Government Relations · hedge fund

How could you reach to Ministries of Finance for pitching?

Zafer Ulgez CEO at Yamaska Capital

August 29th, 2016

I developed world’s most effective tail risk hedging algorithm that can render a portfolio of 400 billion USD highly resilient to economical crises. I would like to present it to Ministries of Finance of developed nations. Here are my problems:

  1. They will ask me proof of performance, naturally. As long as my IP rights are protected, I can reveal the algorithm to a quant developer, designated by a reliable government. It would take approximately 6 months to construct the prototype as a tangible proof (algorithm already tested on Excel, so there will be no bad surprise). However, I don’t know how to reach government officials. Another concern is that I don’t have budget for professional website, etc... I am afraid that they can ignore the Holy Grail due to bad package even if I can reach to decision makers, somehow.
  2. I received lots of offers from venture capitalists, hedge funds, software developers and even one Fortune 500 corporation. They offered me to construct the prototype in exchange of equity or partnership. However, they all offered me to use their own IT team. I prefer them to provide financing, so I can hire my own quant developer. Financial algorithms cannot be patented, so I prefer not to reveal it to third parties that I don’t know. However, I can trust governments of developed nations. Again, how can I reach them? 

Thanks in advance for your comments.  

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Martin Omansky Independent Venture Capital & Private Equity Professional

August 29th, 2016

Many Algorithms floating around making claims. You need a test bed - not access to finance ministers. Best advice is to take equity money from a reliable non-government source, such as a VC or equivalent. You can make a deal with the source for proprietary protection if you are concerned about thievery or hacking - but unless or until the algorithm is proven, nobody is likely to want to appropriate it. Sent from my iPhone

Zafer Ulgez CEO at Yamaska Capital

August 29th, 2016

I know many algorithms fail in real market conditions, mostly due to curve fitting. The only way of convincing people that my algorithm will perform well in real life is to get a track record. However, min. 1 million USD is needed to test it. I need a VC to do that. Venture capitalists prefer to use their own IT team while I prefer to hire mine. Proprietary protection is not possible in trading algorithms. Otherwise, I wouldn't have any problem to accept one of the offers, anyway.

Martin Omansky Independent Venture Capital & Private Equity Professional

August 29th, 2016

I understand your (justified) paranoia, but even if you use your own IP team, for due diligence purposes, you will need to reveal the algorithm to the investors. Still advise you to take the equity money, maybe do a joint coding/test program, and get this thing evaluated, Sent from my iPhone

Tom Duffy

September 2nd, 2016

you need proof that it works at some level 10,000 or 100,000 before anyone lets you play with a sovereign nations finances 

Zafer Ulgez CEO at Yamaska Capital

August 29th, 2016

When I wrote "I cannot take any risk", I referred to risk of IP theft. That's why I shun to reveal it to third parties. I didn't mean risk of success. If I had had 1 million USD, I would have invested in this algorithm without slightest hesitation.

I already have a website. I meant that "I don't have a website, prepared by a designer for 10.000 USD". Sorry for nor being clear.

I am aware that it is very difficult to deal with government officials and that's why I asked this question here.Probably, it is easier to raise some capital, have the algorithm coded; manage a small fund and establish track record. However, all investors preferred to use their IT team instead of providing financing for me (or with them) to hire someone. Therefore, it is also difficult.

Product is ready and I can establish the firm. However, it seems I should find another way to solve trust issue. I don't know how.... Any ideas?

Joanan Hernandez CEO & Founder at Mollejuo

August 30th, 2016

Hello Zafer,

Product is ready and I can establish the firm. However, it seems I should find another way to solve trust issue. I don't know how.... Any ideas?

Well ... This is what I would do if I were in your situation: Given that the excel sheet has everything (according to what you said), if it works on Excel it can be put to work as a web services. Coding such a thing could cost you between 40$K & 150$K. Depending on who you use.

Specifically, one thing is to code Facebook for 500 users, one thing is to code it for 1 billion. Size matters, and because your requirements are a few users, you don't need to worry about scaling the product. Even if you use a lot of data, speed shouldn't be an issue, thus, you don't need to pay for that, keeping the cost low.

So, for around 100$K you should have that service up & running. Might not be fast in calculation, then again you don't need that, and if a customer needs speed, well, then its a chargeable customization to them.

Therefor, you can hire a good programmer, make them sign an NDA and you're covered, you shouldn't worry about that IP.

Last but not least, I just checked your profile after writing all these words: You're here in Montreal! Let me know when we can have a coffee and discuss :-)

Best of lucks!

Martin Omansky Independent Venture Capital & Private Equity Professional

August 29th, 2016

In the U.S. there is a very stiff law that requires issuers (you) to provide investors all information such that they can make "an informed investment decision". The courts have consistently held that this phrase means "full disclosure". That means that potential investors have a legal right to see the algorithm. If you don't want to disclose it, fine, but don't plan on getting any outside funding from individual U.S. investors. Sent from my iPhone

Joanan Hernandez CEO & Founder at Mollejuo

August 29th, 2016

Hello Zafer,

You wrote:

I cannot take any risk for such a product

If you can't take the risk on your idea, why should anyone else? Even more, why a politician (because ALL ministers are politicians) would put around 1$ million (according to you) in an Excel sheet? (your words) Why should they take the risk and responsibility of expending such an amount of public money on that idea if it isn't proven?

Going to the practicality of your request: Since governments handle public money, most acquisitions made by the government are public. In order to bid for those offers, a company must be registered on each of the governments the entity would like to bid (BTW, registering a company to be a vendor for any government, it's an incredibly long process). Even if a finance minister likes you excel sheet, that excel sheet MUST become a product (with a company) in order for those governments go ahead and buy the product. Other wise, it could be illegal, given that you're aiming to 'developed nations' (as you put it). Now, if you go to other governments and from there make it, that's an option too!

If you are not willing to make a simple website for the product, which cost nothing (I'm not talking about the algorithm), it's going to be very difficult, to open doors towards those ministers. All the previous, ignoring the fact that to become a vendor for governments, local partnership might be required.

Best of lucks!

Cheers!

Zafer Ulgez CEO at Yamaska Capital

August 29th, 2016

Can anyone please help me on my question:

  • How can I reach to government officials to pitch my algorithm?

NOTE: Martin, I appreciate your comments, but I am not looking for VC investment as long as they insist on seeing the algorithm.


Zafer Ulgez CEO at Yamaska Capital

August 29th, 2016

No, hedge fund algorithms are not shared with investors. That's why track record is important. I know everyone claims to have the next big thing, so I understand your point. 

For the sake of my question, however, can we please assume that I developed a financial algorithm that is capable of rendering national economy more resilient? I cannot take any risk for such a product and trust only government or my own developer? You may not be convinced but I would appreciate if you guys answer the question based on this assumption.

Thank you