StatPro acquires 51% of InfoVest
Why I am delighted with this win-win deal.
I was chatting with Damian Handzy, (the CEO of Investor Analytics (IA) which we acquired in January and so now StatPro’s Global Head of Risk and all round brilliant and lovely chap) about the strange things he had done in the past.
He told me that as a physics student he had put on a show with fellow students where he would lie on a bed of nails, have another bed of nails placed on top of him, have a cinder block (breeze block to us Brits) placed on top of the second bed of nails and then someone would smash the cinder block with a sledge hammer – making a Handzy nail sandwich in the process. Of course, far from causing Damian to look like he was covered in ketchup, he came to no harm whatsoever. The reason is that the pressure was dispersed evenly across the nails so that the individual pressure exerted by each nail on his skin was miniscule.
Nice story, what is my point? The same principle of physics seems to apply to business. If you have too many products, the total pressure you can bring to bear gets dispersed across all of them and the result is that you succeed in none. StatPro has made a fundamental strategic decision to put all its analytics functionality into a single, cloud-based, multi-tenant platform: StatPro Revolution. The aim is to have one platform with every type of portfolio analytics (performance, attribution, risk and data), but nothing else. We have built most of these analytics and our recent acquisition of IA adds handsomely to Revolution’s capabilities especially as it is a cloud-based, multi-tenant risk platform too.
However, in StatPro Portfolio Control (SPC), we had a product that we could not provide enough focus to without reducing pressure on Revolution. SPC is a great product and the market place for it has also opened up recently, so we could see opportunity, but the law of comparative advantage (and pressure) meant that we should stick to selling Revolution. That is where InfoVest came in. They are a rapidly growing, highly competent, South African FinTech business. The founders are all veterans of other successful FinTech businesses, so they know what they are about. We had already outsourced the support of SPC to InfoVest, but they wanted to push its development faster and grow the market. From our perspective the opportunity was clear. We could take a majority stake in their excellent business by using the SPC revenue stream from 26 clients to buy it. They would in turn invest like crazy to make the product better and get access to our worldwide client list of 500 asset managers, fund administrators, pension and hedge funds. We reckon they could grow SPC revenues by more than 50% this year and maybe do the same next year.
What is more, InfoVest’s own products are a neat fit with StatPro. They have a suite of products covering a data warehouse, ETL and reporting software. Selling solutions around a data warehouse is a very different process to selling analytics on a cloud platform. We want StatPro Revolution to be totally standardised. However our clients need to get clean input data to make Revolution work. Some already have data warehouses and clean data feeds, but many do not. This means that the success of an implementation is often just down to how well we can overcome data management issues at the client. This is a necessary evil for us, but it is bread and butter for InfoVest. They welcome consulting projects and pre-deal more than 50% of their revenue was consulting related. So we will certainly introduce InfoVest to those clients of ours that need a little help dealing with their internal data challenges. A well-implemented data warehouse means that feeding systems likes Revolution becomes easy. They can also extract output from Revolution and feed it back to the data warehouse and then produce high quality reports from it.
So, this investment by StatPro creates two zones of competence, each focused on its own speciality. We will be keeping the management and branding of each company separate and distinct, but we will try and leverage the opportunities each business can offer the other. When a client has his data well organised, we can provide them an easy to setup analytics platform with StatPro Revolution. When a client needs to sort out his internal data, we can offer a solution to fit his needs and then make the setup of Revolution easy. There is a real opportunity here because the market for data warehouse products does not have many alternatives and those that are established date from a long time ago and are typically quite expensive. InfoVest’s solutions utilise very recent technology and the price point is good value. This will be very attractive to many mid-sized businesses in the asset management industry.
So welcome Robin, Riaan, Tarquin and Lionel to the StatPro Group, I think this deal offers a great opportunity to both our businesses.