At the LHoFT, we are part of a collaborative and globally connected Fintech ecosystem. For a long time Luxembourg has been a key financial centre within Europe, and more recently has enjoyed global recognition for cutting edge innovation — moving financial services forward with the growth of digital technologies.
To shed some light on the startups of this ecosystem, and the inspiring people behind them, we are asking each of them a few questions as a part of our interview series: The Innovators. This time we’re speaking to Davide Martucci CEO & Co-Founder at Next Gate Tech.
Davide Martucci – CEO & Co-Founder at Next Gate Tech
Davide, can you tell us a little about yourself and about your company, Next Gate Tech?
I am Swiss Italian, born in Lugano, and started my career in Geneva. I spent around nine years in UBS, between Zurich and Geneva. Over the last five years I have managed single family office money for UBS clients with different strategies. This is when and where I met the single-family office that asked me to set up their asset management infrastructure. That’s what brought me to Luxembourg.
The story of Next Gate Tech is the continuation of that. When you are in the front facing part of the business, you are not necessarily aware of the complexity that is happening in the middle or the back-office side. You just want to buy or sell something, and what happens after is less of a concern. When we had to set up the entire infrastructure for the asset manager from scratch, I discovered the huge universe of “back office”, including regulation.
It was at this moment, with my team, that we discovered the lack of the industry, particularly in terms of data management, reconciliation between systems, or between the data from different service providers. The first reaction is to say: “Okay, I have a problem myself, let’s see if there are solutions out there.” So, we started to look for a solution, and we worked with a “Big Name” provider, but it was still very complex and highly time consuming on our side; we still needed to spend a lot of time on the data preparation and data handling.
I had the chance to work with very smart people on the tech side, so we started to develop our own technology. In the beginning it was really for ourselves, trying to have a good way of managing the data; the trades that we’re doing with different brokers, prime brokers data, fund administrators’ data, and all other kind of data flow coming from different players spread across the value chain of the fund industry.
Eventually we decided, with Semin Ibisevic, co-founder of Next Gate Tech, to completely spin off the entire technology part and properly launch Next Gate Tech in 2019. Little by little, we started to look at where there is a possibility to perform not only data management, but as well, some data analytics in the middle and back office. Since then, the offer of the company is a continuous process, and we are still working on it.
Another important factor that triggered the launch of our solution was the increasingly accepted regulation on cloud technology that arrived in 2017 in Luxembourg. The fact that you can use public cloud opened the door to using advanced methodologies such as machine learning, and an offering that is both fast and smart. It’s simply not possible if you don’t have a cloud environment.
It’s difficult to define Next Gate Tech as a Fintech or a Regtech, but for sure we are triggered by regulation. By both the fact that Regulation creates the environment for us to exist, by defining a clear regulation around the cloud, and so opening the door to use those innovating methodologies in offering a solution, but also the fact that there is more and more pressure on the regulation side, with regulators across Europe asking more and more in terms of oversight and delegates controls.
What are the key elements of Data Management as a Service (DMaaS)?
I would define Data Management as a Service (DMaaS) as giving a client the power to access their data. And if you have a look within the industry today, it’s not the case. When you look at some big players, you see that they are not in control of their data. And if you don’t have the control of your data, you then have control on very little in the end.
Once your data is clean, harmonized, standardized, it is mappable with other financial data that you have. You can perform this process on a daily basis, creating time series which opens the doors to do anomaly detection. You gain the ability to perform whatever analytics you want in the data, and therefore spot alerts, perform due diligence on your assets, create automatic reporting… That’s data management as a service.
What we provide, in term of data management, is that we collect the data on-behalf of the client from the different service providers and offer a unique point of access that is harmonized and clean, standardized across all different sources. And this on a daily basis in a quick, automated, and effective way.
Do you think data driven automation is the future of asset management? In what ways will it help to evolve the industry?
I do believe it’s a revolution. And I believe it’s a revolution that will impact all the different areas of asset management. Not only the middle and back office part, but also the front office portfolio management. Using data to drive investment decisions, with the access to alternative data sets, such as sentiment extracted from social media and news or fields extracted from satellites images. This kind of information is helpful for the entire industry and currently under-use.
I really think that particularly the data driven technology in the Manco space will lead to the automation of many processes. And so there, our solution helps to have a single point of access and forms a golden source for the data. It then enables us to provide all kind of analytics and reporting; NAV oversight, risk reporting, due diligence… And the second segment is the big players: fund administrators, as an example, that use our technology as independent validation in their accounting business, before to send NAV to their clients. So those are the two segments we are currently addressing, and I think that today in our current area, we do have a couple of years in advance. But again, I mean, it’s a very big market and there is space for a lot of innovators, for partnership and to find synergies.
Why is Luxembourg the right base from which to build a Fintech locally, and grow internationally?
As a starting point I would say that, for us, Luxembourg is the biggest market in Europe. We are a FinTech in the fund industry, and in the middle and back office for the asset servicing world, so we have I think 40% of the European market just domestically. So for sure, this is the place to be, and it will stay the place to be. The other market that is comparable is Ireland.
In addition, for us as a company, there is proof that there are tools in Luxembourg that work very well, be it via DigiTech Fund with Expon Capital or other Venture Capital that invest here like MiddleGames Venture, but also support from the Government with Luxinnovation and investment in R&D. The first reason is the market, the second is the ecosystem that we found in Luxembourg.
You took part in the MiddleGame Ventures acceleration program, NadiFin, in early 2020 and raised 2 million Euros in July 2020 co-led by MGV and Expon Capital. What has happened since then, and what is your roadmap for 2021 and 5 years to come?
I think that, particularly in the FinTech space, it is important to overdeliver rather than overpromise, because clients and prospects in that space have to be transparent with each other. So, you really need a very robust and reliable infrastructure and technology. So, our short term roadmap is focused on scalability. This is where we are investing the most. We have a team that is I think 90% composed of tech people: either software engineer, or what we call ‘quantitative developers’ – data scientists with a kind of practical implementation skills as well.
Longer term, the goal is clearly to become a one stop shop for our ManCo clients. This means we will have to become one of the leaders in data management and data analytics in the fund industry. With everything that is needed to go there, we are lucky to have very supportive shareholders and investors. They understand what we are doing and where we want to go. I really do believe that there is a huge market there, and I think we have a good position to go and take a stake of that market.
How do you go about finding your tech talent?
At the end of the day, is all about the team. To find good talents we are always looking to partnerships in research, and right now we are in discussion with the SnT. In term of innovation I’m a huge believer of synergy between academia and industry, and we’ll invest in that for sure. It’s clear that what we do, it’s only possible because we have an amazing team.