Weekly Briefing No. 161 | Ain’t no party like a fintech party; NYC HQ2 dies a premature death

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Welcome to The FR. Our pricing is always fair.

In this edition:

  • Top fintech conferences in Q2

  • HQ2’s brief New York stay

  • The NYSE sues the SEC

  • IBM’s AI debater

  • Ellie Mae goes private

  • The big Bitcoin bet

Going to be at SXSW on March 9 or 10?

If so drop us a note and let us know. We're providing a limited number of readers with tickets to exclusive networking events & a dinner we’re hosting for financial innovators. Hope to see you in Austin!

INSIGHT

Five fintech conferences in Q2 for hobnobbing with VCs.

Industry conferences can often be a great way to network with peers, catch up on the latest trends and — if you’re a start-up seeking funding — hobnob with venture capital firms that may be looking to invest in the next big thing. But not all conferences are created equal; when you only have a few moments to give your elevator pitch, you want to be in a setting where you can get in front of as many potential investors as possible. And for that, we’re here to help. Here are the can’t-miss conferences during Q2 for mingling with VCs.

SXSW Interactive in Austin (March 8-17)

Okay, so we cheated a bit with this one, as it falls towards the end of Q1 and is not technically in Q2, but nonetheless, SXSW is a can’t miss event. Innovators in virtually every industry are present at “SX” — as it’s known to those who have been — so you’re bound to learn about a new interesting trend or two. For that same reason, the SXSW also attracts a host of VCs — especially for the Pitch event, where some of the most cutting-edge start-ups around the world present their technology to a panel of expert judges in front of a live audience.

It’s a whirlwind of music, BBQ and networking that can’t be missed.

TROVE

HQ2 in NYC is no more.

Well, it was fun while it lasted. Amazon on Thursday announced it would pull out out of its plans to build a new headquarters in Long Island City, Queens. The tech giant bowed to increasing pressure from activists and some local Democratic elected officials who, in the end, perceived the deal differently from party leadership, as New York Gov. Andrew Cuomo and New York City Mayor Bill De Blasio both initially lauded the deal.

In November, after a year-long search, Amazon announced it had selected New York City and Northern Virginia to split duty as its second headquarters (nicknamed HQ2). Each city was expected to have more than 25,000 workers over time. We examined the economics of the deal at the time, and how it might benefit (or not) each area. It looks like New York ultimately decided the cost outweighed any possible benefits.

NYSE is suing the SEC

The financial world was rocked Friday morning when the president of the New York Stock Exchange announced, in an op-ed piece in The Wall Street Journal, it would be suing its regulator, the Securities and Exchange Commission (SEC).

Stacey Cunningham, the NYSE’s president, is attempting to block an SEC pilot program that would monitor the effects of the complex models of fee and rebates in share trading. The SEC’s plan would “impose government control on the incentives that public markets can offer,” Cunningham argued in the piece. He added: “Market-maker benefits will be sharply reduced for some securities and fully eliminated for others. To no one’s surprise, dozens of public companies either have asked the SEC to spare them from being selected for forced participation in the pilot or have opposed the pilot in its entirety.”

Joe Wald, CEO and founder of Clearpool, a financial technology company whose software designs electronic trading algorithms, offered his point of view. The SEC plan comes after years of both large and small market participants making their way to the SEC and the exchanges themselves, “to talk about how we can make our markets more efficient, how we can do things that are more transparent, how we can root out potential conflicts of interest or bias in order routing.”

“Taking a holistic look at this is important,” Wald adds. “It is not just about the access fee pilot. It is about market data, transparency and fairness across the board.”

Wald believes the SEC ultimately is using the pilot to try and create the most transparent and efficient markets.

“Ultimately, the exchanges recognize this may not be in their best interest to their bottom line, but I don’t think that should be their biggest concern,” he adds, “the biggest concern should be investors themselves…. are they missing out on opportunities to have better returns because markets may not be as efficient as they could be? That should be the focus.”

This will be an interesting one to keep an eye on.

NEWS

Human narrowly edges out IBM Research’s AI system.

“While I cannot experience poverty directly, and have no complaints concerning my own standards of living, I still have the following to share: Regarding poverty, research clearly shows that a good preschool can help kids overcome the disadvantages often associated with poverty” (12.53).

Those words were spoken forcefully by IBM’s Project Debater in an Intelligence Squared debate that transpired this past week. The debate question was whether the government should should subsidize preschools, and Debater’s formidable opponent was renowned debate champion Harish Natarajan. Ultimately, Natarajan’s experience and creativity prevented the AI system which hadn’t been trained on the question beforehand from joining the victorious ranks of AlphaGo, Watson and AlphaZero.

But in a way, Project Debater’s “accomplishment” was more significant because it was trafficking in the infinitely complex and nuanced world of human language. Yes, words were mispronounced and sentences were awkwardly constructed. However, Dario Gill and the team of creators behind IBM’s latest AI solution can hold their heads high.

Ellie Mae goes private.

What was whispered for a while became reality this week: Mortgage technology provider Ellie Mae was acquired and taken private. For $99 a share in cash, or $3.7 billion, by private equity firm Thoma Bravo, it turns out.

The move makes sense for both sides, according to much of the industry consensus in the aftermath of the deal. For Ellie Mae, the move to becoming a private company means it reduces the oversight and limitations that come with being publicly traded.

Meanwhile, Thoma Bravo has acquired what has become almost the de facto IT system powering the digital mortgage industry, says Forbes, as Ellie Mae counts more than 2,000 lenders as its customers. And, Forbes further notes, Ellie Mae's increasingly entrenched position in powering the mortgage market is the sort of “moated” business Warren Buffet has always advocated investing in, one that can remain relatively resistant to broader economic headwinds.

Further, Thoma Bravo has stated the current Ellie management will remain on board, and that it has no plans to make radical changes to the company. This is certainly one we’ll be keeping an eye on in the coming months.

The big Bitcoin bet.

In 2014, uber VC Ben Horowitz of Andreessen Horowitz bet uber financial journalist Felix Salmon on the future of Bitcoin. Specifically, Horowitz believed that within five years’ time, a meaningful percentage of all Americans would have used bitcoin to buy stuff. The quintessentially British Salmon believed that this prediction was poppycock, asserting that because Bitcoin was inherently deflationary, owners of the currency were incentivized to hold on to their bitcoin. Adding to the sizzling divergence of perspective, the two men agreed to wager a pair of alpaca socks on top of the bragging rights that would accrue to the victor. Five years later, the bet had run its course, and a winner had been decided.

Quote of the Week

“Although we work through financial markets, our goal is to help Main Street, not Wall Street.”

~ Janet Yellen