The Financial Revolutionist’s Gregg Schoenberg sat down with Ryan Terpstra, CEO of Selerity, for a wide-ranging discussion. Founded in 2009, Selerity provides personalized and actionable content for financial services professionals. The company, which had originally been focused on servicing electronic trading firms, shifted its core offering in the wake of market developments. 2015 proved to be a breakout year for the company on multiple fronts. Last May, Selerity’s proprietary technology scooped Twitter’s earnings one hour ahead of schedule during market hours. Then in September, Symphony, the financial messaging platform backed by Alphabet, Blackrock, Goldman Sachs and others, announced that Selerity would be joining Dow Jones and McGraw Hill’s Capital IQ as one of three content partners. That partnership, as well as the company’s recent capital raise — led by Citigroup — has helped to catapult the company into the ranks of New York’s leading fintech companies.
The Financial Revolutionist: Thank you for sitting down with me. First off, I took note of the fact that you went to Miami University of Ohio. What percentage of people you meet think you went to school in Florida?
Ryan Terpstra: It depends on where you’re from. If you’re from the Midwest, they know where it is. But a majority of people think it’s Miami, Florida. Now it’s interesting, right, because they say, “Oh, that must have been so cool, the weather is great.” You’re like, “No, it’s in Ohio.” They’re not as excited after hearing that.
FR: Ha, yes, Ohio isn’t known for its weather. Turning to your career, I see that after a few stints at Thomson, you started Selerity in the eye of the storm of the financial crisis. Did you ever regret your decision to start a company then?
RT: Not really, and to be honest, we were very fortunate. I remember one of our early investors saying, “You are the only deal that I’m doing right now, and certainly the only company run by a 26-year-old that I’m looking at.” Looking back, I think ignorance was bliss because we didn’t fully appreciate the difficulties that other entrepreneurs were experiencing at that time.
FR: And how did your idea to start the company come about?
RT: For a long time I had been eager to build a technology-enabled media company using real-time search. A friend in private equity came to me with an idea to buy a company in a related space, but I didn’t feel comfortable negotiating that purchase while still at Thomson. So I decided to leave on my own accord to pursue that acquisition.
FR: Why didn’t that deal close?
RT: After taking a hard look at the company’s technology framework, I passed. So I was left without a job and a specific company in sight. But I still had investors who believed in me and who shared my vision of building a real-time search company for financial content. On that basis, I launched Selerity.
FR: And how much capital did you have when you launched?
RT: I took a $20,000 loan from my father and then gathered up all my own savings too. But in comparison to others, I was in good shape because I had a little money to tide me over during what I call the “entrepreneur’s gap.”
FR: Could you define that term more specifically?
RT: It’s that time period where you’re not making any money and yet you’re working harder than ever to get your start-up off the ground. The way to avoid it is to say, “Hey, I’m going to keep my day job and then do my new venture on the weekends and nights.” That just wasn’t realistic for my goals.
FR: So you had a little bit of runway as you began building your first product. When you finally looked to raise capital, how much money did you secure?
RT: $5 million, which I know is very atypical. But I was fortunate to have some very successful angel investors in financial technology who believed in our idea.
FR: And what was that core idea?
RT: My backers and I saw the explosive growth in financial information thanks to social networks and alternative sources of content. But finding the really important pieces of information to enable firms and individuals to make optimal decisions in real-time — that is what was missing.
FR: Understood, but you were initially focused on the high-frequency trading market?
RT: Yes, the HFTs were our first target because we knew that those firms weren’t being well served by existing vendors. And during the period when we launched, the HFT segment was one of the few areas that was doing well.
FR: You have since said that you enjoy selling a solution to humans more than computers. Now that you’re focused on people, could you give a practical use case on how Selerity can make a difference for financial professionals?
RT: Absolutely. We’re focused on enabling our users to customize the world’s information flows based on their interests. So a commercial banker who uses our product might learn about a client that just announced a new deal or partnership. That gives the banker a reason to pick up the phone and call the client.
Another use case relates to equity research analysts, many of whom can’t access Twitter directly because of compliance restrictions. So instead, analysts go to Selerity Context, a fully compliant Twitter solution that streams only relevant information for them.
FR: So the fact that news outlets and content generators continue to proliferate is good for you because you can help clients see through the noise?
RT: That’s exactly right — it’s a good thing for us. Thanks to social media tools, corporations, governments, individuals and politicians have all become publishers. We have the ability to sift through content and find the important pieces that are relevant to a customer in real-time.
We also work with organizations to improve their information workflow tools. The reason is simple: the longer one spends on a platform, the more likely they will be to transact. Take an e-broker for example, and a news event like Jack Dorsey being confirmed as Twitter’s CEO. Our technology can enable the e-broker to automatically push that information to customers who have Twitter in their portfolio. That’s a powerful form of customer engagement.
FR: Speaking of Twitter…
FR: How important was the Twitter scoop in putting Selerity on the map?
RT: I think it was powerful because it demonstrated the sophistication of our technology. Plenty of companies can scrape a website. The value we demonstrated was the ability to verify and calculate the information instantaneously. To confirm that it was the actual earnings for Twitter and automatically publish accurate results, that’s the science behind what we do and I think people were impressed to see our technology in action.
FR: But in order for people to act on the news you broke, they had to believe that the data you were disseminating was true. How was that the case?
RT: Many news outlets, such as Bloomberg and Reuters, follow our Twitter feed. So when our information was retweeted by these outlets, it increased the credibility of the content.
FR: Do you think Selerity’s Twitter fame helped in its selection as one of Symphony’s three original content partners?
RT: No, it wasn’t really a factor. In truth, David Gurle (CEO of Symphony) and I had been talking for a while. We shared a common vision about how marrying contextual content with messaging would be a game changer. Fortunately, Selerity was able to demonstrate that it was pushing the envelope in context-based recommendation. And through a series of meetings with Symphony’s product and engineering teams, we developed a great relationship that helped us to win the slot.
FR: In a somewhat ironic turn, Selerity and Twitter struck a partnership to filter Twitter’s data for Symphony’s users. How does your Twitter filter differ from the way Bloomberg filters Twitter?
RT: I won’t speak directly to Bloomberg’s Twitter solution, but I’ll tell you the three reasons why social solutions have failed on Wall Street and why we are pursuing the market differently. Number one, they weren’t integrated into existing workflows. A lot of these social media analytics products require another screen. That’s not realistic when looking at the limited desktop real estate a financial professional has. Number two, the data science is very hard to get right. I can only think of two firms besides us that can do real-time semantic processing with the precision necessary for our market. Number three is price. We cost about $30 per user, per month. There are other companies trying to sell solutions for $1,000 per user, per month. Bloomberg terminals, of course, are even more expensive.
FR: Speaking of Bloomberg, is Symphony more comparable to Bloomberg or Slack?
RT: I fundamentally believe that messaging is the next OS, meaning it is the foundation layer that other services and applications will be built on. You’re seeing that with Slack, WeChat and WhatsApp. If you talk to David Gurle, he wants Symphony to be that foundation communications and workflow layer for a wide range of business professionals. Traders are a targeted constituency, of course, but so is the admin who works for the senior executive.
FR: Let’s talk about capital raising. Although you have several well-known corporate and individual backers, you aren’t a Silicon Valley company per se. Did you try to raise money out there?
RT: We had a few conversations with VCs who were trusted connections, but they didn’t understand why we were spending time on developing an adjacent product apart from our core product. Given that we had already done a Series A and B round, we were also in a strange period of our lifecycle for them. It would have been easier for Selerity to raise VC money if we didn’t already have revenue and a product.
FR: You mean revenue kills the dream?
RT: It’s unbelievable to me, but I guess that’s right.
FR: What do you think compelled Citigroup to lead your latest financing round?
RT: In addition to sharing our vision, Citi had faith in our management and engineering teams. Key decision makers at the bank also saw how our product was enhancing one of their services (Citi Velocity). That helped a lot.
FR: As a guy who didn’t grow up coding, how have you managed to build the sophisticated solutions offered by Selerity?
RT: It’s really been a team story. Andrew Brook, our CTO, is one of the best technologists that I have ever met and certainly worked with. Together, we’ve been able to create an environment that attracts seasoned people at the top of their game.
FR: Given the fact that you’ve always had your tech team in-house, what would you say to entrepreneurs who are starting out by using outsourced tech?
RT: It’s fine to use outsourced development to get a prototype off the ground, maybe to help you raise capital. But you really should try to recruit a technical co-founder ASAP. If you’re in fintech and you don’t have a technical co-founder or a really strong technologist on your team, I think your chances at being successful are greatly diminished.
FR: Although things are moving in the right direction for Selerity now, you’ve had your setbacks during the company’s seven-year existence. What do you know now that you wish you had known back when you started?
RT: I think it’s a commitment to the long-term. One of my mentors had to re-mortgage his house and fire his staff twice before his business took off. Another entrepreneur I met likes to point out that he missed payroll eight times and his rent 14 times during his tough years. Resilience is so important. Everyone thinks success is like a straight line. It’s certainly not. You go through some major ups and downs in entrepreneurship. For me, because I took angel money from people whom I respect a great deal, the pressure was even more intense. But those are the same people who came to my aid when things were dark, and they helped me power through.
FR: Well your tenacity has certainly paid off. Congratulations to you and your team on turning the corner.
RT: Thank you, I appreciate it.