The Alternatives Entrepreneur - Haik Sahakyan

Speaker A: It doesn't matter where that data is, you kind of go out and get it. Right now a lot of the providers like Addepar and a lot of the black diamonds of the world and the apx, which is an advent solution, uh, out there, they do bring that data, but they bring them with archaic methods which are the SFTP file method. You essentially get that data, uh, into a file folder and then you go ahead and process it every morning. We want to go beyond that and we want to actually have a great relationship and engagement with a lot of these custodians and build the next generation data distribution, uh, network.

Speaker B: Welcome to the Entrepreneur Story podcast. Powered by the Trellis platform. I'm your host, Dennis Crowley. My guest today is the co founder and CEO of Altair. He, he's had an amazing career working with Atlantic Trust, Addepar, founding Blackmark Technologies and now building Altair. I really enjoyed the conversation and getting to know him and so without further ado, let's get this podcast started. Hike. Thanks for joining me today.

Speaker A: How are you doing? Well Danny, thanks so much for having me on.

Speaker B: So you are the co founder and co CEO of Altair. What is Altair and what do you guys do?

Speaker A: Correct. So Altair is a new cutting edge portfolio management and reporting system that we're building for family offices, registered investment advisors and institutions. Um, we're looking to tap into a space which I know well due to my background and past work experience. Um, but we feel like there's a lot of white space in the market that we can go after and we're trying to give people a tool and a platform to really solve complex problems within the wealth management space.

Speaker B: So what is your background? What's that experience that gives you this expertise in this area?

Speaker A: Great question. I started my career in the client services side of wealth management, uh, in San Francisco, where I ran a lot of reports, manually, updated a lot of portfolios manually for every offline investment. Um, and I went through a lot of the processes that a back office and middle office type of role would experience in a smaller team setting. After I left that role, I went to a company called Addepar, which works within the wealth management, ah, technology space. And I realized that although we were providing a platform to a lot of the clients, there were still a lot of desirable features that needed to, uh, take place within that platform that clients can automate their job, make it a little easier to understand their data and really get what they were paying for. And so after I spent my one and a half years As a client solutions expert within the Addepar organization, I left and started a consulting practice that catered to the same client base. Over time I realized that regardless of how much help I could provide them as a consultant, as a third party provider, a lot of it came down to issues with data, issues with performance within the system, um, and they weren't really seeing what they wanted over, um, their entire client experience. And so we started tapping into the potential of can we build something better out there, use newer technology to make this data a little more automated, give them the tools that they really need so they can focus on what they really want to do, which is manage the money versus having to figure out how to bring in data, how to categorize it, make it more accurate, manipulate it, et cetera, for reports.

Speaker B: So the white space you talked about earlier is really that void you found both working for Addepar and then as a consultant setting up and managing Addepar with others is that white space and what Addepar is not bringing to the market. Is that a fair way to say it?

Speaker A: Correct. I feel like with my expertise and my experience on essentially the client side of who is a client of Addepar's and then working on the provider side with Addepar and then working as a third party provider as a consultant gives me a really interesting take about what this industry really needs. And in each role I realized both as a user of the platform than a provider of the platform, than someone who's just trying to figure out workarounds within the platform, what you can do by taking all that and putting it together to provide something that's going to be much bigger, um, than what's out in the market today.

Speaker B: And you consider Add a Par would then become your main competition, that'll be the target market you users of Addepar would. Altair would be the alternative solution.

Speaker A: Correct. I think there's a lot of providers out there that are similar to Add a Par and they do, they've been around for a long time. So a lot of the bigger issues in the space is converting over those clients. Um, but you'd be surprised. There's a number of family offices that still operate in Excel. So what I like to tell a lot of my clients is the best fintech solution that's been out there for the last 30 plus years is Excel. Um, and even with Addepar and some of these providers out there, they haven't been able to pull anyone away from Excel itself because of the flexibility of the data on there and they can do whatever they want essentially. Ah. And so although Addepar is pretty much a competitor in our space, uh, I would even say Excel is one of the top competitors that still is a competitor to add a part as well.

Speaker B: So that's a great topic right there because I think we continue to see that as a challenge everywhere. We see it with trellis of uh, people operating and managing everything Excel, complicated, convoluted, but people know how to use it the way they want it used and it's just kind of built on itself over the years. So change is a hard task. So how are you embracing that challenge of getting people to change over from add a par but uh, more importantly the old school of Excel?

Speaker A: That's a great question. I think the real pain, um, that really exists and the point where you can kind of tackle this on is the data component of even using Excel. A lot of these family office operators, everyone who is on Excel today, I've even converted over some RIAs um, during my time at Addepar and as a consultant. The data import piece is probably the most difficult piece for them. So as they bring on new data providers they have new formats that they need to deal with and they can't always do it in an automated fashion. So if you have a formula set up in Excel that's grabbing your rows 1 through 1010 and then you get a couple of more positions to get added on. If someone forgets to drag that um, coverage all the way down to the new level, then you're going to start missing a lot of the aum, you're going to start missing your positions, the cost basis. And then when you really go into what finance and wealth management has become more recently, you're having clients who have multi custodian asset basis that they're coming on from. So whether it's online and offline from general component or you're going from Schwab, the Fidelities and the uh, Ameritrades of the world, you're bringing in different sets of data into your system and you're gonna try to do comparison of what Apple did across three different custodians from a time weighted uh, return perspective, which becomes more difficult with the larger data sets that you have. So I think when you can tackle those problems in a much more simpler solution, which is what we're pitching, um, I think a client becomes an evangelist of that because you're essentially giving them the tools they need.

Speaker B: So your platform is going to be able to go out capture all of the Client data from the various custodians and sources out there. When we say data, it's the client's information and data that's being stored or managed by third party users such as custodians. Uh, just making sure we're clarified. Do I have that correct?

Speaker A: Correct, yes. The positional level data, the tax lot level data, the transactional data that you're getting, and also not only the custodians, but let's say you've made a capital call into an offline investment somewhere. So money left your checking account but it just went onto paper somewhere else within a fund admin's control. Um, now you don't really see what's happening there daily. You're just getting a PDF, um, and then you're reporting with that PDF manually and trying to cross reference it with distributions, capital calls or total valuations across the rest of your portfolio.

Speaker B: So you can take in, doesn't matter where the data source is coming from, you're building the functionality to go out easily, capture it, bring it in and then organize and sort it the way a client needs to see it. Or more importantly your client's client, who's ultimately the investor needs to see it. Is that an accurate statement?

Speaker A: Exactly. And I think one thing that we can talk about here, which is a great um, point you made, it doesn't matter where that data is, you go out and get it. Right now a lot of the providers like Addepar and a lot of the black diamonds of the world and the apx, which is an advent solution, uh, out there, they do bring that data, but they bring them with archaic methods which are the SFTP file method. You essentially get that data into a file folder and then you go ahead and process it every morning. We want to go beyond that and we want to actually have a great relationship and engagement with a lot of these custodians and build the next generation data distribution network. Um, so what we'll do is allow them to have not only one way and one method of them sending the data to us, but we will interact with that data in new ways that this industry hasn't really done yet.

Speaker B: And are you allowed to talk about those new ways or is that that secret sauce that we want to leave out, uh, for future reference?

Speaker A: Yeah, I think we'll leave out a lot of the methodologies that we're doing, but just high level, it's essentially going to be you have a bi directional method of talking with that data. And so what that means, and I could present a use case. So you kind of better imagine it whenever, uh, today you put in a buy trade at the custodian, essentially it's T plus one. So tomorrow you will get the file that says this was the transaction and here is the position and how it changed. Um, with this new method that we're talking about, we're essentially not having any lag within that data, so you're not having to wait. It essentially comes in instantaneously. But also if there are things that are done offline, like any capital call has been committed over to a fund or anything like that, you're talking to validators within this network that are essentially saying, yes, this capital call was paid for, rather than having to then wire it out of bank wait for it to be received, you don't know where it is. So we're essentially trying to minimize the lag between transactions that occur between a, uh, customer's or a client's portfolio across different validators, whether it's custodians, fund admins, banks or other investors in the network.

Speaker B: In working with, I think you said something earlier about offline, so alternatives, private investments, one of the challenges is always getting that data collected back out and shared out by to the clients, the investors. How are you working and doing that?

Speaker A: That's a great question. So right now a lot of the use cases that exist out there and what clients are using is they're just centralized on the PDF. So they go after the PDF and say we're going to automate the entry of the PDF, which is great. It's a great first solution and great first stepping stone to be at. However, I feel that if you can front run that PDF process and go into the data and provide an interface for a lot of these fund admins who are generating the PDF with the capabilities for them to be able to provide estimations, to override the estimations, to provide any type of audited final numbers as well. Um, you'll be able to build a very nice data ledger that's coming into a lot of these clients portfolios and is being kind of validated and controlled not only one way where it's like someone puts in the data and that's pretty much it, but you're essentially having this auditability of what happened over the life cycle of this investment. When did we get the capital commitment, when was the actual contribution, what distributions happen over time and then how do you actually track what updates were made? So you could have put in a report where the valuation was X over time it got audited to Y. How does the report actually change? And I think those questions are the biggest fears that exist within the marketplace that no one has really gone after the space due to because they realize that there's a lot of different things that need to take place for this to happen. And so what we've done is step back and said, how can we work with these fund admins and custodians and provide them a solution they're comfortable with? Uh, instead of making something and telling them, hey now, take whatever data you're putting and try to make it fit into what we're providing. So we're working this a little differently than other providers.

Speaker B: Interesting. And are you already talking and working with those fund administrators and providers?

Speaker A: Correct. Yes, we have a couple on the list. Um, we're not making public yet just because they're um, within our clients kind of asset base. Uh, so we're working with essentially the top three fund admins at this point, um, and an early conversation with a couple of others that want to have more capabilities. So then the conversation has always been here's what we want from you today, which is the data in similar fashion that you're providing to everyone else. But over time, here's where we're going. And I will say hands down, everyone's been very interested in that roadmap to where we're going because they do feel that there's a need for it, they want to be a part of it. It's just no one has gone out and done it yet.

Speaker B: Did you guys start from scratch? Did you start with some type of product to begin with? How did this, how has it come about to date?

Speaker A: Yeah, we did start from scratch, but we really made. I um, think we've done a really good uh, discovery of what's out there. Right. Whether it's from the outside marketplace or internal tools with our partners, um, who are using internal portfolio management and wealth management reporting tools that we can essentially use that and say, here's what works for this type of client who is a 13 billion plus, uh, asset under management RIA. And then here's what I can bring to the table, which we know another large family office or MFO is doing outside in the marketplace and conjoined that together and build something from scratch. So although the code is uh, from scratch and the protocols we're building are from scratch, we're leveraging a lot of the knowledge and a lot of the tools that exist out there already that we're able to leverage to build our site.

Speaker B: Where are you to date and what's your timeline? Look forward to coming to market?

Speaker A: Great question. So today we've been building a lot of the architectural infrastructure that we would require to be able to manage large accounts, uh, large clients. So we do stress testing about how this looks for a client who has 1.5 million accounts and 700 million entities and they're reporting on it. And we're able to really kind of minimize, uh, the lag between any processing that we're seeing out there that other providers do have. So right now we're within the architecture phase. Ah. And we're building out the data ledger architecture as well. Um, we're looking to go into market at the end of this year with a couple of family offices who are within our wait list. Um, so they're going to be our alpha users and one large ria and then we're looking to roll it out to more RAs second, um, half of next year.

Speaker B: So it's probably another, well, where we are recording this in early February. Uh, so another year to year and a half before it's really fully ready for market.

Speaker A: Public market. Correct. Yeah. So we'll have a lot of people that come in privately and kind of use it, give us the feedback, work with us for the roadmap. Luckily, I'm, um, fortunate enough to have amassed a large client list of folks who are interested in new tech and are in the wealth management space and they want to see everything we put out there. And knock on wood, we've been able to get to revenue positivity very quickly. Now we're looking to scale that into other kind of parts of this solution where we can start having them pay across different types of verticals that they want to be in. So rather than us, uh, selling a large tool and waiting to release it at once to someone, we're releasing features within the tool and allowing them to add capability over time. So if you are coming on and you're saying, I want to do X, Y and Z within your platform, but I don't want to buy ABC yet, you can come in there and use it and then we'll show you what that looks like when it's released or how your data looks like there and essentially convert them over, um, and we're going to try to do almost turnkey, uh, betas for a lot of our clients. That's the biggest issue which I alluded to before. Converting your data over is never easy within this type of, uh, industry. So we think we have some solutions around that that will be able to give folks A trial for a quarter, have um, them come in and look at what it looks like. And then once they want to cut the cord, um, elsewhere, then we'll bring them on, happily bring the rest of the data set with them.

Speaker B: And did I hear you correctly? So you're generating revenue now, correct, through various services, in a sense, microservices that you've built that can be created and used, consumed by these groups. And then as you put all of these microservices together, that'll become that true alpha product that you will then use with these customers to explore, learn, develop, uh, and then enhance to bring it to market fully in the next 12 to 18 months.

Speaker A: Is that exactly? Yeah. And so one thing we're looking at, as well as a lot of the expert services for clients that we're able to offer, including the microservices for like, uh, operational, uh, scalability for these clients we're able to do. So a lot of clients can come to us and say, here's the problem set I have. It's around data feeds, it's around um, reporting and we'll solve for a lot of that kind of ad hoc and work with the client. Because what this is really giving us this insight into the problem set they're dealing with. And then we're able to come up with an automated and a technical solution with our development team that caters exactly to what they're looking for. And then go back to them and say, hey, rather than all this stuff we were doing for you, here's the solution, here's the feature that we released that addresses that exact problem set and then they become a user of that microservice slowly as we build out the rest of the product. Um, and I think that's probably one of the strongest things we can do because folks within this marketplace are very secretive. Um, they're not going to open the doors and say, come in and look at all our assets and come in and look at our clients and try to find out what's wrong with our uh, process today. But when you do have a solution that you can provide to them day one and then slowly scale it into something more technical, you're creating that reputation and relationship and engagement that I think is needed for us to be able to roll into larger technology platform.

Speaker B: Well, I am very excited to follow this and see where it all goes. How do people that want to learn more about, uh, Altair get in touch with you?

Speaker A: Yeah, so they can get in touch with us directly, myself or my co CEO at our emails, hikeltairws.com or petealtairws.com and then, obviously, we'll be on the Trellis platform, um, for some of our, uh, projections and financials and pitch decks. So, um, anything there that anyone has questions about, you know, they're, you know, happily can reach out to any of us or the team. And, uh, yeah, we'll. We'll be in touch with them shortly.

Speaker B: And we at Trellis are excited to have you and look forward to partnering with you to bring the alternative investment opportunities right into the Altair system so that people can look, find, share, invest, and manage all the information right back to their clients. So, exciting times coming up. Thanks so much for joining me today.

Speaker A: Thank you so much, Danny. Thank you for having me on.

Speaker B: Sam.

Speaker A: Sa.