Serendipity & Opportunity
Turning frustration into fruit
Courtesy of Danielle Lawrence - Co-Founder & CEO of Freyda.
My path of entry into the world of alternatives would best be described as a combination of serendipity and opportunity. As an Economics student, l knew that I had an interest in the world of business and commerce, but I didn’t know where, when and how it would all fit into choosing a career path. In my second year at university, I did the typical thing of getting an internship, working as part of the sales and trading team at Citibank. As someone who likes to be longer-term focused and a bit more strategic in my thinking, I discovered very quickly that it wasn’t for me. Fast forward to my last year at university, I had all these questions in my mind about what I was going to do with myself, knowing how difficult it is to get into graduate programmes.
Fortunately, a contact I had made during my internship had notified me that Goldman Sachs was looking for some graduates and had a couple of places left. It just so happens that the only spaces left were in the asset management division, and I hadn’t really considered them before as I was focused on sales and trading during that period. When I met with the teams during the interview process, I had the opportunity to join Private Wealth or this thing called ‘Alternatives'. During the conversation with the team, they explained what exactly ‘Alternatives’ was to me, and it just seemed so much more intriguing. As a young grad, you go with your interests and that’s what led me to ‘Alternatives’. I get asked quite a lot “how did you end up in private equity?” It just so happens that the opportunity came from day one, and so I didn’t have to go through the usual path of working in investment banking and then transitioning into the buy-side.
My first role at Goldman Sachs represented a very interesting time for its asset management division because there was a definite shift in the strategic direction of the firm. Typically, the crown jewels of the business would be investment banking and sales and trading. However, the year I joined was potentially the first year where there were just as many grads in asset management as there were in investment banking which was unheard of! With everyone still reeling from the economic crisis and markets struggling to reach pre-recession levels, the business reached an inflection point where it began to recognise the importance of asset management for generating revenues in the near future. That strategic shift fell directly in line with a steady upward trend towards alternatives as it continues to be the fastest growing sector within asset management.
Before the financial crisis, the tendency was very much for companies to grow up to a certain point before they list and then IPO as they go public. Now, more and more businesses are continuing to be privately held while getting backing from a private equity firm. In doing so, they don’t have to go through the whole listing process and are also potentially able to maintain a little bit more autonomy than they would have had they gone public.
Alongside that shift in private markets, something I’ve witnessed first-hand practically from day one of my career is how inefficiently data was and still is being analysed. That has been a focus of a lot of my time and thought over the years working in the alternatives sector. As a student, you work incredibly hard to pass all the exams and go to the right universities so you can get that position. You believe that now that you’re in that role you’re going to change the world, but then you find yourself spending a huge amount of your time and effort doing data gathering and data cleansing before you can even start making assessments that are helpful for decision-making. Even as I became more senior and had the chance to work for different organisations, both large and small, that continued to be an ever-present theme during the working day. With so many advancements in the rest of financial services and technology in general, spending so much time doing this repetitive and manual task didn’t make sense to me. The more time spent doing manual data entry, the less time you have to collect a subset of data and the greater the likelihood of you making suboptimal decisions. Helping people to focus more on higher value and higher impact tasks by building efficiencies that facilitate making better business decisions is where my passion lies.
Before I fully committed to working on a solution, I did a sizeable amount of market validation which was probably a little bit of my former investor hat on. I went out and spoke to about fifty individuals across the industry to understand if this was a pain point they were also experiencing, how often they were experiencing it and how acute this problem was. I asked questions such as “why haven’t we solved this problem, what are the barriers and what would you need the solution to look like?” All of the answers to those core questions furthered my belief that there was definitely something in this. If I could reach the success criteria of accuracy and technology fit for industry data, this could be a massive opportunity and, potentially, very disruptive.
Knowing what the industry’s pain points were, the challenge then became finding someone to build a prototype since my background was not technical. Eventually, whether by luck or persistence, I connected with someone on LinkedIn who had a PhD in AI (Artificial Intelligence). We spoke over Google Hangout for a few hours and about an hour after the call, he sent me over some code showing an example of how one would extract a financial document. From then on, we began working together, and eventually, we built a prototype to get to the benchmark of over 90% accuracy, which was what the market was demanding.
In the process of doing the market validation, I was also interviewing with larger funds after taking a short career break. It was at that stage when I began to ask myself if I wanted to do this for the next twenty, thirty years of my life. Before I left my last role, I had started taking up all these different kinds of activities like guitar lessons and Spanish lessons, and it was a sign that I was just getting bored! Having had a career close to ten years at that point, I could very easily continue on that path or I could take this time to explore other things that excite me and are going to grow me. Going back into private equity, I knew it was just going to be a process of ‘rinse, repeat, rinse, repeat’. With that underlying desire to expand my horizons and develop my skill set, I decided to rely on the flexibility that my financial position and family life afforded me.
However, in doing so, I still had to be pragmatic. As such, I gave myself a year to do this, knowing that I could always go back to work in alternatives. At the end of the year, I needed to have built some sort of formidable product and started getting revenue and/or secured funding. If I didn’t have two out of those three, then I didn’t want to be in an endless reel of chasing a dream that wasn’t going to happen and end up running myself into financial ruin.
Although financial security wasn’t my worry for the initial year, it took me a while to step in and be confident telling people this is what I was going to do, especially having set out what my initial success criteria were. Things changed a little bit when we successfully applied for an innovation grant from Innovation UK, which gave us a whole year of runway. That was the first sign of legitimacy in my head because we now had the budget to go and get developers and launch the business. We had gone through the process of having numerous people filter through different ideas and deciding that this was something they wanted to back. That was a turning point for me in terms of having that validation.
At the core of the prototype we submitted is what currently forms the Freyda platform. Freyda is a fintech company built for asset allocators to help them improve operational efficiency and make better decisions by automating document processing. Sounds sexy, I know; however, it really is a massive pain point. What we’ve found in our journey is that interesting dynamic of everyone having manual data entry in their day to day lives and absolutely hating it. With our target market being so niche, what we continue to see is various inbound opportunities outside our original target market. That has been our internal dilemma in deciding whether to expand our initial target market or not. Although the solution we first envisioned is very much the same, I would say that our roadmap has definitely extended to include actionable insights. Practically, that means that when a client has their data, we go deeper into insights and decision-making, using our skill sets to provide superior analyses for them.
Freyda Process. Courtesy of Danielle Lawrence/Freyda
We estimate Freyda on average increases productivity by 25% and processes data at least 10 times faster compared to manual processing. Clients, thus, have access to a wider breadth of data at a faster pace and can now service a larger number of clients without increasing their operating costs. For an average back office team, we expect organisations to witness a third in cost savings. On the other side of our service offering is the ability to manage risks because businesses can minimise human errors and easily spot anomalies. Additionally, the Freyda platform facilitates actionable insights whereby clients can harness the power of their data and stay ahead of competitors in their decision making.
As customer demands evolve, I have confidence in our user-focused culture to meet those needs. At every stage of developing the product, we’ve had users involved because I didn’t want Freyda to turn into a lot of start-ups that provide solutions in search of problems. With automation and digital being two big pillars that larger clients will have genuine mandates for, especially with the pandemic, we’re cautiously optimistic that we are at the right place at the right time.
Danielle Lawrence - Freyda Co-Founder & CEO.