The big question Ben Cho and the founders at Quantim Intelligence were trying to solve is: How do they make an average commodities merchant trader perform like a unicorn trader?
The latter is typically a seasoned pro that built up years of knowledge that’s morphed into a market-moving intuition. The unicorn trader has built up the expertise to know how the commodities market functions and how it self-corrects.
They work in the extrinsic trading market, where traders gather information and take a point of view on where the market might be months from now and take a commodities position that reflects their research.
“If you ask them to kind of explain it or write it down on paper, they wouldn’t be able to write it, but they’re good at what they do,” Cho said.
“They also get compensated extraordinarily well for doing that – anywhere from a million dollars a year to $10 million a year, so it’s not really scalable.”
That’s where the Quantim Intelligence software system comes in. Cho said it could save organizations millions annually. There are three primary segments to the commodity supply chain – the producer, the processor and the market. He said most producers focus on the logistics – getting the product from one place to another – rather than the commercial decision along that supply chain.
That commercial decision leaves a $100 billion in annual leakage that funnels down to merchant traders.
“We, as an organization aim to help the producers claw back, some of that value leakage back into their own pockets, through a combination of software, talent management, and consulting,” he said.
“We start to systematize some of the intuition that a unicorn trader might have through mathematics, data science and quantitative finance to equip the traders, or their analysts with that sort of information. If I can pay a trader $30,000 a year and get 80 per cent of the outcome of a million dollar a year a trader, I’ve won.”
Velocity: The nitty gritty of starting a company
Cho, along with partners Philippe Cote and Nima Safaia, have years of experience in the banking and energy commodities industry, and oil and gas is where they saw the biggest opportunity and want to anchor their system.
They joined the Alberta Catalyzer – Velocity program to learn more on how to properly set up a company.
“I think the Velocity program was really good because it got into the nitty gritty details of how to set up a company, especially in light of an exit strategy,” Cho said.
“I would say that a lot of the information that we got is applicable regardless of whether you’re seeking an exit or not.”
Everything from setting up a data room, to have an intellectual property strategy and even debt financing versus equity.
“It’s helping our business go from three guys just kind of figuring it out as they go along, to ‘let’s think like an actual company now.’
Their focus today is on oil and gas, particularly oil and gasoline products. They are expanding into the natural gas trading space. Cho said, however, the fundamentals for their proprietary software can be applied to any market.
They’ve been eyeing up both the coffee market (the second biggest traded commodity in the world) and electricity trading.
Other platforms out there are the biggies, like Bloomberg Terminal and Eikon. Those can cost between $30K and $100K per seat, Cho said. That’s not the space they want to play in. They want to take the data often seen in those terminals and use their proprietary tools to synthesize the data and turn it into something useful for traders
“We’re trying to take that information, combine it with a lot of other market data; so what’s happening with supply, demand macroeconomic factors and build that into a proprietary model,” Cho said.
- Join Alberta Catalyzer to fast-track your startup with know-how and expert guidance. Alberta Catalyzer offers merit-based, pre-accelerator programs for early-stage tech entrepreneurs in Alberta at no cost. These programs are developed and delivered by Platform Calgary and Edmonton Unlimited, with support from partners and organizations across the Alberta Innovation Network. They are made possible by the generous support of the Alberta Scaleup and Growth Accelerator Program, run by a consortium led by Alberta Innovates. The consortium includes the Government of Alberta, Prairies Economic Development Canada (PrairiesCan), The City of Edmonton through Edmonton Unlimited, and the City of Calgary’s Opportunity Calgary Investment Fund allocated $35 million over three years to retain business accelerators. It’s part of the Alberta government’s goal to help create 20,000 jobs and increase technology firm revenue to $5 billion by 2030.
