Although forex market has a large turnover and is very profitable (most of the time) for forex brokers and technology firms we see little independent innovation, if any. Most of the innovation is coming from forex brokers themselves (who can afford it) or a small number of technology firms who most of the time offer similar products and compete head to head for same clients – often just on pricing. Forex brokers, as the most profitable of all the market participants, should be the ones driving innovation and investments just like in the high-tech market where many large firms invest in small startups hoping to benefit from their innovation and future success.
The only actual investment by a broker into a technology firm in the forex market was with Saxo’s 25% acquisition of Leverate. Other firms struggle to find financing and must bootstrap to maintain their business – something that doesn’t allow heavy investment in long term projects.
Finally FXCM picked up the glove and it is announcing an exciting project called FXCM Ventures. FXCM Ventures, just like its name suggests, emulates the Venture Capital industry and is set to invest in forex and financial startups that can benefit both FXCM and the forex industry.
FXCM Ventures is sponsoring the Startups panel at our London Summit in November.
We’ve had the chance to interview Jacqueline Johnson who leads this project for FXCM:
Please describe the idea behind the project
The idea behind FXCM Ventures is to provide a mutually beneficial partnership between startup companies and FXCM. The startup taps into resources that FXCM can offer, our industry knowledge and experience, along with access to our client base while FXCM benefits from the new ideas and technologies in the industry. We recognize that there are many cutting edge companies out there that can significantly benefit from the expertise that FXCM can bring to them, both from a marketing standpoint as well as our extensive industry knowledge, so we want to partner with those companies on the ground level. We have the ability to provide financing and we obviously want to see a positive return on our investments, but most importantly, we can add real strategic value to these companies that they would not be able to get from traditional VC financing. The most important benefit to FXCM is what these venture investments can do for us in the long run by adding to our core business.
Please describe your background
FXCM Ventures is made up of a team of top senior executives within FXCM, including our heads of Marketing and IT, among others. I have personally been with FXCM for almost 8 years in various sales and business development roles, and will now be the Vice President of this new VC division. The entire executive team involved in FXCM Ventures will be responsible for deciding which companies that we invest in, and then closely working with these companies throughout the life of the investment.
What kind of companies are you interested in (market, stage, etc)?
Separating Yourself From the Pack in a Mature FX IndustryGo to article >>
First and foremost the businesses FXCM Ventures invests in will have clear competitive advantages and are led by strong management teams. We are looking for teams and products that demonstrate their usefulness, value add to customer experience and overall will generate new business.
The new division will look to find successful start-up and growth stage companies within the electronic financial sector, specifically with a focus on forex (FX) and contracts for difference (CFD’s) sub-sectors.
FXCM Ventures will be making private equity and debt investments ranging from $100,000 – $1,000,000 per each portfolio company. We are seeking business opportunities with cost-effective paths to increasing value and extracting risk.
We are exclusively interested in companies where we believe we can add real value using our industry standing and experience, and where they can add real value to our core business
Will you only invest in companies you’ll be using the technology of or is it completely separate?
Yes, we plan to only invest in companies where their technology benefits our core business. We want for there to be a bi-directional knowledge transfer in each of our investments so that we are gaining insight into new products and innovations in the market.
What else do you provide to these companies besides investment?
In addition to the capital investment, the primary benefit for a company to work with FXCM Ventures is because of our ability to allow them to tap into our position as an industry leader. This includes working directly with top executives who have built FXCM into the global leader, as well as gaining access to FXCM’s contacts and technologies and gaining exposure to our client base, which is one of the largest in the industry. Leveraging FXCM’s reputation and networks this will give companies a critical advantage, and it is those resources which we believe make FXCM a better strategic partner than receiving financing through traditional sources that cannot add the depth of industry expertise that FXCM can.
What are the criteria?
We are looking for companies with strong leadership since the management of any startup is vital to its success or failure. Additionally, we want to invest in companies that have clear competitive advantages and can offer innovative products to FXCM and to the FX industry as a whole. The company should offer a product that has a proven ability to attract new users and add value to our clients, while complimenting or enhancing our current suite of products and services.
Proposals can be submitted via our website at www.fxcmventures.com, we will review every proposal and then contact companies that we believe are a good fit for us to move forward in our due diligence process.