MCO Europe is the exclusive European distributor of eXtremeDB Financial Edition, a high speed database software for trading and risk areas of Banks, Fund Managers, Brokers and data vendors. Led by veterans of the IT industry, MCO Europe is positioned to provide an industry beating solution to commercial and regulatory requirements of major financial institutions in a sector described as the most successful for investment in the UK.
MCO Europe is the exclusive European distributor of eXtremeDB Financial Edition high speed database for trading and risk areas of Banks, Fund Managers, Brokers and data vendors, all of which we know Regulators are pressing to store real time trading data.
MCO Europe plans to build the business through database sales and associated software and consulting. According to a recent Times Raconteur supplement London can claim to be the world leader in “Fintech” (Financial Services Technology) and this is echoed by the Finextra on line Newsletter and blog.
In order to comply with increased regulation such as European MiFID 2, banks and other financial market trading organisations must collect and store vast quantities of price and trade information – and be able to analyse this information very quickly. 20 years ago prices and trades were reported and stored hourly or even daily – now, with the advent of computerised trading, prices are recorded, stored and analysed in micro seconds! Major banks make millions of trades every day, which means that huge quantities of data must be stored very quickly in real time – a combination of “Big data” and very fast data is required to meet the regulatory requirements.
eXtremeDB Financial Edition and MCO Europe seek to bring together very fast data storage and analysis, and “Big data”.
The Company plans to operate in a number of sectors of the Financial Services IT markets:
- Hedge Funds which are very significant users of algorithmic trading applications and are now subject to regulation. As their use of algorithmic trading strategies increases, the major Fund Managers will also be targets for MCO Europe.
- Investment Banks which not only have algorithmic trading activities but can also use eXtremeDB for Risk management applications to enable them to comply with much increased regulation.
- Central Banks & Regulators which monitor trading activity and risk management of the organisations which they are charged with regulating.
- Brokers which now provide primarily electronic trading platforms for Foreign Exchange, Energy and other broader markets. Their activities are increasingly being regulated.
- Exchanges & Clearing Houseswhich we know are increasingly needing extensive, high speed database technology as the majority of trading is now electronic and trading firms are constantly looking for the lowest latency possible trading venues. Also many derivative products which used to be traded OTC (Over The Counter) are now, as a result of increased regulation and EU Directives, required to be settled through the Clearing Houses.
- Consulting & Systems Integration firmswhich we know are increasingly carrying out projects in the algorithmic trading sector and supply database systems to their clients.
- Market Data Vendors such as Thomson Reuters & Bloomberg, which we know are increasingly offering a broad range of managed services to their customers, which requires them to have their own implementations of high speed, low latency databases
MCO EUROPE will have its own Business Development staff in major market areas, commencing with London, but will also work through Consultants, Systems Integrators and other smaller organisations to open new markets across Europe. The founders of MCO Europe have worked successfully in the Financial Markets technology sector and are confident in their database of contacts to whom they can sell eXtremeDB.
This raising of market awareness and generating of sales activity, will be the primary focus of the company’s marketing activities. In its formal marketing activity the company will devote significant effort into developing early sales in the various target sectors.
The Company’s direct marketing activity in 2015 will be focused upon press and public relations, particularly in the areas of the benefits of eXtremeDB in the Financial markets, and “happy user” stories, as well as events and seminars. Conference and exhibition attendance will be restricted primarily to speaking opportunities and low cost booths at specialised, focussed events.
MCO Europe will generate revenue from sales of eXtremeDB Financial Edition database software licences and also build consulting and software development activities. MCO EUROPE will receive 35% of both Software Licence and Support fees, and also 100% of related Consulting and client specific software development revenues.
The Story So Far
To date we have negotiated the exclusive European eXtremeDB Financial edition distribution agreement, established a presence in the market by attending industry specific conferences and events and setting up the website. A press release announcing the formation of MCO Europe and the signing of the exclusive distribution agreement was issued and extensive coverage was achieved in Financial Markets Technology publications and websites.
Use of funds:
- Commence the extensive marketing of eXtremeDB Financial Edition
- Build the MCO EUROPE brand with potential clients and partners
- Drive broad Business Development and consulting activity
- Identify and commence hiring Business Development and Consulting staff
- Develop software for clients as the use of Financial Edition grows
- Provide working capital and reserves.
We know that the market for high performance databases in the Financial Sector is large and growing rapidly.
Every major Investment Bank in the world has a trading presence in London and many of them have their International or European Headquarters in London, from where a number of them manage global technology operations. There are over 250 Hedge Funds based in London and 2 out of the 3 large Inter Dealer Brokers are London based as are major providers of Market Data and services such as Markit, Thomson Reuters, IDC, BT and other smaller organisations. The London Stock Exchange and its subsidiaries the London Clearing House and FTSE are also based in London.
We know that the most important issue facing all financial trading organisations since the “crash” of 2008 (and various banking scandals such as the rigging of LIBOR and Foreign Exchange prices) is vastly increased regulation. New regulations and EU Directives such as MiFID, MiFIR and BIS (Bank for International Settlements) guidelines, and globally enforced USA regulations such as Dodd Frank, all require financial market trading organisations to collect, store and analyse trading and price data. High performance is critical in this market and in two recent STAC (Securities Technology Analysis Center an industry funded independent testing centre) benchmarks eXtremeBD Financial Edition outperformed competion and broke performance records.
Financial institutions will not accept eXtremeDB Financial Edition.
- Long history of the eXtremeDB embedded database in such demanding environments as aerospace, defence, security and telecoms, we know that extremeDB has already been sold into major banks in New York.
- Excellent STAC benchmark results
- We do not believe this is a real threat owing to the interest we have received to date.
Rapid growth exceeds cash flow
- MCO EUROPE’s directors have paid detailed attention to the management of cash in past successful start up businesses
- MCO Europe does not have to purchase software until it is ordered by a client
We know of one direct competitor – KX Systems – which also has a low latency time series database: KDB. Until now they have had little direct competition. KX has been in the marketplace for some years and has a user base, which we know is largely unhappy because of the lack of competition, high prices and, most importantly, the fact that KDB has its own proprietary language. We know that the trained programmers required to operate this are scarce which enables them to command very high fees, often in excess of £2,000 per day.
eXtremeDB Financial Edition can utilise standard SQL and has C/C++, C#, Java and Python API’s enabling experienced programmers to “hit the ground running” with no specialised language training or experience. This can dramatically reduce the cost of staff and prevents the trained KX programmers “holding clients to ransom” because they are hard to replace and expensive.
We believe KX has had a free run in the high performance arena until the advent of eXtremeDB Financial Edition, which has recently outperformed KDB significantly in STAC M3 benchmarks. The first, run on IBM Power 8 hardware, was announced by Ian Hillier-Brook and Peter Lankford, CEO of STAC, on 30th October 2014 at the STAC London Summit, where it was very well received. Prospective clients to whom Ian Hillier-Brook, and the MCO Europe team have spoken have expressed a wish to be able to “escape” from KDB and its high cost – of both the database and its associated programmers.
To quote a prospective client we are “Better, faster and less expensive”.
Ian Hillier-Brook – Founder and CEO
A successful career of over 35 years in IT, much of it in the Financial sector. Experienced senior manager and entrepreneur. Held senior positions in the UK, Europe and the USA. Managed European Operations for American IT companies before becoming CEO of an LSE listed company. In the early 1990’s moved into helping small companies in the Financial IT sector raise funding, grow and be acquired. One of these was Market Data Systems, a Value Added Developer for FAME, the only specialised Time Series database available at the time. As Joint Managing Director he grew the business and managed the sale of the company.
In late 1990’s founded Market Information Services (MIS), a company based upon the Informix Object Relational database which had a Time Series DataBlade enabling the rapid collection, analysis and storage of Market Data. MIS was sold to Moneyline Telerate in 2002. During the 2000’s Ian helped a number of small American technology companies enter the European market.
Ian has also been a consultant to McObject in the Financial Markets for the past year, and is thus clearly aware of the potential customers for eXtremeDB Financial Edition and the size of the opportunity.
Mark Reece – Director of Professional Services
BSc. Hons. Over 25 years in the IT industry. Started as a developer. From the early 90s, worked almost exclusively within Financial Markets, primarily with Stock Exchanges and Clearing Houses, but also with banks and brokers. Very deep understanding of trading systems including the handling of market data and algorithms. Mark has worked as a consultant in many projects, Throughout this time, Mark has also worked within the standards community (FIX Protocol Limited), leading a number of standardisation initiatives, which has both extended his understanding of the trading process across asset classes and resulted in him working with a wide variety of people from across the industry who are potential clients for MCO Europe
Peter Elsworth – CFO
As well as being an Associate of the Institute of Charted Secretaries and Administrators (the professional body for professionals in compliance, governance and risk), Peter has worked with Ian Hillier-Brook on two occasions and we are confident that his experience in finance and IT will be of great value to the busiess.
These notes should be read alongside the Financial Snapshot
SALES: Key sales drivers
Acquisition of clients: Banks and other financial trading organisations now have to store trading data, including high speed data, for analysis and regulatory use.
We also supply client specific consulting and software development for trading and risk analysis and regulatory reporting
USE OF FUNDS: Outline how you plan to use the funds you raise on Crowdcube?
Commence the marketing of eXtremeDB Financial Edition
Build the MCO EUROPE brand with potential clients and partners
Drive Business Development and consulting activity
Identify and hire Business Development and Consulting staff
Develop specialised software for clients
Provide working capital and reserves
EXPENSES AND PROFITABILITY: Please comment on your expense levels, gross and EBITDA margins
The only fixed costs are the team and a serviced office. Some marketing and travel. As software is downloaded there is no need for stock and it is paid for when the client pays us.
Gross margin is 35% on software and annual support. 100% on Consulting and software development. EBITDA margins are simply gross margin less running costs. Only capital expenditure is inexpensive PC’s and laptops which are treated as expense items
EXISTING DEBT OR EQUITY INVESTMENTS: Please outline the background to any existing debt or equity finance on the company balance sheet
McObject, the company which developed eXtremeDB invested £10k in September 2014 as did Ian Hillier-Brook, founder and CEO.
Ian invested a further £12.5k and he and McObject loaned the company £10k each in early 2015.
The McObject loan and investment demonstrate their commitment to MCO Europe.
CASH: Cash burn rate, Operational cashflow, when will you need to raise the next round?
The cash burn rate pre investment is £20k per month. Post investment £30k per month, growing as sales are made and staff hired. It will be tightly controlled and not increased until sales are made.
We will not need a further round, unless we go for quicker expansion – which will only happen if sales grow much quicker than planned.
The Exit Strategy
The most likely, and expected, exit will be a trade sale. As MCO EUROPE progresses its success will become more apparent to the established, larger, software distributors in the finance sector. There is the potential for a sale to a larger software distributor, or to McObject itself to establish a direct European presence for the company.
As MCO EUROPE is planning rapid growth in a fast growing marketplace, we believe significant financial rewards should be obtainable in a relatively short time scale. We forecast a 10 times return on a £60,000 investment for 10% of the company’s shares within three years, using a conservative eight times EBITDA valuation. Given the current and growing interest in algorithmic trading and risk management (we expect this to result in growing interest in high performance, low latency databases), much greater returns might be projected by a less conservative management team.
Recent features in the Times Raconteur section, and the Finextra On line newsletter have described the Fintech (Financial Technology) software area as the most successful and fast growing sector for investment in the UK, and London in particular.
This company is offering only A-shares with full voting rights to all investors.
MCO Europe has submitted their plans to raise money, details of their structure and trade etc. to HMRC and has been given advance assurance that the proposed share issue is likely to qualify for Seed Enterprise Investment Scheme (SEIS) tax reliefs relating to their shares.
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