The advent of the internet has undoubtedly changed the speed of communication. Letters, faxes, and, memos are now all but obsolete. Cloud9 is tackling communications within financial services by harnessing the cloud. Using the platform, financial firms can now connect with institutional traders seamlessly and in a safe, secure manner.
AlleyWatch spoke with the company’s president, Greg Kenepp, about the newest features and the company’s latest round of funding from some powerhouses in the financial space.
Who were your investors and how much did you raise?
We received $30M in Series A funding led by JP Morgan, with Barclays, ICAP, and Point 72 Ventures. The round also includes individual participation by the principals of several leading firms who were among some of our earliest customers.
Tell us about your product or service.
Cloud9 is a cloud communications service provider that delivers high-performance voice and collaboration services for financial firms and institutional traders. We connect counterparties across all asset classes with an easy-to-use platform that eliminates costly infrastructure, features end-to-end security and encryption, and is fully compliant with the latest call recording and retention mandates.
We provide unprecedented levels of connectivity, with the Cloud9 Community feature enabling firms to make instant connections with fellow users and expand their business by discovering new counterparties in the directory.
We also have an open API strategy that enables our customers to connect Cloud9 with other services, as well as enabling other vendors to build new products on top of the Cloud9 platform.
What inspired the start of the company?
The cofounders of the company, including CEO, Jerry Starr; Chief Product Officer, Steve Kammerer; and CTO, Leo Papadopoulos, saw a clear need for a better communication solution in the trader voice space. Turrets, the legacy trader voice system, are a 40+ year old technology that lack a great deal of the functionality needed for a modern working environment. We wanted to eliminate the cost and complexity of dealing with traditional telephony solutions and bring the ease of communicating and connecting via consumer-based apps to the enterprise, so trading teams can talk to counterparties instantly – anywhere, and anytime.
With their knowledge of the industry, cloud services, and technology like WebRTC, they knew they could create a revolutionary platform that was inherently more reliable, less expensive, and of an enterprise-level quality.
How is it different?
Cloud9 is a truly disruptive technology – replacing legacy trader voice systems (turrets) that have become the status quo on trading floors. We have an advantage because we understand what traders need – especially when it comes to the level of quality firms expect, the level of security necessary to operate in the industry, and the level of compliance needed for the strict regulations in the industry.
Cloud9’s offering is up to 50% more affordable and can be used anywhere there is an internet connection. We also take into account features such as audio distribution, acoustical processing, and trade reconstruction compliance, as well as capabilities for partnership and integration with solutions that support trade-related activity.
What market you are targeting and how big is it?
We’re currently targeting the financial services industry, and even more specifically, institutional traders. There are 220,000 institutional traders and 2,500 trading floors globally.
What’s your business model?
We have a monthly, subscription-based model. Since our service doesn’t require hardware, it can be easily and inexpensively deployed across a business and managed by existing IT teams. There is no additional cost for scaling up or down based on business needs.
You had previously raised a round in April and now a round this month. Is there something that we should know?
After initially announcing our round in April, JP Morgan decided to commit additional capital to Cloud9. We also received a number of investment requests from some of the earliest adopters of our platform. We also welcomed Point 72 Ventures, whose participation comes as part of their strategy to invest in firms that will give them an edge and generate returns. This funding signals the close of our series A.
What was the funding process like?
For the second half of this round we were lucky to have some of our most loyal customers interested in investing in our service. We’re incredibly proud of this because these customers have tried our platform and experienced the benefits firsthand on their traders’ workflow and their balance sheets.
We’re also happy to have recognition from some of the largest influencers in the financial services industry, with increased investment from J.P. Morgan, who will be implementing our solution on their desks globally, and participation from Barclays and from ICAP, who is already using our service within its energy trading teams.
Point 72 Ventures believes that we’re transforming the way the buy-side and sell-side communicate across the capital markets and are interested in helping peers and trading counterparts in the industry convert to our platform.
Overall the funding process was a very positive experience, because we have supportive investors that trust the value of our product, our leadership, and our team.
What are the biggest challenges that you faced while raising capital?
Patience, once again, is the biggest challenge – even though we went through part of the process back in April and we had people approaching us and excited to be a part of this round, it doesn’t get easier. With financial institutions it takes time to work through the procedure and the details before everything becomes official.
What factors about your business led your investors to write the check?
Our investors have a great deal of confidence in our technology, largely due to the overwhelmingly positive response from traders. The product is easy to use, and requires little to no training to start connecting with counterparties. Traders often comment on the excellent voice quality as well as the reliability of the service, which can be used anywhere there is an internet connection. The Cloud9 Community also organizes trading partners by communities and asset classes, which makes it easy for traders to find existing counterparties or discover new business.
What are the milestones you plan to achieve in the next six months?
We just opened up our sales and support office in Singapore, and we plan to continue global expansion to serve demand for our service in other markets.
We also are focusing on expanding our communication services beyond the trading floor, serving the communication and collaboration needs of middle and back office support teams.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
The most important thing any company can do is focus on building their business – have a solid business plan in place, and the rest will come. Make sure you have a solid product that both your customers and potential investors will trust. The worst thing you can do is to constantly react to your competitors or chase an exit.
Where do you see the company going now over the near term?
Over the near time we are continuing to expand our company internally to accelerate the development of several products in great demand by our current customer base, such as our interoperability services.
Where is your favorite fall destination in the city?
While Central Park is a great place to catch some fall foliage, I recommend Fort Tryon Park in upper Manhattan. It’s a beautiful park with majestic views of the Hudson!