How One FinTech Company Used Lean Startup in a Regulated Industry

ARTIVEST james-waldinger-headshot

Before he founded Artivest, CEO James Waldinger was frustrated with the dinosaur pace of the investment world. He watched as bigwigs in other sectors figured out how to make that crucial shift from analog to a digital. But as he told CEO CFO Magazine, “investing in a private alternative is still back in the stone age.” Not to mention that there wasn’t a great way to analyze investor behavior.

Waldinger worked as an advisor and investor in the startup world, and sensed it was time to leverage his background at Clarium Capital to resolve this digital divide. With New York as his backdrop, he also had access to the best minds in the financial industry close by, so he built Artivest, a tech-driven platform that expands access to leading private equity and hedge funds, right there in Silicon Alley.

Artivest is one of the exciting New York City-based startups we’ll be visiting as part of our Lean Startup Labs Enterprise Summit Feb. 24-25.

It’s also an example of a company working in a highly regulated industry that’s busted free from the old stone age mentality (a little inspiration for those of you wanting to get the hell away from all that analog paperwork too) and tightened the customer feedback loops along the way.

Before we meet his team in person, here’s a little more about Artivest, and how Waldinger was able to implement Lean Startup into his company.

What fundamental problem were you solving for by starting Artivest?

We enable individuals and their financial advisors to access leading private funds. Traditionally, only large institutions like pensions and endowments were able to invest in top private equity and hedge funds. The process was cumbersome and inefficient, e.g., paper-based documentation flows, which kept investment minimums high. Artivest streamlines operations and distribution – the entire process is now digital and consistent across all funds on our platform. Our behavioral analytics capability also greatly improves the understanding of market needs in real-time, helping to efficiently match funds to investors and investors to funds. With these innovations, Artivest is able to offer qualified individuals and their advisors access to premier private funds at lower minimums, while keeping fees competitive.

What have you learned about your audience that’s different than the assumptions you had about them in your early days of thinking about the company?

We knew that financial advisors and asset managers would find value in our platform since it expands their access to a larger selection of premier funds and a larger capital base. What we didn’t know is how excited they would be about the technology itself. We now have a business line that provides a white-labeled, customized version of our technology and operational solution to asset managers, private banks, and advisory networks that need to manage their own processing of alternatives. We’ve realized that part of what is so innovative and appealing about our technology is the amount of data we can potentially collect. Because alternative investing was previously an ‘offline’ process, there was no data to understand advisor and investor behavior – with Artivest, because we can track and analyze how advisors and investors behave over time, we can better match product need with availability and make the sales process more efficient.

What’s been your biggest success so far?

Our biggest success has been the amount of traction we’ve gained in such a short period of time. Even though we were only in ‘beta’ launch until early 2015, we have amassed an engaged user base that includes some of the largest independent advisors, broker dealers, funds, and asset managers in the world.

What was a big fail that turned into an excellent learning moment?

As a startup, we’re constantly failing, learning, iterating, and improving. Some early ‘rejections’ actually came back to us with great interest after a few months, and we realized that the adoption cycle varies greatly for different types of customers depending on their needs. For example, those who are newer to private investments may be hesitant to pull the trigger after finding interesting funds on our platform, simply because they’ve never gone through the process before. Seeing the technology used at larger institutions can help them become familiar with the process and our product. We’re now able to quickly segment customers according to where they are in the investment cycle.

How has Lean Startup methodology come into your product and/or process?

Getting customer feedback during the product development phase has been critical for us. Very early on, we established an ‘Early Access’ program which allowed us to test our software with financial advisors and quickly come up with a minimum viable product, then iterate to perfect it. Developing consultative relationships with our clients has enabled us to spend our time and effort on the features and functionality with the highest value-add for our audience.

How do you see the financial market differently since working on Artivest?

I don’t know that we see the market differently, but in the last year, market conditions have certainly highlighted the need for increased access to a wider selection of private funds. As investors have struggled to chase returns in public markets, it has become clear that there is inadequate access to alternatives, an asset class that has the ability to dampen volatility, improve diversification, and generate alpha through top managers.

Generally how does the New York startup scene differ from Silicon Valley’s in your mind?

Financial services has many additional compliance, regulatory, and operational constraints when compared to other industries. The density of financial services firms in New York means the knowledge base around this area is not only deep and wide but also extremely current. As a fintech startup, having access to and being a part of this extensive financial services community is incredibly advantageous in terms of building robust, reliable, and compliant infrastructure. We rely heavily on this community in terms of finding new team members, customers, partners, advisors, and backers and learning from their great wealth of knowledge and experience. Here in New York, we’ve been able to assemble an amazing team with wide expertise, from organizations ranging from Merrill Lynch and Goldman Sachs to Second Market. We’ve also attracted a very diverse set of backers, including KKR, Peter Thiel, RRE Ventures, and Nyca Partners.

Learn more about Artivest at the Lean Startup Labs Enterprise Summit startup tours in NYC Feb. 24-25th. The summit is limited to 200 people, so grab a ticket for yourself or your team before we sell out.

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