Since we embarked on our Nauiokas Park adventure, one of the elements of our vision has been to create a common working environment allowing us to be close to the companies we invest in, but more importantly bringing together the hard-to-quantify but very real benefits of having a shared working environment. Having spent 15 years working on trading floors, I know what the advantages (and disadvantages) are and for very early stage start-ups. In particular the benefits of just having some people around are huge.

We have a few different – and hopefully smart, interesting – ideas of how we would do this but they will have to wait until we have the necessary funding. Until then I’m only too happy to heartily recommend that any London based start-ups looking for space (and funding) talk to Stefan and Eileen and try to get a desk or two at White Bear Yard.

All industries operate within echo chambers; ironically the rise of the web has probably accentuated this as most communities go ‘deep’ rather than ‘broad’ in terms of information flows. Like any good flatlander, after having spent 15 years in institutional capital markets, I was certain that that industry’s echo chamber reverberated loudest. But now having spent a couple years around the fringes of the venture capital industry, I know that isn’t true. Further I suspect every industry and community suffers from this disease more or less equally. I’m not an anthropologist but I bet it has something to do with the evolutionary hard-wired pre-disposition for people to form tribes. I’m not sure why, but naively I expected the venture capital industry to be less political, less petty, less groupthink than the investment banking industry. Well it’s not. In fact it might even be more dysfunctional. And it certainly could use a few more traders within it’s ranks. (Just to be perfectly clear, that last opinion is completely self-interested, possibly self-centered and isn’t trying to help anyone except possibly me, including the poor entrepreneurs.)

I don’t mind the fact that this (or any other) industry is messed up. That’s where the opportunity lies. And being outside an echo chamber looking in is a wonderful – if sometime lonely – vantage point from which to recognize and capture these opportunities. And if I’m right, just maybe I’ll have an edge. Everyone needs an edge. And if this edge helps me succeed (I mean really succeed) then just perhaps one day the frame of reference will shift. And I’ll be the one out there telling everyone not to rock the boat because, “y’know it’s really helping the little guys.” Not. Well at least I hope not. But I can’t guarantee it. So if this comes to pass, that’s when you should tune out. Find a new prophet…because you know it will just be so much baloney…

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Nauiokas Park – which was set up last summer by Amy Nauiokas and Sean Park, a former head of debt syndicate, credit trading and digital markets at Dresdner Kleinwort – has recruited an ex-NYSE Group electronic trading expert and the former global co-head of financial technology advisory at Deutsche Bank as venture partners.

Nauiokas Park was set up by the pair to offer strategic advice, leadership and capital to growth companies with innovative business models at the intersection of financial services, markets and technology. Nauiokas has in the past featured in Financial News’ list of the Top 100 Women in Finance, while Park is a former Financial News Rising Star.

It has now struck a joint venture agreement with Financial Technology Advisors, a new corporate finance and advisory boutique set up by Udayan Goyal after he left Deutsche Bank in February. Goyal has become a venture partner at Nauiokas Park. The two firms share offices in central London.

Also joining as a venture partner is Sam Johnson, a former vice president in equities electronic trading at Goldman Sachs who left in 2000 to found a trading connectivity solutions company that was acquired in 2007 by NYSE Group. Johnson remained at NYSE, most recently as executive vice president and co-chief executive of NYSE Technologies, until his departure earlier this year, according to Nauiokas Park’s website.

Nauiokas Park has made five investments since its creation, but market conditions have put its focus more on advisory work in recent months, according to its founders.

Nauiokas said of Goyal’s arrival: “When we launched it was clearly a very interesting time in the markets, and while our long-term capital raising and investment strategy has not changed we made the decision to focus our efforts more on consulting and advisory work. As Sean and I turn our attention back to capital raising, it makes sense to bring on a partner who can share in and pick up the advisory side of the business. The partnership with FT Advisors offers complementary skills in a similar sector and critical mass for both firms.”

Park also highlighted the complementary skills of the four partners encompassing financial sector experience and knowledge of the start-up technology industry, citing the “technical skills and network contacts” of Johnson, whom he has known since their days playing rugby at the same university.

Nauiokas said the company hopes to turn its attention to fundraising soon, following signs that investors’ risk appetite is returning in the financial sector. Nauiokas Park is weighing several potential investments, while broader plans over the coming months could include expanding the team at analyst and associate level, particularly in New York.

Nauiokas and Johnson are based in New York, where the company does not yet have offices, while Park and Goyal are London-based, and Park believes the rare approach of having twin bases spanning the Atlantic can yield benefits because the London and New York markets are very different and yet equally important in terms of understanding and investing in emerging opportunities for disruption and innovation in financial services.

– Write to Vivek Ahuja at vahuja@efinancialnews.com

Aren’t sure what kind of overlap there is between Financial News and Park Paradigm subscribers so hope they don’t mind me posting this here.

I first discovered her and her firm Acumen Fund in the summer of 2005 at TED Global in Oxford where she started her talk with her Blue Sweater anecdote (which aptly is the title of her new autobiography: The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World)

I then had the good fortune to see her speak again at TED Global in 2007, this time in Arusha, Tanzania.

And although there are many differences between Nauiokas Park and the Acumen Fund, I think it is fair to say that in shaping our vision for our firm, and even in planting the initial ideas as to the relevance of bringing a fresh approach to the business of investing in ideas and people, Acumen and Jacqueline have been an inspiration to Amy and I. And so it was great to see her get an excellent and well-deserved write up in the Economist recently. One passage in particular resonated with me as I sincerely hope one day as much can be said of Nauiokas Park in terms of having an impact that goes far beyond our capital resources and reflects a success in building an ideal and a community around the change we are trying to catalyze:

Her firm runs highly coveted fellowship and mentoring schemes, and its alumni are spreading its ideas throughout the development field. The firm’s influence in poor countries is also bigger than it first appears. By leveraging Acumen’s funds to obtain other financing, recipients are able to magnify their impact. Even more important, perhaps, is the firm’s catalytic role in sparking entrepreneurship in developing countries. Acumen devotes much time and money to training local managers, rotating experts from the developed world through its recipient firms and disseminating successful ideas.

In case anyone on Wall Street or Westminster is interested, this is what a leader looks like. We need more people like her in our Board and State rooms.

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It’s lovely that you have a website and that you even allow Companies to file (some) documents online. And wait until Google and others find out about your revolutionary business model of paid search! (Imagine if Google caught on and started charging a pound for every search! I can’t believe they didn’t think of this, but think I should buy some shares in case they see this. Just imagine – they would make billions!) Isn’t modern technology wonderful? But although you do seem to be quite ‘au fait’ with this whole internet thingy, there are a couple really neat newfangled things that could make your site even better. Things like relational databases for example. And if you really want to live on the edge, check out what the crazy kids at places like LinkedIn and Facebook have done. And then there’s this stuff called UI and UX, but I understand if you think this is perhaps a step to far. Maybe in 2015. In any event, the blue is very nice. Most people like blue. Very clever! Best regards, – A. Director

Say you are a Director of a UK limited company. Say you are a Director of many UK limited companies. You would think that in 2009, you’d be able to go to the Companies House website and ‘manage your profile’, no? (Address, contact details, present and former Directorships, qualifications, etc.) Well, you’d be wrong. You can’t even search on a person. Only on Companies. God help the poor bastard who is Director of 50 companies and has the stupidity to move: 50 change of address forms to fill in and submit. Online. Sort of. (Only for Limited companies, by post for LLP’s.) Aaaarrgh! I mean c’mon! WTF?!? Just because it is a government organization doesn’t mean it needs to be devoid of innovation, especially since:

The Minister responsible for Companies House is Ian Pearson MP, Minister of State for Science and Innovation. The agency also has Trading Fund status which allows the agency to directly manage its own finances.

Maybe next time he’s in the UK, Reid Hoffman might want to spend an hour with the Companies House Board…(could be mistaken but a cursory google search would suggest that none of the Companies House directors are on LinkedIn so perhaps they do think they are on top of their game…)

In the ten minutes I’ve taken to write this one could sketch out the business model for Companies House 2.0 and given it’s key monopoly status, I’m sure you could build a killer revenue model (without fleecing your customers.) Better service. More revenues. Smarter business.

Please?

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“The single most important thing was to dismantle the organisational structure,” he recalls. “We tore it apart in 60 days, removing a large number of leaders who had been there a long time and who represented an operating style that lay outside any proper understanding of market dynamics.” In their place he promoted a group of younger executives, many with a background in consumer marketing, who understood and could provide what he wanted: accountability, openness, rapid communication and impatience with hierarchy and internal politics.

An interview with the CEO of [insert name of rare banking success story] c. 2014? One would hope so. Especially as the value of this approach – if it wasn’t self-evident enough to intelligent Boards everywhere – had already been proven: the quote is in fact from Sergio Marchionne (in The Economist) on how he was able to turn Fiat from a basket case into a market leader.

The market dynamics in financial services have clearly changed (this was already true a couple years ago but is now apparent and obvious to even the most blinkered…) and events have highlighted that incumbent management in most large financial institutions are no better adapted to embrace this new reality than their analogs in the auto, telecom, media or any other industry. But they do have the advantage of having seen first hand the disastrous results in these other industries of failing to act and of desperately holding on to an obsolete business model, so the hope is that even if they have been slow off the mark, that the best amongst them will be able to re-invent themselves under the cover of the current systemic turmoil.

An interesting question would be – can this kind of change be implemented without first changing the CEO? ie Is parachuting someone from outside a necessary condition to achieving the kind of change that Mr. Marchionne achieved at Fiat? (If so, I’d guess you’d need not just someone from outside the company but someone from outside the Establishment.) Another interesting question would be whether or not – as the senior non-executive Director – Mr. Marchionne pressed for a similar approach (to the one he took at Fiat) at UBS? And if so, whether or not he was rebuffed, ignored or embraced? Is the appointment of Mr. Grubel (clearly an outsider, although also part of the Establishment) an indication of this strategy in action?

If anyone has any examples of the ‘Fiat experience’ in action/being replicated in financial services (banks, brokers, insurance companies, etc.) I’d love to hear about them in the comments.

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I guess it is impossible to write a blog like the Park Paradigm without posting relatively frequently about Citigroup; every hero need a nemesis right? So I guess in this context they’re the Joker (and I’m, um…Batman???)

Anyhow, amongst the noise surrounding Citigroup this week, I think Roger nails the heart of the matter:

Clearly much of the price appreciation is due to a vicious short-covering rally that Messrs. Pandit and Lewis kicked off. But the fact is, what do they have to lose? If they can fool us long enough, credit spreads will come in and recovery will become a self-fulfilling prophecy. Otherwise, Congress (read: the US taxpayer) will bail them out once again. Citi, B of A and AIG have each had multiple bites of the bailout apple, so what’s another bite among friends? They are inclined to do this because their reputations are already severly damaged; in essence, short of outright fraud, they can’t get any worse. Therefore, they are motivated to throw caution to the wind, be super-positive and hope for the best. If new management with fresh reputations were on the scene, the would be much less inclined to release bullish statements without empirical data to back it up. This is a major flaw of TARP: letting incumbent managements stay around. It has created perverse motives that serve neither the troubled institutions nor its shareholders very well.

So with this in mind, I’ve been curious to see how the whole (non-executive) Boardroom shake-up that has been hinted at would play out. Well today Reuters reported that Citi would be adding (at least) three new outside directors, and confirming that – due to mandatory retirement at age 72 (not gross negligence and/or insanity) – 2 current directors would be leaving. Speculation was that the new directors would be:

• former U.S. Bancorp chief executive Jerry Grundhofer, 64
• Michael O’Neill, former CEO of Bank of Hawaii Corp., 62(?)
• William Thompson, former co-head of Pimco, 63

Wow. That will really shake things up. I mean these new guys, they bring a completely new perspective to the existing Board, right? A real diversity of experience and knowledge. Two plus two equals five stuff…

I don’t know much/anything about Messrs. Grundhofer, O’Neill or Thompson, but I’m pretty sure they are all very talented, experienced managers with great track records; and there is no reason to believe they won’t be an improvement on whomever they replace (admittedly a fairly low hurdle…) But c’mon! Where are the new Board members who will challenge the industry (not just the corporate) status quo? Who have a vision of what finance might/should be in the 21st century? Where is the new Board member with a firm grasp of the latest trends (and implications thereof) in information and communications technology and how they will shift the societal and cultural framework in which Citi operates over the coming years? Where is the independent Director who isn’t a paid-up member of the Fortune500 great-and-good (and so will be more likely to bring a different perspective to the table, and less baggage)? Where are the Board members that manage their own email inbox (or at least read and respond directly themselves), that have a Facebook or a Twitter account, that write and/or read blogs? That have bought at least one iPhone app and feel more panic when they don’t have access to broadband/the web than when they don’t have a mobile/voice signal?

Every successful team I’ve ever seen or been a part of has one common denominator: diversity. Diversity of experience. Culture. Expertise. Seniority. Temperament. Gender. And even better if there were one or more ‘independent thinkers’ amongst the group. And just to be clear, I’m not talking about box-ticking compliance driven ‘diversity’ (although by accident rather than by design, this can sometimes help at the margins, by at least avoiding the ten 60-something white guys out of central casting…) but diversity that creates intersections. Of ideas, world views and aspirations. Because that’s where interesting things happen. (You can bet that my bank’s Board will have this principal as its foundation.)

I’d be curious to know which headhunter(s) worked/are working on this mandate and what was their brief (and who wrote it?) I would have hoped (on behalf of US taxpayers) that the Obama administration had much input into the search criteria and that they would be looking for Directors that would focus primarily on ensuring the future success of Citigroup without regard to worrying about legacies and sunk costs (real and psychological.)

As an aside, take a couple minutes and wade through the mangroves of Citi’s corporate governance. No wonder it’s gone so horribly wrong! (I wish I had looked at this a couple of years ago, even without hindsight, it just screams sell…) They have 49 people on their Senior Leadership Committee. FORTY-NINE!!! I assume they at least have a wiki to manage committee business…

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As you know, one of the key fundamental foundation pillars of our investment thesis here at Nauiokas Park is the migration of value in many (most?) markets from transactions (matching, broking) to data. Quick and dirty: technology is driving the marginal cost of matching buyers and sellers to zero, and is driving the ability to collect, store and analyze previously unimaginable amounts of data and metadata to a different dimension. The value (and creativity and innovation from a business model point of view) now lies in thinking up ways to harness this new ability to good effect. The possibilities seem vast to us and we love discovering clever entrepreneurs and technologists who identify opportunities along this vector.

If you are a data geek, (or just a wannabe/groupie like me) you need to add Joshua Reich’s i2pi blog to your RSS feed. Not only does he know alot about data and technology, but he can leverage that knowledge through his excellent and lucid understanding of markets and business:

The premise that led us to this mess was that with only a modicum of data and some threadbare models trading would be the final arbiter of value and the collective intelligence of efficient markets would result in fundamentally sound pricing. Now that liquidity has gone from the markets, traders of these illiquid instruments are bulking up their data and models to try and better their understanding of fundamental value. And so it is that when markets are liquid the market relies on trading to assimilate the information of individual agents. Without this method of price discovery these agents need to gather their own data as the market no longer performs the role of grand aggregator. Data trades inversely to liquidity.

And he gives great math lessons too (which is great for those of us having mid-life worries about having forgotten more than they’ve remembered…) He’s just (re)started his consulting business i2pi, but I’ve got my eye on him for my new bank so if you are interested in his services, you better move quickly!

He starts his blog with a comment on venture finance for musicians (and kindly highlights some of my thinking over the years on the topic…)

In any event, for anyone interested in the future of (financial) markets, one to add to the feed reader I think.

I suspect that there may be more than a few talented (financial markets) developers who have now found themselves with more free time on their hands than they would like.  Some of that time might even be spent reading this blog, and so with that in mind, I thought it was worthwhile to pass on this exciting opportunity at Mark Davies’ BusyLab in Ghana (who are behind the fantastic Esoko/TradeNet initiative, on which I have commented several times in the past:)

BusyLab is a software company engaged in building innovative mobile web solutions for the African market and beyond. Our main project, Esoko , is a web and mobile based market information system that includes an SMS gateway component, a J2ME mobile application, and an ajax-driven, open API web application. We were recently featured on CNN and in the Economist, and are currently in 12 countries throughout Africa and Asia. Our mission is to improve livelihoods by building healthier and more efficient markets. We believe agriculture in developing countries is one of the final frontiers to benefit from the technology revolution of the last two decades.

We’re looking for an experienced software developer interested in trying something different and sharing knowledge in Africa.

You should be able to teach the processes and best practices of software development with our bright young team, and contribute to a world-class innovative web and mobile application product.

You should know:

- html, javascript, ajax
- php or java (J2SE/J2ME)
- sql databases (postgres or other)
- software development process
- software testing and quality assurance practices
The position would be for a minimum of six months.

I’m sure for whoever takes up this challenge it will be rewarding in many ways. Good luck!