Benzinga hosts its Global FinTech Awards at Pier Sixty in New York on December 8, 2022. At the event, Kevin O’Leary and Anthony Scaramucci, along with executives from DriveWealth, Prime Trust, Synctera and beyond, will discuss controversial topics, perspectives on opportunities and threats in fintech, as well as how they monetize disruptive trends.
Prior to that, Benzinga will periodically post about those he believes have a big impact. Today’s conversation is with Federico Baradellofounder and CEO of Final.
The following text has been edited for clarity and brevity.
Q: Hi Federico, nice to meet you. Want to start with an introduction?
Federico Baradello: I spent several years in San Francisco buying out middle market technology companies for private equity funds like Vista Equity Partners and Silver Lake.
After a while, I realized that there was a central irony in my day-to-day work, which was that we were doing all these big tech buyouts on the one hand, but we were leveraging a tech stack 30 years old, on the other hand. on the other hand, to actually execute these transactions.
This resulted in an obsession with how to bring digital transformation to what I would call a kind of capital market legacy space.
Ok, what were the first achievements after starting the adventure?
Digitizing our workflows was a great opportunity.
To be relevant in digitizing workflows across the stack, we realized we needed to start at the beginning of those workflows, or the investment bank itself.
And, then, to get into investment banking, at high speed and scale, we saw there was a tremendous opportunity to emulate the go-to-market strategies of companies like Compass Inc. COMP in the real estate brokerage sector.
This is indeed what we decided to build.
Basically, what is Finalis?
Finalis is truly a first-of-its-kind, category-building company that provides turnkey infrastructure as a service (IaaS) for investment banks, placement agencies, independent stockbrokers, and even fintech companies across the United States today.
Since we launched the business in May 2020, we have become the fastest growing independent broker operating in this segment of the market.
We support more than 150 independent investment banks, placement agencies and traders.
We are rapidly merging the long tail of this industry onto our fully cloud-based regulatory and compliance rails.
Since you’re so new, how do you establish trust?
We’ve actually handicapped our growth as a direct result of the importance of evolving that layer of trust in a sustainable way.
We do it in different ways.
To do this, we actually engage in a membership interview process for all new investment bankers who join the Finalis platform.
How was the start at Finalis? How did you initially get the message across?
I would say our first customers were a direct result of an outbound email campaign I was sending.
I used the LinkedIn sales navigator and identified small investment bankers and sent a lot of emails. Pretty quickly, we realized we were starting to generate some notoriety.
Today, most of our investment banking news actually comes from word of mouth and our own inbound marketing efforts.
How do you actually make money?
Finalis has a two-way revenue model.
We charge a monthly subscription fee. You can consider this as a software license fee, like any other SaaS business. These fees vary depending on the size of the investment banking store as well as their level of confidence in their ability to complete transactions.
We also charge commission fees which vary. The investment bank can choose a plan that best suits their desire to take on perhaps some exposure to liquidity on a monthly basis in return for a lower fee.
What are some of the costs involved in running such a business?
Much of our software development is aimed at enabling the scalability of our compliance platform as a service.
Here, efficiency is centered on the collection of data and information. Then the other is how to provide a faster workflow for the investment banker.
Currently, the investment banker, or at least before Finalis, used email-based workflows to interact with their compliance officer.
We have revolutionized this by moving these workflows directly into a cloud environment where they are streamlined. Only the information that must be provided is at the time requested.
Given the market environment, what are you concerned about and how are you addressing some of those concerns?
Based on the conversations we’ve had, there is a strong belief that while capital appears to be on the sidelines during this period, it will exit the margins well before the end of this year.
I expect Q4 to be very different from Q3. But, obviously, we live in a very dynamic picture, so that really remains to be seen.
What’s the takeaway you want readers to take away?
The zeitgeist these days has focused on fintech retail apps.
Finalis represents a category-building company delivering grassroots innovation to the investment banking space, which we believe will be increasingly targeted.
This is, in particular, in a recessionary environment where recessions have been the times when most people think about starting their own boutique investment bank.
So it’s actually countercyclical from that perspective. And so we think there will be more focused attention here, and we’re excited to start telling our story.
Photo: Video feed via Shutterstock