First of all, how are you and your family doing in these COVID-19 times?
Mike Chu: We’re doing well. Thank you for asking. I am normally based in New York City but have been in Toronto, Canada, to be closer to my family. We are monitoring the second wave situation closely to plan our return to NYC.
Tell us about you, your career, how you founded Recap Investing.
Mike Chu: I studied Biomedical Engineering in school but have been coding in C/C++ since I was very young. I enjoyed building software and the rapid iteration in Tech and Finance, so I took my first job out of school at Bloomberg in NYC, building an Equity algo trading platform.
I spent about a decade at Bloomberg and was very fortunate to have been given amazing opportunities during my time there. I was the lead engineer for an internally incubated startup, building a new Portfolio Analytics platform, which was very successful. Grew with that business and later co-founded another internal startup building financial indices, which is the business logic behind the new wave of ETFs entering the market.
Left Bloomberg to pursue more entrepreneurial opportunities, advising a few FinTech startups and developing my own ideas. I got really interested in Sustainable Investing when I took a more active role in managing my own Retirement money and wanted to do more with it. That’s when my cofounders and I saw the opportunity for Sustainable and Impact Investing as a new paradigm for socially-minded investors to do it with a much more authentic, sophisticated, and accessible investment product.
How does Recap Investing innovate?
Mike Chu: We’re a small team, but as a startup, you have to find creative ways to outsmart the market. We innovate in 2 main areas right now.
First, Sustainable Investing is still in a nascent stage with the data and methodologies being used. As a startup, we can be much more nimble in testing ideas and trying new products. We’re a data-driven company, and having a setup where we can do rapid iteration is very important.
For example, if we’re working with a client or data partner who has an interesting dataset and we want to see how useful it is from an investment perspective (for example, does it improve the efficient frontier compared to another similar dataset), that’s something we can do in a matter of hours. Many traditional players have complex, layered systems that make rapid iteration really hard, and these layers add complexity, and fewer people can see the full picture. That’s why I firmly believe that having a nimble architecture can be a competitive advantage for innovative firms.
Second, like many early-stage startups, we’re looking to validate product-market fit in a way that can generate venture scale. We’re doing this with the customer discovery methods in the startup playbook – paid social testing to interested groups, customer discovery interviews, and iterative rounds of hypothesis testing. What has been surprising is that we hear perspectives in this space that’s not always consistent with the broad market industry reports that the larger firms tend to watch. As an innovator, you just have to take control and find the primary sources of data and be willing to take a chance and test it out.
How the coronavirus pandemic affects your business, and how are you coping?
Mike Chu: When you found a startup, you know to expect the unexpected, but the COVID pandemic takes it to another level. It’s been a tough year for those looking for early-stage investors to partner with because there have been multiple waves of changing investor sentiment. Since last summer with WeWork, investors started to change their stance on how they evaluate startups, given how the exits were doing. Throw in the uncertainty of COVID, and we really just had to wait it out and focus on building relationships until the panic subsided.
As a tech-driven investment manager, the market activity also put our product to the test. Thankfully, our portfolios performed as we expected throughout this period. It’s really been about adapting the strategy and being empathetic to investors, customers, and each other more than anything else.
Did you have to make difficult choices, and what are the lessons learned?
Mike Chu: I think the difficult choice was to continue to stay the course when you had no idea what the world was going to look like, and when early-stage investment activity would pick up again. Mental health was an issue that I think affected everyone at one point or another since COVID started.
A big lesson is to take care of your team first and take care of each other. That’s the best way to be ready for the next curveball that’s thrown at you. For that, I’m very thankful for my 2 cofounders, and we have grown stronger as a team as a result.
How do you deal with stress and anxiety? How do you project yourself and Recap Investing in the future?
Mike Chu: Personally, physical activity helps me. And intentionally shaking up the routine regularly also helps. With everyone working from home, more of these little things can claw away at you. And you have to be proactive and managing and changing your environment.
We are very hopeful in the direction of the company. We have made significant headway in the past month on fundraising and progressing with our product release. We have some very exciting announcements in the coming weeks, so we’re pushing forward.
Who are your competitors? And how do you plan to stay in the game?
Mike Chu: There are a number of established FinTech players in the US between the Roboadvisors, Micro-investing, and personal finance apps.
When it comes to sustainable and impact investing, though, we’re taking a novel approach with sophisticated technology that was previously very exclusive and expensive, so we believe that the socially conscious investors out there will really love what we’ve put together.
In terms of staying in the game, I think partnerships are a key part of a lean growth strategy right now. Fewer startups are getting the big checks on the backs of an idea, and investors are looking for revenue and traction even for the early stage. So founders really have to look at what they uniquely bring to the table, and sometimes, the best way to get to that particular market is to work with someone else. It’s not always going to be a cofounder. I think we’ve been having many more conversations like that in the past 6 months than we had in the past.
Your final thoughts?
Mike Chu: Uncertainty breeds opportunity for those who are looking. Many of the startup success stories in the past decade started around the financial crisis. So I encourage the innovators out there to continue to be bold, test your assumptions, and be open to solutions that may not be part of the conventional playbook.
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