IEX Trading is an upstart stock trading platform – and the first equity trading venue owned exclusively by a consortium of buy-side investors, including mutual funds, hedge funds, and family offices. The idea: to institutionalize fairness in the markets by providing a more balanced marketplace via simplified market structure design and cutting-edge technology.
And talk about disruptive, they’ve just closed a $75 Million Series C Round, led by Spark Capital, to see that they do what they set out to do.
“IEX is an electronic stock market,” said Flash Boy Brad Katsuyama, President and CEO of IEX. “From a regulatory and commercial perspective we are a “dark pool,” but this capital raise allows us to start a regulatory process to become an exchange, and compete directly with New York Stock Exchange and NASDAQ. They have a 220 year and 40 year head start on us respectively – but we are ready for the challenge.”
At the simplest level, IEX matches buyers and sellers, “but we are different from other stock exchanges in how we do it,” Katsuyama continued. “Our technology was built in a way to level the playing field by slowing down our fastest participants. While other exchanges are selling high speed technology to certain players, we are doing the opposite – essentially to ensure that we create the fairest possible conditions for everyone who trades on IEX.”
Katsuyama and Alex Finkelstein, General Partner at Spark Capital, who led this round, tell us more:
Who were your investors? [Brad Katsuyama]
We are really excited about this latest round of funding as it further diversifies and strengthens our consortium of investors. The team at Spark Capital led the round, which included other venture investors Bain Capital Ventures, MassMutual Ventures and TDF Ventures, investment managers Franklin Resources, Inc., and visionary entrepreneurs Jim Clark (Netscape) and Steve Wynn (Wynn Resorts), among others.
The stock market exists to serve investors and issuer companies, and we believe this consortium strongly aligns us with both constituents.
What was the funding process like? [Katsuyama]
It was definitely a different process this time around then the last! We feel really lucky that our company was able to get very broad exposure across all media outlets. Michael Lewis’ book Flash Boys and the 60 minutes episode were game changers for us in a positive way and we were immediately flooded with inbound interest. The key for us was to focus on adding partners who were aligned in our vision and strategically added value to our network of broker, investor, and corporate relationships.
What are the biggest challenges that you faced while raising capital? [Katsuyama]
Making sure potential investors didn’t own assets or businesses that could present a conflict of interest with our business and our principles. We are challenging the status quo in a very large and profitable industry – so we did not want to be competing with other investments and portfolio companies.
Also, given the amount of interest, it was a really hard decision when we had to narrow down who was going to lead the round. We chose the team from Spark because we had really great chemistry with Alex and his partners. They were candid, honest, and very entrepreneurial – our firms are a lot alike in that way.
What factors about your business led your investors to write the check? [Alex Finkelstein]
A number of reasons: 1. We focus on companies that have inherent network effects and IEX clearly fits into that model. 2. We invest in technology financial services companies that are disrupting legacy financial institutions by creating great products, providing transparency and putting the customer first. 3. Brad and the team he has built. 4. Conversations we had with many industry leaders on the buy side and sell side. 5. IEX’s volume traction in a short amount of time.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank? [Alex Finkelstein]
Focus 100% on building an amazing product and building a great team.
Where do you see the company going now over the near term? [Katsuyama]
We are in the process of filing to become a stock exchange to compete directly with the New York Stock Exchange and NASDAQ.
To drive more business towards our platform, our goal is to educate the industry on the IEX value proposition – what are the issues with the market and how are we addressing them.
From your data, where’s the best place for happy hour after the market closes? [Katsuyama]
Ha. With a 4-year-old, 2-year-old, and a crazy work schedule the days of happy hour after the bell are a thing of the past for me.
But I know the team likes to go to Manhattan Proper by our office. We have had a few work outings there and they are always good to us.
