http://www.wiredevent.co.uk/wired-money-2016
Six years ago, Hardeep Walia wanted to invest in the ‘mobile internet’. He asked friends on Wall Street and in Silicon Valley for advice and they told him to just buy Apple stock. However, Walia wanted to invest more generally in the mobile internet ecosystem, including cellphone tower companies, chip manufacturers and touchscreen companies.
Walia looked around for exchange-traded funds that might give him the exposure he was looking for, but none existed. He’d have to buy a couple of dozen individual stocks in companies using an online trading platform, paying up to $10 in fees for each trade. The fees made creating such a portfolio prohibitively expensive.
“It was a big aha moment for me,” says Walia, a former Microsoft executive. “Most people think conceptually or thematically about investing — I want to invest in connected cars, robots or fracking — but find it difficult to act on these investing desires,” he says. “You can be right about an idea but putting that idea to work is rarely captured in a single stock.”
That’s how he came to launch Motif, a concept-driven trading platform that creates intelligently weighted baskets of up to 30 stocks or exchange-traded funds — called ‘motifs’ — that you can buy into for $9.95.
There are motifs for trends such as ‘robotic revolution’ or ‘tablet takeover’; trading strategies such as ‘tech takeout targets’ or ‘buy the dip’ or investment styles such as ‘Ivy League endowment’. Around 150 of them have been created in-house, while the 250,000 strong community has created more than 185,000 of their own motifs.
Motif's major innovation is letting individuals own fractions of shares in company, something that’s typically not possible when buying stocks on the open market. Users can invest, say, $300 in a motif containing a weighted basket of 30 different company stocks, each of whose share prices could be tens or hundreds of dollars, and constantly fluctuating. Motif’s technology makes it possible for individuals to immediately own the underlying fractions of shares contained in the basket at the point of purchase.
Motif also gives individual investors fractional ownership on single shares, allowing a user with only $300 to still buy a piece of Alphabet (formerly known as Google) even though a single share is currently trading at more than $700.
Walia wouldn’t go into detail about how exactly this works as he says there are several other startups interested in cloning his technology. What he will say is that Motif doesn't aggregate trades. “We have a lot of patents”, he adds.
Motif’s overarching objective is to make investing more intuitive by focusing the way that humans think, rather than enhancing the way that trading has always been. “The industry is not thinking about humans. The focus is on AI and robo-advisors – we are the anti-robot,” says Walia.
Read more: The robot uprising has begun and it's about to change your life
The holy grail would be to allow individuals to invest in the same way they might search for something in Google, something Walia describes as 'natural language investing'. “Just type what you want and it will build a motif for you,” he says.
Beyond the core consumer service, Motif has launched a subsidiary called Motif Capital Management designed to help financial institutions make themed investment strategies for clients. The division launched with a partnership with Ascent Private Capital Management, which helps families with $75 million or more to manage their wealth.
“They wanted to invest in the reurbanisation of American cities,” says Walia of the early work with Ascent. “It’s a really complicated investment idea that we could allow them to do quite easily. The advantage they wanted for their high net worth clients was to be limited not by financial products but by their ideas,” he adds.
The startup is bolstered by an impressive board, which includes the former president and CEO of Boston Consulting Group Carl Stern; the CEO of JP Morgan Private Bank Kelly Coffey and Darren Cohen, the co-head of strategic investment at Goldman Sachs. “It’s a very unusual board for a Silicon Valley startup. They are very notable figures and they keep me on my toes,” explains Walia, who will be amongst the speakers at WIRED Money 2016 on June 23.
Having made significant headway in the US, Motif has set its sights on expanding to other markets, including the UK, Australia and Hong Kong. Unlike some startups, Motif has opted to cooperate with the relevant bodies in each market, which can be painfully bureaucratic. “We’ve directly engaged with regulators," explains Walia. "You get more grey hair doing that but you have more confidence that you are compliant.”
Beyond getting on the wrong side of regulators, another risk for fintech startups is having the incumbents in the financial sector copy your idea. This happened to some degree with robo-advisors, which proliferated a couple of years ago. The traditional asset management industry took notice and replicated the new technology. “Big institutions have crushed the robo-advisory sector, but we’re in the second series. The Empire Strikes Back,” he jokes.
“The startups that succeed will be those with a differentiated product. If your big competitor could build an equivalent in five months, and have more customers, you’re doomed."
http://www.wiredevent.co.uk/wired-money-2016
This article was originally published by WIRED UK
