Goldman Sachs has bought a one-person startup to help supercharge its bankers’ financial modeling skills
The bank is hoping the cloud-based software can begin to do for investment banking what SecDB, its risk management system, has done for the securities division by creating a single place where models can be stored and analyzed.
Goldman Sachs has been searching for years for an investment-banking equivalent to the vaunted risk management system its traders use. It may have just found it.
This week, the company agreed to buy ClearFactr, a one-person startup that makes a cloud-based competitor to Microsoft Excel, according to a note the company sent to clients this week. Its founder, Dean Zarras, will join Goldman Sachs as a managing director and stick around to continue developing the financial modeling software, the note said.
I know what you’re thinking. Financial modeling? Snooze.
For decades, Wall Street has relied on Microsoft’s Excel program to handle financial models, keep track of trading positions, and underpin much of the calculations that make the industry work. Excel is ubiquitous.
But ClearFactr may help Goldman solve one of the most entrenched challenges in investment banking: how to update the financial modeling software that bankers use for the digital age.
Goldman Sachs reviewed several options
Goldman has struggled with the question, considering solutions from relieving bankers from the task entirely to teaching them to code, according to a person with knowledge of the transaction who asked for anonymity to speak freely. Both solutions felt too extreme, and many bankers complained that learning to build models was a foundational skill they wanted to learn at Goldman, the person said.
So it went searching for some middle ground.
Talks with ClearFactr began about a year and a half ago. Many insiders were initially skeptical about the program’s promise, largely because of how Excel is so completely integrated into work flows. They began to come around after the company was one of the first two to be accepted into GS Accelerate, a technology incubator announced earlier this year to give employees and in some cases, outside partners, a chance to turn outside-the-box ideas into real businesses.
And ClearFactr isn’t meant to be an Excel-killer, the person said. But Goldman bankers will be able to import and export their models between ClearFactr and Excel, and bankers will be asked to do some of the more common modeling exercises in ClearFactr from now on, the person said.
The software is based in the cloud, making it easy to apply big data and artificial intelligence techniques across hundreds and thousands of models. Goldman will migrate the storage of models off of analyst desktops and into a central repository, so the model isn’t tied to the banker.
Natural language processing capabilities embedded in the software define cells, not by Excel’s conventions which refer to cells by their column and row location, but by the description of the financial metrics the cells reference. While it seems like a simple thing, the difference will make it easier for those who …read more
Source:: Business Insider