Our start-up of the week is Fund Recs, provider of reconciliation software to global fund administration companies. Fund Recs provides an alternative to outsourcing reconciliation work to low-cost bases, such as India, and offers upgraded technology to replace legacy in-house systems.
Based out of DIT Hothouse, the company is currently participating in the New Frontiers Entrepreneur Development programme in Dublin.
As co-founder Alan Meaney explains, Fund Recs formed as a result of a pivot that occurred while working on their initial idea for collaboration software called Task Messenger.
“We had some initial success with Task Messenger, signing up over 1,300 users to date but finding a business model and a way to charge users in a crowded space was proving difficult. During this time a friend of a friend asked us to take a look at building their fund administration company a new reconciliation system. That conversation opened our eyes to the Fund Recs opportunity and considering our industry and technology expertise made it a sensible path to follow. All of a sudden all the boxes we’d been trying to tick with Task Messenger like value proposition, target market, channel, unique selling point and customer validation were ticked with Fund Recs.”
The market opportunity
There are more than12,000 people employed in more than 45 fund administration companies in Ireland so it’s likely that most people will know somebody in the industry. However, there can be a general lack of understanding of what these fund administration companies do in Ireland.
“Most people will have heard of hedge funds and have an understanding that they are run by an investment manager who invests money on behalf of the funds investors. This is the sexy side of things where you have mangers typically in New York or London earning large sums in management and incentive fees, think Wall Street. Fund administration is the non-sexy side of the Industry where fund managers outsource all the non-core activities to an independent third-party administrator.
“Their main back office functions include tracking and publishing the fund’s net asset value. This value is used to allow investors subscribe and redeem from the fund,” Meaney explains.
"One of the core activities for a fund administrator is verifying that all the cash, holdings and FX transactions made by a fund are reconciled to the custodian. This can be a manual and time-consuming process. Over the last few years the trend has been to have this work outsourced to lower-cost bases such as India. We’re developing software to fully automate this process and keep this work in Ireland."
Ireland is the world’s largest funds administration centre, with an all-time high of US$2.5trn in assets under administration, copper fastening its position as the No 1 hedge fund servicing centre in the world with 43pc of the globe’s assets.
“From speaking to key industry executives it became clear that while there is a real desire to find a cheaper alternative to doing in-house reconciliations, the option of using a lower-cost base like India is proving increasingly unattractive.“ he says.
Although India is perceived as a low cost labour alternative, the last 12 months has seen a 12pc increase in the Rupee to the US Dollar along with consumer price inflation (CPI) rising to 11.24pc in November. Add to that reportedly lower service levels and a preference for Investors to have all work carried out on their fund completed in Ireland the case to keep these functions here is gaining momentum.
“Investors are very happy having their funds administered entirely in Ireland. The IFSC celebrated its 25th anniversary in 2012 and during that time we’ve built a reputation for a highly skilled and knowledgeable workforce and that makes Investors extremely comfortable doing business here. Other countries don’t have our track record and that makes Investors nervous.”
“One of the things that make our solution different to companies existing reconciliation systems is the flexibility to import and automate all custodian statement types and formats along with the creation of a streamlined reconciliation workflow. We’ve set ourselves the goal of building the first truly automated reconciliation system from the ground up”
Having spoken to over a dozen fund administrators in the last month the company is also seeing growing interest in fully outsourced reconciliation services based in Dublin.
“If we can get the cost model right I believe there is significant demand for an outsourced reconciliation service based in Dublin, run by experienced Irish staff leveraging Irish built software”.
Fund Recs has a balance of industry and technical experience in co-founders Alan Meaney and Padraig O’Scanaill. Meaney studied Business Information Systems at DIT and from there began his career in Fund Administration in 2005 with HSBC. He moved on to roles at SEI Investments in fund accounting while also keeping up to speed with the latest technology trends and getting involved in the local Start-up community.
“Having studied computer programming in college and then pursuing a career in fund administration it’s great to now have an opportunity to combine the two to create a software company that will help protect jobs in Ireland and hopefully directly create new ones. I’ve dealt with the problems we’re addressing on a daily basis for several years which has provided a solid foundation for developing Fund Recs.”
Fund Rec’s CTO Padraig O’Scanaill has a love of computers and usually orders his in parts online in order to build them himself. He graduated with a BSc, (Hons) Information Technology & Telecommunications from the University of Limerick and obtained a postgraduate diploma in Computing and Web Application Development through the Graduate Initial Fidelity Training (GIFT) programme at Fidelity Ireland.
“The challenge of providing solutions to global financial companies is very rewarding and promoting the benefits of cloud services is something I do whenever possible. While we understand the need in some cases to offer a local environment, which we give the option of, our main focus is on leveraging the scale, access and cost benefit of a cloud infrastructure.”
Our Fund Recs software is delivered as a web application which can be hosted in the cloud or on a company’s private network.
“Ultimately we want to offer our software on a Software-as-a-Service basis hosted entirely in the cloud. That’s great for the Fund Administration companies that are ready for a fully cloud solution but we also want to ensure that companies that are not there yet can also benefit from our technology. When they’re ready to switch fully to the cloud we’ll be there to help them.”
Our technology uses the Grails framework which is an open source, full-stack, web application framework for the JVM. The fact it’s built on top of Java makes it appealing as an Enterprise solution. Companies using it today include SkyTV, LinkedIn and Netflix. Another added benefit is the ability to develop a local instance of our application in parallel making it easy for us to offer a cloud and locally hosted solution. Our cloud solution is hosted on Amazon Web Services and leverages their Elastic Beanstalk environment to manage scalability.
Taking the plunge and seed investment
“For us the leap of leaving permanent secure jobs to going full time on our start-up was a stressful period. We took a lot of advice from as many people as we could but at the end of the day you just have to back yourself and make the commitment.”
“The help we’ve received on New Frontiers in DIT Hothouse have been invaluable in developing our business proposition. We’re speaking to a number of Irish and US investors and are looking to raise €250,000 in our first seed Investment round. Also we’d love to hear from experienced funds Industry staff with a software background as we look to grow our team to 10 in 2014.”
Meaney’s advice for other budding entrepreneurs dreaming of leaving the day job is to start by working on side projects in the evenings and weekends.
“Eventually you’ll find one that has the potential to develop into a company. You don’t know where opportunity will spring up from but if you’re proactive in searching it out you may be pleasantly surprised by what presents itself. In my opinion the biggest risk you can take today is to carry on in your permanent job expecting to be looked after by that company for the rest of your life.”