marketing, software, venture-capital, finance, stock-optionsI have a shark tank-type event coming up (10 million USD available to be invested) and I am curious as to how to market and pitch my algorithmic trading system. Pretty much, the system automatically buys and sells stocks depending on market conditions and indicators.
If you are working on one are have worked on one, I was wondering what you guys were doing/did? Would you pitch it as a higher end hedge fund product or was the target market to retail traders and the upper-middle class?
I just don’t exactly know how an venture capitalist would “see” a trading platform; in terms of their perception and presumptions about how it would work. Especially, if they aren’t familiar with finance. Also, I don’t have a full fledged platform available yet. But the beta system will use virtual cash first to determine its profitability. In addition, algotrading development, coding, backtesting, etc is relatively inexpensive so for an investor my biggest task is proof of concept, and I’m truly in need of ideas here if you guys can help!! Thanks
This is a “tough love” answer. Please don’t be offended as I mean well.
I am curious as to how to market and pitch my algorithmic trading system.
You take a piece of paper and in massive 96 pt font write the annual yield your system produced over some long period of time (let’s say 10 years or more) using a significant amount of real money in a live environment. Then on the bottom, you have a credible entity like a well-known accounting firm provide a statement that they have audited your claims and believe them to be accurate. On the back, you describe, in detail, what overall strategies you use and why your system is legitimately predictive. You don’t have to give up your algorithms, but you would have to find a serious fool to invest in a “black box.” Your chances of venture capital would probably be lower than a guy starting yet another funny t-shirt company.
Would you pitch it as a higher end hedge fund product or was the target market to retail traders and the upper-middle class?
Based on what you describe so far, your only chance to market this is to the dumbest money which is typically retail traders who think they can beat the market with no experience. Hedge funds would never be interested in a system that has not even been tested for profitability.
Please keep in mind, you might be breaking the law by either marketing to retail traders or by marketing a system that does not meet strict regulatory criteria so get qualified legal advice before marketing anything in the financial industry.
I just don’t exactly know how an venture capitalist would “see” a trading platform; in terms of their perception and presumptions about how it would work. Especially, if they aren’t familiar with finance.
Venture capitalists are finance professionals, by definition. It’s not possible to be a venture capitalist if you don’t understand finance. Further, by definition, venture capitalists are not investing in public equity (as they system you describe does) because that’s not venture capitalism. So unless your approach is to have them invest in a business that will sell this trading system to others, there is a contradiction in what you’re saying.
But the beta system will use virtual cash first to determine its profitability.
You have no product to pitch if you have no results. Make something that you can prove works before you even consider pitching it. Making a genuine algorithmic trading system is perhaps among the most difficult things a human being can accomplish. It’s much easier, respectable, and honest to help people invest over longer-term periods in a safe way.
Also, keep in mind “virtual money” is not the same as real money unless your trading long-term horizons (months or more). Trading impacts markets dramatically. You can’t assume your virtual trade will in any way resemble a real trade and no successful financial markets professional would either.
In addition, algotrading development, coding, backtesting, etc is relatively inexpensive so for an investor my biggest task is proof of concept, and I’m truly in need of ideas here if you guys can help!! Thanks
Testing a trading system is very expensive because your testing is only truely reliable if it’s done with real money without the benefit of hindsight.
As with anything, you have to show them what you’re doing differently, better, or more profitably than anyone else who’s already in the market is doing.
To me, your best bet hinges on running simulated transactions against real-time market data to show how effective it would have been if real money had been in play. That’s how you show proof of concept on the technical side. Show them a month’s worth of simulated trades and how your platform stacks up against others that are already out there.
Remember that you’re playing in a very crowded market where investors are overwhelmed on a daily basis by everyone who thinks they have developed the perfect and ultimate trading platform. You get just a few seconds to capture their attention, and that’s it. Unless you can show pretty significant and believable results based on real-world data (not just marketing hype and promises) then it’s going to be a tough sell to customers, which translates into an even tougher sell to investors.
For investors, however, there are several questions you have to answer if you want them to write you a check:
What is the market (realistically) for what you’re doing?
What’s proprietary about your system that can’t be copied by competitors? (Having defensible intellectual property is a major plus to investors)
Who is your market audience (professionals, individuals, institutions, etc)?
What’s the cost of your system, and what makes it worth that to potential customers?
What is your cost of customer acquisition, and what is your attrition rate?
How do you propose to market this, and why would anyone pay any attention?
These are the typical basic questions you need answers for, but of course, what an investor really cares about is:
How much equity do they get for their money?
How long will it take to recoup their investment?
What is the realistic prospect of success for what you’re doing?
If you can satisfy those three questions up front, your task will be much easier.
I hope this helps.
Good luck!
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