Angel investment in FX startups is once again on the increase. How to get off to a flying start and avoid pitfalls

Long gone are the days when startups and novel ideas were precariously placed on the shoulders of the metaphorical minnow in a sea of sharks who took the initiative to push the boundaries. In today’s sophisticated and technologically advanced online world, reliance on traditional banks for expensive and risky business loans, or delving into the […]

Long gone are the days when startups and novel ideas were precariously placed on the shoulders of the metaphorical minnow in a sea of sharks who took the initiative to push the boundaries.

In today’s sophisticated and technologically advanced online world, reliance on traditional banks for expensive and risky business loans, or delving into the already committed pockets of an entrepreneur, angel investing is once again on the increase, and surprisingly at a relatively high rate in the FX business.

Removing the worry of putting food on the table, or of having an expensive commitment to a bank has been proven to allow founders of new firms to concentrate on their product and service, and to strive to make a good impact, however there are downsides as well as upsides.

Today, James Giancotti, CEO of Oddup, a company which assists investors in making informed decisions as to whcih startups to back, made a clear and positive statement toward the future of angel investment.

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Mr. Giancotti views the prospect of moving from a steady, employed position to going it alone with good backing as something which many people are almost afraid of, and that domestic concerns are often at the root of the fear.

Last week, FinanceFeeds debated in a television interview the diffences between successful executives within a large firm, whose infrastructure, database and range of specialist departments can be leveraged by a talented employee, who then gains success, begins to dream of owning a business, and then fails just a matter of months after establishment due to lack of ability to consider every aspect that is required to operate as an independent business.

Being a successful salesman at a large software house is radically different to becoming the founder of a bespoke and innovative technology firm.

Mr. Giancotti depicts concerns about domestic lives changing due to the founder of a startup’s worrying that they may succeed and become a different person with different priorities, therefore unrecognizable to their partner.

Referring to this as a ‘mid-life crisis’, Mr. Giancotti considers that angel investing is at a peak point due to more individuals having a desire to push the boundaries, away from the percieved security of a large corporation.

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Oddup predicts that Asia, a massive area for growth in angel investing, is likely to be one region in which a continual increase will occur this year. In 2014, 245,000 new investors in technology startups appeared in the Asian continent according to Oddup data.

FinanceFeeds spoke to Itai Damti, Managing Director for Asia Pacific at FX brokerage solution provider Leverate, who has significant experience in Asia’s burgeoning angel investment segment, and is very much familiar with the ethos behind many firms in the region which use Leverate for their brokerage technology.

Mr. Damti actually sees the investor rather than the start up as the one taking the greatest risk in this particular circumstance. He explained to FinanceFeeds

It’s definitely happening, the startup scene greatly benefits from new money and connections and it’s exciting to see people pursuing a new passion. But I also think it’s important to raise a key question: is this movement sustainable? Will enough people get rich from investing in startups?

One method of ensuring synergy and making a point of gaining startup capital from an entity that will provide the right backing is to do so from firms that are looking to expand within the same industry sector, therefore the likelihood of understanding each other’s business ethics and potential goals is likely to be greater, especially in an industry which evolves so rapidly as the FX business, and in which circumstances can be different every half year.

A very interesting dynamic has been the willingness recently of very well established venture capital firms to back Bitcoin startups, mostly centering on the drive toward large investment in technology to advance the blockchain and secure wallets for cold storage.

Unlike the majority of technology start ups, San Francisco and Tel Aviv are less significant than New York as the destination for such innovation, with Coinsetter’s success being a prime example, and provider of automated execution of large orders and trading strategies for crypto currencies Digital Trading Solutions having been backed earlier this year by taking seed funding of just $50,000 from incubator CrossCoin Ventures, and now arriving at a valuation of $1,700,000 since emerging as a new firm in March this year.

Whilst the company was given its initial funding by San Francisco’s crypto currency incubator CrossCoin Ventures, Digital Trading Solutions is firmly part of New York’s digital currency scene.

Who would have thought that just 10 years ago, retail FX was a very new phenomenon, as were the ingenious technology companies providing indicators, trading devices and applications that headed into existence, the Bitcoin scene has gained huge interest from large institutions who have not shown the will in going boldy where nobody has gone before.

The difference is that when retail FX rose to popularity, astute investors in fintech had less risk because the institutional and interbank FX sector had been long since established and therefore the future landscape would be easier to gauge, however with Bitcoin, an entirely new phenomenon from the ground up, the risks and uncertainty were monumental. Ten years ago, nobody invested $120 million in an FX company’s technology, however earlier this year, 21 Inc got exactly that amount in a record-breaking round of funding.

Perhaps the avantgarde and the institutionalized alike are up for making their mark in pushing the limits of development.

Photographs: Top left – James Giancotti, CEO of Oddup. Lower right – Itai Damti, Managing Director, APAC, Leverate

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