Quantopian, the Boston company that has created an open online network for developers of quantitative trading algorithms, announced today that it has raised $15 million in funding.
Additionally, the company made an announcement that creates some competition among its users by launching the Quantopian Managers Program. The company is calling the program a “hedge fund that allocates capital to the top-performing quants in the community.”
Quantopian was created as a place, as founder and chief executive John Fawcett told me earlier this year, where “nerds and hackers write code that is then used to trade stocks and invest.” Started as a community for “quants,” people who design trading algorithms for the stock market, the idea behind Quantopian was to create an alternative to the secret, and often protected (by Wall Street firms) world of quantitative economic analysis.
In January, Quantopian started allowing community members to use their algorithms for live stock market trading, and in June, the company opened up more of its network to the public.
“When we launched live trading where you could take an algorithm you’d been working on and actually connect to your brokerage account and have it trade, that lit a lot of fires. Our users got excited and our investors got excited,” Fawcett said.
“Once we had these live traders, who were making money, and had high risk/reward profiles, even though its early days, we have enough [community members] to do population statistics on the quants, and compare them to one another…and to start thinking about creating a portfolio.”
So, Quantopian created its own hedge fund, made up of its most successful algorithm designers. In many ways, the company is taking a completely different approach to online stock trading; as you can imagine, that doesn’t sit well with the establishment.
Fawcett said, it’s the same way they talk about startups, “At first, the incumbents are going to dismiss you, then they are going to make fun of you, and then they are going to attack you.”
He said that established firms are telling Quantopian that quants will leave the community to go to Wall Street because there is more compensation; however, the new fund has the potential to even that playing field. “We are designing the fund in a way that it will be the best economic deal for quants,” Fawcett said.
Quantopian’s $15 million Series B round was led by Bessemer Venture Partners, and was joined by previous investors Spark Capital, Khosla Ventures, and Wicklow Capital.
Fawcett said that the new funding will help the company improve its product, and possibly even expand internationally and to other tradable markets.
“We believe that the best quants are going to want to put their best ideas to work at Quantopian,” Fawcett said.