Embracing Math for Daily Decision Making – Sebastian Ceria, CEO of Qontigo

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I sat down with Sebastian Ceria, CEO of Qontigo, a NY-based global company with over 550 employees that combines the most sophisticated risk analytics and portfolio-construction tools in the market, while also offering indexing services.

Prior to launching his own venture, Sebastian was an Associate Professor of Decision, Risk, and Operations at Columbia Business School. But after seeing the incredible entrepreneurial success of some of his former students, he decided to leave academia and become an entrepreneur in 1998.

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Back when Sebastian was a professor at Columbia University, he remembers being bitten by the entrepreneurship bug at the height of the internet bubble of the 90s. Not only was he inspired by several of his students who went on to launch successful ventures, but he also realized becoming a tenured academic was not for him and he did not see himself pursuing an academic career any longer. Instead, he wanted to take what he had studied and learned and apply it to solving real-world problems.

Launching Axioma

Mr. Ceria left Columbia in 1998 to launch Axioma, with the idea of bringing mathematically-based models to help financial professionals make better decisions. In particular, his specialty was in the area of optimization, which had to do with the efficient use of resources and could be applied to portfolio construction services for asset managers.

He started with a very small team and a single client, but over time focused on growing through adjacencies. Their clients tend to be asset managers, hedge funds, asset owners, and sell-side firms and the company offers clients a generic tool that allows them to deal and understand the trade-offs of their business and select the assets that are most convenient for them. Over time, they also ended up building risk models to help clients assess risk.

By 2019, Axioma had grown to more than 200 employees with a long list of clients, and last year Sebastian sold Axioma to Deutsche Börse Group (DB). After merging Axioma with two legacy companies fully owned by DB (STOXX and DAX), they ended up forming what we now call Qontigo under the auspices of DB and General Atlantic to create a “financial intelligence innovator and leader in the modernization of investment management, from risk to return”.

A Tech-First Company

From day one, Sebastian tells us they have always thought of themselves as a software and technology firm. They jumped very early on the API bandwagon so that their tools and engines could be easily integrated into blind systems and, in 2011, they decided to build their risk system directly on the cloud.

The industry has been undergoing a trend of margin compression and financial institutions recognize the only way to get out of this puzzle is to really use technology as a way to leverage their business efficiently. But to a large extent, technology is not something that a lot of these companies really embrace because they're dealing with legacy applications and systems that were built a long time ago. So, being a tech-first company has allowed Qontigo to help clients, particularly big financial institutions, that need technology to improve their processes.

Navigating COVID

The COVID crisis reminds Sebastian of the financial crisis of 2008. The last financial recession was actually a big opportunity for the company because it provided a discontinuity that, essentially, led everybody in the industry to question whether the models and systems they were using were the right ones. In particular, when it comes to risk assessment, it gave an opportunity to a new player like Axioma to offer a new way of looking at risk.

In many ways, Mr. Ceria expects COVID to open new challenges and opportunities across the industry, but the big change in the horizon he envisions post-COVID is a greater emphasis on sustainability. Not only is he convinced people will embrace technology, but a lot of asset managers and investors are starting to think a lot more closely about sustainability and he expects Environmental, Social, and Corporate Governance (ESG) to be the big trend to come up on top after the crisis.

Entrepreneurial Reflections

After more than two decades as a business leader and entrepreneur, Sebastian has some key lessons to share. For starters, he recognizes having underestimated the challenges as a founder and suspects that had he known about all the things he would go through, he would have been less likely to take that jump to become an entrepreneur.

He also reminds us that building a successful company takes time, In his own words “it's not a marathon, it's an ultramarathon. And you have to be ready to overcome many challenges multiple times along the way (…) Entrepreneurship is about the long haul, it's about a long battle. It's about many blows that you get in multiple parts of your body and how you recover and get up and continue going (...) I believe that the most successful entrepreneurs are the ones that keep raising the bar and keep raising their ambition, and just keep pushing themselves to the next level, and the next level, and the next level. And that's something that I constantly did.”

Miguel Armaza is Co-Host of the Wharton Fintech Podcast and Co-Founder of Gilgamesh Ventures, a seed-stage investment fund focused on fintech in the Americas.