um, like that. And if you have a platform that is visually stunning and that ah, does all of the steps correctly, then it works. In the base case, it works very well. But as soon as there's an issue, um, you go back to manual operation. And so we wanted to avoid that and be flexible and really address the concerns that our customers have. And we could do that because we basically built a tool that we wished we had when, when, when we were in their position. Right. And maybe the, the other mantra that I like a lot is, um, this saying the absence of evidence is not evidence of absence. Um, and that comes up all the time again in different scenarios. So just because you haven't seen something in the past doesn't mean it's impossible that it will happen. And so, uh, you have to be prepared for all eventualities. And a good example of that is, you know, our company was started in 2017 and then afterwards, you know, came the COVID time, which nobody had ever seen maybe since the, since the plague. Um, so it was a completely different environment. Then came inflation, then came, you know, all these different, uh, challenging situations. And if you build your business assuming that just because it hasn't happened in the past, it won't happen this time, you're going to be on very shaky ground.

Speaker B: Absolutely. Absolutely. No, and this is definitely, these are very wise words and thank you for sharing them.

Speaker C: Um, and they're not my words. Right, they're quotes. I believe the second One was from Carl Sagan. Yeah, the first one, I'm not sure, but, um, they're not my words, but I lived by these, um, by these words.

Speaker B: Yeah. Thank you. Thank you. We really appreciate it. Uh, closing off, I would like just to ask you if our listeners, whoever listens to this, uh, episode, would like to reach, uh, Vestor, or at least learn more about Vester. Where should they go?

Speaker C: Yeah, so you can, you can visit our website on Vestre, uh.com, that's V-E-S-T R.com and on there you can download some very informative white papers and also find links to our own podcast that we have with industry insiders. And you can also find us on LinkedIn where we have a pretty good presence. And in addition, we. We often attend asset management, securitization and related conferences, and we'll be very happy to meet you there in person.

Speaker B: Thank you so much, Rico. This was a true pleasure. We really appreciate your answers and, uh, we appreciate your time, first and foremost.

Speaker C: Thank you for having me. It's always a pleasure speaking to you. And, um, as I mentioned earlier, it's great working with RIFIs and with elevator Ventures and with you personally. Much appreciated.

Speaker B: Thank you. Thank you so much.

Speaker A: That wraps up another episode of the Elevator Ventures podcast. If you like this episode, make sure to subscribe to our channel and leave us a review on your favorite podcast platforms. Also, if you'd like to be featured, know an interesting startup or just say hi, send us your thoughts, uh, at office elevator-ventures.com until next time, keep elevating your growth.