Earlier this week Cloud9 announced a series A funding round from a consortium of financial institutions including J.P. Morgan, ICAP, and Barclays, to help it expand its cloud-based voice trading communication solutions globally and broaden into other asset classes beyond energy.
Finance Magnates had a chance to speak with the company’s CEO. He explained that the financial terms of the deal had not yet been disclosed, but according to people familiar with the matter the investors may release the data as a number of investors were waiting to fill in on the round.
Talking with Cloud9 CEO Jerry Starr in a conference call shortly after the news, to learn more about what attracted the series A round, we talked about future prospects for Cloud9 itself as an emerging company.
Regarding the funding, Mr. Starr said: “The investment will be used to help grow the company and meet demand here in the USA and globally as more and more institutions begin to embrace modern alternatives to their voice communications needs.”
In terms of the outlook ahead, he added: “We’ve actually been putting the investment to work since before we announced it publicly and have been steadily transforming the trader voice landscape at hundreds of institutions using our proprietary WebRTC-based technology. Now, as we look ahead, we’re excited to work closely with our backers to develop our application, which we ultimately see as more than just trader voice.
One of the main appeals of Cloud9’s solution is that instead of going the traditional landline based route which requires physical equipment and hardware (turrets), the company instead uses a completely cloud-based solution. This also helps avoid of the costs that would be tied to the disaster recovery-related expenses and other rental space-related costs that would be tied to hardware in a physical location.
It is similar to a voice over internet protocol (VOIP) approach where calls are all done via the internet and encrypted throughout the process, including in real-time during transit, when stored within Amazon, which is who the company is using for their robust cloud solution. The encryption feature was critical since the information is online, and Mr. Starr explained that some firms want to make sure they are the only ones that can decrypt the communications held in the stored files.
While the use of VOIP and related solutions doesn’t appear to be anything new, the manner in which Cloud9 has apparently packaged up its offering makes it lean and cost-effective for firms that might otherwise have legacy systems or complex processes in place for their voice-related systems. There are a number of firms competing in this space, including Greenkey, Redbox, and BT Radiance, for example.
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Cloud9’s technology is a very important advancement for the industry.
The company works with many energy brokers where the use of voice broking solutions is needed, and plans to expand into other asset classes to cater to stocks, foreign exchange, and fixed income.
The interest from the tier one banks appears to be the ability for the solution to be rolled out to their institutional clients. Considering that the company was just started in January 2014, and deployed its products a few months later, it’s still a fairly new company with clients trading for just over a year and a half.
However, the firm doesn’t lack experience for a new company as many of the members were formerly with IPC – including Mr. Starr – before he started Cloud9 to compete in this space. It already serves more than 2,000 traders at 350 firms in 21 countries.
Landline to online
Commenting in the press release from earlier in the week regarding the investment, Sean Charlton, Head of Voice at Barclays, said: “Soft turrets are clearly the direction of travel for the industry and their security capabilities and compliance functionality are continually improving. We look forward to seeing Cloud9 roll out across the market.”
“Cloud9’s technology is a very important advancement for the industry,” said Rick Smith, Head of Private Investments at J.P. Morgan Chase & Co. Inc., commenting in the press release about the round. Mr. Smith added: “It allows us to rethink our communication strategy for traders, and with it the economics of communication.”