- Behavox, the foremost provider of compliance surveillance software, announced its first institutional round of investment today.
- The funding comes despite concerns of potential market reluctance to invest in London fintech post-Brexit; the round was led jointly by London-based Hoxton Ventures and Chicago-based Promus Ventures.
- After two years of successful pilots and client development, Behavox sought external investment to expand globally, deepen its talent base to process new client engagement, and introduce its novel collaborative approach to industry-wide compliance.
The company has two clients in live deployment and three ongoing pilots with bulge-bracket financial services firms. “We are working in partnership with some of the leading participants in the capital markets. Our future-proof compliance system reduces the risk of fraud, misconduct and other insider threats that can destabilize even the largest financial services players”, said Erkin Adylov, CEO and Founder of Behavox. The Behavox system ensures an effective, automated approach of detecting breaches and alerting the compliance, legal and risk teams of investment banks, brokerage houses, commodities traders and asset managers.
“Our software is in high demand in the current environment. With the intensity of enforcement increasing after the LIBOR and FX scandals, it is clear that the legacy technologies are not doing their job properly. We know our system is better and more cost effective at protecting institutions; throwing bodies at the compliance problem is j ust not sustainable”, said Adylov.
The Behavox platform allows institutions to search and interrogate their data in real-time to identify specific activity of employees. The technology is able to detect types of misconduct such as insider trading, rogue trading, abuse of conflicts of interest, as well as more generic threats such as bribery, expenses abuse and IP theft.
The power of the system was best shown in a pilot with an investment bank in New York; behavioral algorithms spotted anomalous communications (unusual background noise/calls made out of office hours) between the front and back office that had been missed by a federal agency that had investigated the trading floor j ust before Behavox was introduced. At another institution, the software reduced the number of hits produced by a daily “risk words” search from 64,000 uninvestigated positives to a more manageable 34.
The new funding will be used to expand into the US (NY initially), and continue scaling the development and deployment teams to meet the company’s growing demand. Recruitment of more world-class engineers is a key priority for the company in 2016.
Management is keen to differentiate the business from other pretenders in the market. No other vendor offers the multi-dimensional subject matter expertise assembled at Behavox. Adylov comes from a capital markets background as an analyst at Goldman and then a financials portfolio manager at GLG; Alex Viall is a former regulator at the Financial Services Authority, investment bank compliance officer and founder of Complinet, a successful compliance software company. But without doubt the company’s greatest asset is the strength of the development team, the core of which came from Sun Microsystems, and its research partnerships with academia. No other provider understands the compliance challenge and can tackle it in the way that Behavox can.
New regulatory pressures are placing more demands on financial institutions to raise the standard of compliance, at a time when cost control and operational efficiency are paramount. The interest and cooperation that Behavox has received from both regulator and regulated alike reinforces the appeal of the unique offering already built; big challenges like MAR, SMR, MiFID II and Dodd Frank play into Behavox’s hands and the business has been overwhelmed in a good way by the recent demand. Brexit is not going to reduce the drive towards higher standards. Regulation could be equivalent or gold-plated but not diminished.
“We are aware of the limitations of the current approach and antiquated tech stack within enterprises when data grows exponentially, regulation intensifies constantly, and market practice changes faster than ever. The level of collaboration we are receiving in the financial markets and regulatory bodies to build a centralized, cross-industry solution that protects everyone is highly encouraging”, said Mike Collett, Managing Partner at Promus. Adylov added: “We are delighted to have attracted such successful investors as Hoxton and Promus. Both have a track record of picking winners in the very early stages with a deep commitment to artificial intelligence. We see their recognition of our potential in this field as a significant endorsement of our product offering”.
Despite the concern aired over London’s viability as a financial technology ecosystem in the last two weeks, Hussein Kanj i, Founder and Partner at Hoxton Ventures said, “Brexit or no Brexit, Behavox is scaling and has the potential to offer a real solution to the financial services industry. It just goes to show the most promising companies will always thrive”.
ABOUT HOXTON VENTURES
Hoxton is a unique London-based early stage venture capital firm run entirely by computer scientists
and repeat founders. They invest in European startups that are able to scale into global winners. Hoxton
focuses on companies that either disrupt existing industries or invent entirely new ones. For more
information, please visit www.hoxton.vc.
ABOUT PROMUS VENTURES
Promus Ventures is a Chicago-based venture capital firm that invests in software teams that are changing the world. The team invests in innovative verticals such as AI/Machine Learning, Robotics, Space, Drones, AR/VR, Connected Car, Heathtech, Fintech, Computer Vision, Retail and IOT. For more information,
please visit www.promusventures.com.