Luxembourg's first FinTech awards drew nearly 80 applications from around the world, including lending and crowdfunding platforms, RegTechs, digital banking products, robo-advisors, and big data solutions. The winner of the grand prize (€50k, four months' hosting at the Technoport, and a one-year membership at the KPMG Hub for Entrepreneurship) was Governance.io, an oversight and control product for investment fund professionals. I sat down with CEO Bert Boerman to get a closer look.
Tell me about Governance.io. What's it all about?
Well, for fifteen years I was a banker in charge of depositary bank activities and investment fund oversight, so I was dealing with a lot of fund industry challenges. And, basically, that experience gave me the idea for the software that became Governance.io. I implemented an earlier version of the system at my bank in order to fix my own problems and make my job easier. In 2014 I decided to leave the bank and to focus exclusively on that project.
So, in a nutshell: Governance.io is a fund oversight platform that helps fund managers and depositaries deal with their regulatory oversight. When management companies or depositaries want to control investment funds, they first need to have a view over the entire fund structure and know everything that's happening inside that fund structure.
We gather all the fund data and display it in one place: you can see a graphical representation of your fund, either in an ORG chart or a real-world map; how the fund structure is built; the different entities; who the service providers are; what the fund's assets are, and what transactions took place; the NAVs that have been published; what documents you've received; what controls you have performed; and any other related data.
Is it customisable? Do you tweak and adjust it for every client?
From my background as a banker I had this ideal model of data in my head, something like if you have X, Z, and Y – then you're golden! But when we started testing early on with external clients they said that's nice... but we would like this different and that different, and can we have this, and not that... etc. Our first reaction was to tweak it each time, but if you want to think beyond your first five clients then this is not really feasible.
So, we built an infrastructure for a system that you can continuously upgrade over hundreds of clients, and which can accommodate everybody's different data model. Normally you have customisation but no upgradability, or upgradability and no flexible data structure—but we actually combined the two, which took a lot of time to build.
The difficulty in the design comes from the fact that, of course, every fund is different. You might have two main flavours, UCITS and non-UCITS, which both have their own complexities, but they also break down to multitudes of subcategories. For example a private equity fund is a completely different animal to a hedge fund, and a valuables fund, or even a debt fund. Plus, every ManCo works differently, every depositary works differently, and although the regulation says that you have to perform certain controls, how you go about doing it is up to you to decide—so everyone ends up with a different data set. And Governance.io is built to accommodate it, whatever it is.
RegTech seems to be an escalating area of interest. Who is your competition and what sets you apart?
With no shortage of regulatory obligations nowadays, it's true that RegTech is a big area at the moment. There are more and more companies starting to look at it and you see some of the big consultancy companies trying, for example, to come up with some dashboarding functionalities. Governance.io is going a step further: we say, yes, dashboarding is nice, but what you really want is to have control over your structure, which our product allows you to do. The overview is great but if you can't perform the controls afterwards then all you've gained is the knowledge that you've missed something.
Other competitors are big and established global players offering complex systems that have been around for a long time. But even though I have these companies in my competition overview I don't fully view them as competitors, because they are heavy on organisation, extremely expensive, and take a long time to implement—in short, they're complicated for users to use. Our approach is completely the opposite: we have ensured that our product is simple, fast to implement, flexible, and affordable.
The other interesting side of the field is that currently you see a lot of highly specialised companies working together, rather than big single players trying to do it all. Take the ICT Spring's European Startup of the Year this year, a young Irish company called FundRecs. We're in weekly contact with them because they provide a fantastic solution for high-frequency reconciliation which is not something that we do—so we thought, we have a global view of the investment fund and these guys perform a really specific control excellently, so why not work together? It becomes like an ice cream cone for the client: they can have a scoop of Governance.io, a scoop of FundRecs, etc.—they can build their solutions entirely out of specialists.
What advantages and disadvantages have you found about being located in Luxembourg?
Marketwise, this is the sweet spot to be. We are aiming at the fund industry which, as [Finance] Minister Gramegna said at the Awards yesterday, is the second biggest fund domicile in the world and the first in cross-border distribution. What people may think about less is that this huge and impressive industry hub is pushed into a tiny piece of land, making it very efficient and easy to network here.
What's also great is that the government has really put FinTech on top of their agenda. I was at another event this morning where Mr Gramegna spoke, and he said that there are now four pillars in the financial sector in Luxembourg: banking, the fund industry, insurance, and FinTech. So it's a massive part of the political agenda which is naturally good for us.
What Luxembourg really needs to improve, however, is the administrative environment—there we've had a really big challenge. There are more and more tools becoming available for entrepreneurs, yes, but the administrative process of setting up a company, running it, managing VAT, dealing with the tax authorities, and so on, is really complicated. Other countries do it much better than we do, frankly: last year I was invited to London which is trying to lure FinTech companies, and I must say I was tempted. In London, if you decide that you want a company, then tomorrow you have it. The administrative procedures are online and easy to do, whereas here you have forms in French and German which really slows down international FinTech guys. With the fantastic launch market, the political will, and more and more incubators like the Khube and Nyuko, Luxembourg is definitely a prime spot—if we could just make it simple on top of that, then we'd have a really good mix.
What other challenges have you had?
Our challenge, especially with banks, is to convince them to move, and to move now rather than in 18 months. Many of them are still afraid that they're going to get squeezed out by FinTechs, and they don't realise that most FinTech solutions are going to help them by making their jobs easier, not make them obsolete. The other part of the problem is that banking institutions are very scared of choosing "unproven" or "new" solutions in the market. However, if there's this big political push assuring the industry that FinTechs are here to help, then I hope this will generally help the credibility of FinTechs. Credibility is really key for us.
Do you have any advice for other entrepreneurs?
What entrepreneurs often do wrong in the beginning is that they try to do everything themselves just to save cost. I did it myself—you're in the bootstrapping phase and figure you can get around costs by taking on the duty yourself. But, as an entrepreneur, the more time you spend in areas that you haven't mastered, the less time you have for business, and that hurts you overall. Now we are going to work with the Khube which is great, and there is more and more support out there. So my advice to other entrepreneurs would be to try to seek out advice earlier.
And finally... what were the last three apps you downloaded?
The last three apps? Let's see... the Formula One app, Woov (which is actually an app we created—it's a festival organiser, the only app development client that we still retain), and Pipedrive.
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