02 Oct This NYC Startup Capitalizes on Risk Management
September 29, 2017 – By Reza F. Chowdhury
The Japanese debt crisis in the 1980s, Orange Country bankruptcy and the LTCM fiasco in the 1990s, and the mortgage crisis in 2008 comes to show us that history tends to repeat itself when it comes to Wall Street. Oversight, regulatory reporting, and increased compliance has been needed to regulate the finance industry; especially when considering the effects a few misaligned bets can have on a global economy. Sitting at the helm of the regulatory markets is AxiomSL, a firm founded in 1991 that provides regulatory reporting technology and other tools to provide transparency for regulators.
AlleyWatch chatted with CEO Alex Tsigutkin about the company and its first round of funding that came 35+ year after its founding.
Tell us about your product or service.
AxiomSL is the global leader in risk data management and regulatory reporting technology for the financial services industry. We work with banks, broker dealers, asset managers, insurance companies and other financial services firms to facilitate regulatory compliance, risk and capital analytics, accounting and tax requirements, and reporting.
In addressing the slew of contemporary regulatory mandates—such as Basel III & IV, BCBS 239 Principles, MiFID II, Comprehensive Capital Analysis & Review (CCAR) and CFO Attestation, Liquidity (LCR, NSFR, ALM, etc.) and stress testing requirements, IFRS 9/CECL, FRTB, CRS/FATCA and many more — financial firms need a robust “platform for change” to provide data and process lineage, data enrichment, automated workflow capabilities which delivers the analytics, reconciliation and validation required to face these mandates.
These business functionalities, in addition to providing efficiency gains and resources saved, will enable firms to draw business intelligence from their regulatory compliance data gathering and reporting activities, plugging that intelligence back into their trading, risk management and operations. Top management sees an opportunity, but in order to realize it, they must address data governance frameworks and data lineage in a controlled environment.
Further, our state-of-the-art platform enables firms to complete large and complex projects that would normally take years to finish in a matter of months. This was validated by AxiomSL receiving WatersTechnology’s Best Implementation Award at Sell Side Firms twice.
What inspired you to start the company?
It has always been my dream to start a global software company. I built this firm on two pillars: a) data should never be converted into a different format, in order to demonstrate full transparency and b) since regulations constantly change, it was imperative that our technology needed to adapt quickly while being robust and flexible to meet new regional and global mandates.
AxiomSL’s data-driven technology became highly sought, especially after the financial crisis, when regulations became much more complex and transparency was a requirement. Firms are now required to incorporate much more granular data, calculations and stress testing into their regulatory and risk reporting process. AxiomSL evolved in accordance to client needs and industry demand, and today, risk and regulatory reporting is the main component of our business.
How is it different?
We offer a level of breadth, transparency, nimbleness, accessibility and scope unmatched by our competitors. We currently have the largest footprint among USA Tier 1 banks for CCAR implementation, CCAR reconciliation, and CFO attestation as well as liquidity projects worldwide.
What market you are targeting and how big is it?
As a global company, we target Tier 1 and Tier 2 financial services firms across the world. In addition to North America, we have a strong presence in EMEA, APAC and LATAM. In terms of the size of our market, Chartis Research estimates that financial institutions spent more than $70 billion on risk and compliance IT software and services in 2016. Its 2017 RiskTech 100 report, Chartis Research estimates that the market size, specifically addressing Risk Data Aggregation and Reporting, is more than $10 billion globally.
You waited nearly 30 years after the founding of the company to raise your first round of institutional capital. Why now?
First of all, we wanted to establish clear market leadership in our industry. Our rapid growth since 2008 based on the increased demand for the products and services have propelled us into our next trajectory, and continuing to expand our reach and scope requires additional investment. In addition to raising the capital required to achieve this, our board also benefits from the expertise of Rick Kimball, Founding General Partner at TCV, and Nari Ansari, Principal at TCV – two industry leaders who have extensive experience helping technology companies like AxiomSL grow.
What was the funding process like?
It was a very organic process. We have known Rick, Nari and the rest of the TCV team for several years, and they’ve been following our company’s trajectory. When we realized that, for the first time, we would benefit from outside capital to take AxiomSL to the next level, they were among the first people we approached about a potential partnership. Although we met with several private equity firms, we ultimately partnered with TCV because of their synergy with us.
What are the biggest challenges that you faced while raising capital?
As mentioned above, it was most important for us to find the right investment partner that would not only provide the additional capital required to continue our growth trajectory, but would also provide the expertise and counsel to help us reach the next level. Because this is our first outside funding, it wasn’t a decision we made lightly. We really took the time to ensure that Rick, Nari and the rest of the TCV team were the right partner for us in this regard.
What factors about your business led your investors to write the check?
TCV understands the size of our market and the opportunities future of our business. They recognize the rate at which the quantum of structured and unstructured data grows, combined with the increasing requirement for transparency and traceability demanded by regulators. This will require FIs to implement technology platforms that can leverage repeatedly and across projects and applications to be cost-effective and achieve sustainable growth, and that’s exactly what AxiomSL offers. They believe in our company’s mission, and their vision for our future aligns with our own.
What are the milestones you plan to achieve in the next six months?
Our goals, which partnering with TCV will help us achieve, are to expand our team and enter new markets.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Focus on building the best team possible. If you are a startup founder, you are only as good as your team. Find like-minded people whose areas of expertise complement your own and who believe in your company’s mission. Be as transparent as possible with them, and try to show every employee, from top to bottom, that they are a valuable member of your team. As I told my team recently, it is only through their dedication and hard work that AxiomSL is where it is today.
Where do you see the company going now over the near term?
Our goal, as always, is to make our technology more flexible to seamlessly and quickly transition to any future changes where FIs have the ability to attest to the accuracy of the data. Beyond that, we will continue to empower financial institutions and ensure sustained growth in this unpredictable geopolitical climate, with ever-changing regulatory regimes and market margins that are under pressure. We will continue to show these firms that adapting to constant changes requires implementing a data driven structure and using a cross-functional collaboration approach that involves the Risk, Finance and Operational arms of an organization. This approach strengthens internal controls and gives senior executives the capability to monitor, design processes, and enforces control frameworks at a business unit and product level.
What’s your favorite restaurant in the city?
My favorite restaurant in the city is Le Bernardin in midtown.
This article was first featured in AlleyWatch