If you thought all tech startups were starting to sound the same, here’s one I don’t think you’ve heard before: A startup that’s actually a hedge fund.
That’s the plan for Boston’s Quantopian, which on Thursday announced a $15 million Series B round to develop a new type of hedge fund—one that essentially crowdsources the investment decisions from quants (quantitative finance specialists) using the startup’s browser-based algorithmic trading platform.
The software aims to enable any finance-minded individual to become a full-fledged quant and make automated stock-market trades, something that only a small number of people had been able to do previously.
Quantopian reports having 25,000 quants using its system, and recently said it saw more than $100 million in trades in May alone. The final step is to connect the top performers in Quantopian’s community with a dedicated pool of capital.
In that way, Quantopian hopes that the financial incentives will attract the best quants to the system, and the startup will be able to generate revenue through fees as well.
To help make it all happen, Quantopian is bringing on a Wall Street finance veteran, Rob Stavis, to its board. Stavis is now a partner at Bessemer Venture Partners in New York, which led the Series B round for the startup.
The world of hedge funds is notoriously secretive, and so “getting advice on the specifics of a hedge fund business model is difficult,” said Quantopian CEO and co-founder John Fawcett—and that’s where Stavis will be crucial.
The fund has not been created just yet, with work still needing to be done in determining the fund structure, incentives and the like.
Along with Bessemer, the new round included returning investors Spark Capital, Khosla Ventures and Wicklow Capital. Quantopian has now raised $23.8 million since its founding in early 2012.
Image used with permission from Quantopian.
