Symphony's CEO is planning a big strategy shift as the $1.4 billion startup backed by Wall Street's elite struggles to lure hedge-fund clients
- Symphony, the messaging startup valued at $1.4 billion, is rolling out a referral program in the coming months that will allow its customers to sign their clients up to the platform for free in an effort to expand its network.
- David Gurle, the company's CEO, told Business Insider in an exclusive interview the startup is looking to help firms facilitate complex trades.
- Business Insider has previously reported that the startup has yet to attract major adoption among hedge funds and asset managers.
- Gurle said an increased focus on offering solutions as opposed to just internal collaboration will help the company become profitable within 18 to 24 months.
- Symphony, which was created in 2014, has raised $460 million from some of the biggest firms on Wall Street, including Goldman Sachs, JPMorgan, Morgan Stanley, and BlackRock.
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A unicorn startup is looking to lean on its big-name backers to lure clients it traditionally has fallen short on attracting to help it reach the size its chief executive believes is needed to be profitable.
Messaging startup Symphony, which has raised $460 million from some of the biggest firms on Wall Street en route to a $1.4 billion valuation, plans to roll out a referral program allowing customers to sign their own clients up to the platform for free in an attempt to broaden its network.
The plan, as explained by Symphony CEO David Gurle in an exclusive interview with Business Insider, will be rolled out in the coming months and is meant to entice more buy-side firms, long a sore spot of the firm, as it looks to gain traction helping facilitate complicated financial trades.
The change is part of a focus on building out Symphony's solutions business, which will diversify its revenue beyond the subscription-based model that has served as the core of the company.
Doing so will be critical in making Symphony profitable, which Gurle said can be achieved within the next 18 to 24 months.
"It is no longer I am going to buy a product that does help me to collaborate and connect with my counterparts. No. I want to solve my price discovery. I want to automate for my price discovery. What can you do for me? I need to understand how can I manage my liquidity. I need to know what is the best way you can serve me for end-of-day pricing of the basket I am trading every day," Gurle said.
"That is the new problems that has come to us, which is a different job than what we have done over the course of the last 4-1/2 years."
The new focus will be an adjustment for Symphony, which has built the majority of its business as an internal collaboration platform used mostly between banks' front-, middle- and back-office teams. Gurle said 80% of messaging on Symphony takes place internally as opposed to between firms.
Gurle said the company expected the shift, but noted that Symphony doesn't yet have the network to execute on those opportunities.
With a typical sales cycle of 60 to 321 days and thousands of hedge funds, asset managers, and family offices spread across the globe, Gurle said it's impossible for Symphony, which has roughly 320 employees, to grow its customer base quickly enough.
"There is just no way we can scale our sales organization to go after 5,000 more customers. It's just not possible," Gurle said.
Buy-side adoption has been tricky for Symphony
Gurle positioned the referral program, named the Symphony Community Platform, as a way to keep pace with the growing demand among the banks to use the messaging platform with its clients. However, the change highlights lagging interest among the buy side to adopt the platform, which has been live since September 2015.
Buy-in from the banks has never been the issue for Symphony. The startup's cap table is a who's who of big banks, including Goldman Sachs, JPMorgan, Citi, Bank of America, Morgan Stanley, and Wells Fargo.
And while two of the world's biggest buy-side firms - Citadel and BlackRock - are also Symphony investors and board members, the startup has yet to attract major adoption amongst the hedge funds and asset managers of the world, Business Insider has previously reported.
Gurle said of the 338 clients on Symphony, 117 sit on the buy-side. In total, the startup has 483,000 licenses and posted $57 million in revenue in 2019, which represented 37% year-on-year revenue growth.
Business Insider reported in August 2018 Symphony had 325 clients with close to 350,000 users. The company told Business Insider it had $35 million in recurring annual revenues at the end of 2017, with a growth rate of 50% each year.
"We still have room to grow," Gurle said.
Complex trades represent an opportunity for the messaging startup
The motivation to build out more of a two-sided network stems from the opportunity Gurle sees in the over-the-counter markets.
With no centralized marketplace, OTC markets often lack transparency and standardization around how to get deals done for complex financial instruments. Gurle thinks Symphony could help fill what he believes to be a void in the market.
In the fourth quarter of 2019 Symphony began helping firms with interest rate swaps and some cross-currency swaps. This year, the focus will be to grow that business as well as moving into equity derivatives and foreign exchange swaps, he said.
"What the market lacks today is how do we commonly define an instrument that we can all agree on, whether it is interest rate swap or single leg or mutual leg, for example," Gurle said.
"We are acting there as the standardization facilitator among the market participants. That's really the key, because then we can automate from there. We can connect incompatible systems with each other and accelerate the rate at which things happen, and therefore save money."
To be sure, helping to facilitate trades in OTC markets is a space long dominated by Bloomberg Chat. And while Gurle has previously pushed backed at the notion Symphony was built to compete directly with the terminal, he did acknowledge this would be one area the two firms would go head to head with the Wall Street giant.
Competition for Symphony might also come from its own big-name backers.
Banks have put significant resources towards building out platforms of their own based on application program interfaces (APIs). Goldman Sachs (Marquee), Citi (Citi Velocity) and JPMorgan (JPMorgan Developer) are among the banks who have publicly touted the capabilities they can offer clients.
Gurle said it's possible to embed Symphony into those systems, and that a few firms are working on doing as much, but declined to name them. The banks are also open to Symphony serving as the tissue between the various portals.
"They are looking at a way of addressing this quintessential user-experience problem that exists on the receiving end of those things," Gurle said. "It's not like their platforms are bad. They are excellent. But when you have remember to log into 10 different systems to get the price from 10 different brokers, it's not that efficient."
Gurle acknowledged the shift in focus means the need for Symphony to bring in those with experience in the financial markets. An alum of Microsoft and Skype, Gurle admitted his background is in tech and engineering as opposed to trading and market structure.
"We should absolutely compliment the organization with more talent and experience that comes from the markets," Gurle said. "It would be irresponsible for me and the board to not tap into that talent pool."
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