An exclusive with… Simon Veingard, Co-Founder and Chief Operating Officer of Covestor

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What is Covestor?  Can you explain to us the business model?

Covestor provides the world’s largest online investment management platform. We pioneered social investing which allows you to follow the real trades of any great investor. Our site allows you to see how proven investors manage their own money in their own accounts. Then, with a Covestor Mirroring Account, set up your brokerage account to automatically mirror each strategy selected, trade for trade. Investors can subscribe to a growing set of highly respected professional money managers as well as non-professionals with proven track records – with all securities purchased in the client’s name and held in custody at an independent broker-dealer. Covestor, an SEC registered Investment Advisor, charges clients a simple management fee for each subscription and shares these fees with the managers.

Covestor has some very interesting investors in the UK and US, can you tell us a bit about them and how their involvement benefits the business?

 

We are very fortunate to be funded by Amadeus Capital Partners (London), Spark Capital (Boston) and Union Square Ventures (New York), all leading firms with great track records.  Their involvement has been enormously beneficial, for example in finessing our strategy by applying the wisdom gained building highly scalable consumer internet businesses.

 

How developed is the market you are operating in? What does the competition look like and how do you plan to differentiate?

 

The recent financial crisis highlighted that consumers’ trust in financial institutions continues to ebb away.  Our competitors are these institutional behemoths and include firms such as Fidelity, Vanguard and Oppenheimer. With a lack of transparency and poor performing products with hidden fees, these institutions have failed thus far to embrace the web to innovate their product offerings and re-engage retail investors.

 

At Covestor, trust, transparency and openness are at the heart of our proposition.  Clients can mirror experienced investors, see exactly what they’re holding and how it’s performing, 24/7. And all without any hidden fees.

 

Can you tell us about how you founded and built the business? What have been the biggest challenges?

 

At the outset we had a clear vision of the business we wanted to build.  The complex nature of what we were taking on, in a regulated industry, meant it was necessary to plan for, and evolve through, a series of stages to create the investment management platform we have today.

 

Along the way our challenges have been numerous so here are just three.  First, we’ve had to prove that smart investors are willing to share their real investment activity in public view. Second, we had to figure out how to structure our business keeping it within a regulatory framework that was set up decades before the rise of the web.  And third, we’ve had to be creative in recruiting our world-class team, given that we can’t quite compete with the excessive salaries and bonus schemes offered by traditional investment houses.

 

Where would you like to see the business in the next five years?

 

To become the de-facto platform for investors to manage their assets.

What was your experience of founding a business like this during a recession? How did it help and hinder you?

 

In many ways, building Covestor during the recession has proved advantageous.  We’ve been able to uncover some remarkable investment talent – investors who have thrived during turbulent markets – and provide access to this group of high performers to our clients.

 

What do you think are the main ingredients of building the best team?

Leadership, empowerment, team spirit and when hiring, not accepting second best.

 

Outside of your market, what is ‘hot’ in the online world right now?

 

Location based services (LBS).  Foursquare and Gowalla have blazed the trail in this space with the early adopter community and Facebook Places will take the concept of checking in mainstream.  But we’re only at the beginning of the innovation and adoption to be seen in this area and I’m interested to see how both the privacy issues and business models play out as LBS go mainstream.

 

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