The global trade finance market is worth around $12T USD, and it’s still undergoing massive restructuring and revisioning during this exciting digital age. Tradeteq is one of the companies that is at the forefront of the digital transformation of the trade finance market. This finance distribution platform gives trade finance originators and institutional investors the proper tech to efficiently interact and transact. Through this automated platform, originators can present their portfolios while investors can access all the information they need to make allocation decisions.
London TechWatch spoke with cofounders Christoph Gugelmann and Nils Behling about how years of experience in the financial sector enabled them to build a scalable platform and receive funding.
Who were your investors and how much did you raise?
We raised $6.3M in seed extension funding, led by investor ADV.
Tell us about Tradeteq’s product or service.
Tradeteq is a trade finance distribution platform. It provides the technology for trade finance originators and institutional investors to connect, interact, and transact efficiently. We use AI and machine learning to deliver advanced credit analytics and reporting, making trade finance asset investment as transparent and scalable as possible.
What inspired you to start Tradeteq?
We worked together in investment banking, commodity trading, and asset management for years. We recognised that trade finance presents compelling risk-return features for alternative investors but were repeatedly faced with the market gaps blocking wider distribution: appropriate technology infrastructure, transparency, and standardization. We launched Tradeteq with the aim to bring a scalable solution to these issues.
How is Tradeteq different?
What makes Tradeteq different is that its founders have worked with trade finance distribution from every single angle – from bank origination to asset management, and they understand the investor side extremely well. This is what gives Tradeteq the edge to distribute trade finance assets from banks to institutional investors.
What market is Tradeteq targeting and how big is it?
The global trade finance market is estimated to be worth around US$12T. We estimate that banks fund US$9T and non-banks only about US$25B, the remainder is terms provided by trade participants themselves. Comparing this to the US$28T corporate bond market that is almost entirely funded by non-banks, there is a huge dislocation and opportunity.
What’s your business model?
Our main source of income comes from transaction fees we charge to institutional investors that use the service.
How were you able to identify the two major roadblocks for the efficient distribution of trading financial assets?
Our knowledge of these roadblocks came from extensive experience working for banks and funds. We realised originators lacked the right technological infrastructure to conduct trade finance syndication transactions on a large-scale basis. Banks have made recent efforts to digitise trade transactions, but they have mainly focused on improving the user experience for their corporate clients. Meanwhile, trade finance asset distribution has been done on a case-by-case basis, mostly with other banks.
At the same time, institutional investors want transparency and predictability of returns, but all of them have different reporting requirements, so for them too, portfolio presentations have been made on a case-by-case basis. This has prevented the aggregation of their portfolio.
Both of these issues could be solved with the creation of an automated platform where originators could present their portfolios and investors could access all the information they needed to make allocation decisions.
What was the funding process like?
Interacting with ADV’s highly experienced team made the whole process extremely efficient and straightforward.
What are the biggest challenges that you faced while raising capital?
Trade finance is a relatively new asset class for non-bank funders and one that not many VC investors understand. In ADV we have found an investor who shares our view of the tremendous opportunity in this space and who is supporting our mission to make trade finance investable.
What factors about your business led your investors to write the check?
Our lead investor, ADV, saw our model as a huge opportunity and recognised that making trade finance assets investable would be a groundbreaking way to expand the market and provide more capital to SMEs. Our years of experience in this field also gave them the confidence to invest.
What are the milestones you plan to achieve in the next six months?
We will use this financing to expand the Tradeteq platform and release new applications and data services.
What advice can you offer companies in London that do not have a fresh injection of capital in the bank?
Approach potential funders with a very clear concept and a concrete vision of what you want to achieve. Do prepare for hard questions.
Where do you see the company going now over the near term?
We want to secure our position as the innovation leader in the digital transformation of the trade finance market by expanding our sales and marketing efforts and broadening product development.
What is your favourite restaurant in London?
The brunch tapas at “Ask for Janice” are great.