Streampoint?s software for brokers attracts VC funds

Business Report Correspondent

LOUISVILLE — At a time when high-tech firms are gathered around a slow-dripping faucet of funding trying to get a drop or two, Streampoint Financial is drinking from a fire hose.

The company announced last month that it received $3.5 million from Sequel Venture Partners, a top-tier venture capital firm in Boulder that’s interested primarily in early-stage technology and life sciences companies in the Rocky Mountain region.

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The transaction is a first for both companies: This is Sequel’s first investment in the financial services arena, and this is Streampoint’s first go at venture funding.

“A year ago, people wanted to invest in new ideas for the Internet,´ said Mark Winz, president and chief executive officer of Streampoint. “Now, they want enterprise software companies, and they have a much more realistic view of the time it will take to build a business.”

Winz said the company plans to use the funding for product development and marketing. Streampoint Financial develops software that supports retail sales of mutual funds, annuities, stocks, bonds and other investment products. Streampoint says it’s the first to market with an Internet-enabled workflow system for broker-dealers in the retail-brokerage market.

The 3-year-old company’s flagship product, Investment Streampoint, helps those who sell investment products make quicker presentations and reduce the time they spend on administrative duties common in the retail-investment sales process. At the same time, it helps ensure that businesses are complying with regulations.

Winz said most brokerage firms have something in the neighborhood of 150 to 200 pieces of documentation that their people are responsible for processing in various combinations. “The complexity of doing that correctly, based on all the parameters, results in 20 percent to 50 percent of new accounts or transactions having some issue, or what our business calls an ?exception.’ It can be a missing document, a missing signature, a missing piece of information – anything,” Winz said. These kinds of errors can result in lawsuits.

Streampoint said without the software, processes require a minimum of three to eight people to volley forms to and from the front, middle and back offices of a brokerage. It also can be used over the Internet to deliver updated information and software to brokers. For example, a broker-dealer also can use Investment Streampoint through its own Web site to automate account opening and documenting functions. The company said the software cuts in half the time investment representatives spend on paperwork for sales and customer service, “providing a return on investment several times the price of the product.”

Sequel wants to see good management and a ready market in place before it loosens any purse strings, said Dan Mitchell, a partner at Sequel. “We see a receptive market for Streampoint’s software, and the company already has recurring revenues,” Mitchell said. “At Sequel, our preference is to fund companies that have a compelling reason for the customer to want the product — it’s got to be something they need, rather than something that’s nice to have.”

Streampoint estimates the total market for this category of Internet-based workflow systems will reach several billion dollars annually. Approximately 20 percent of the market consists of bank-affiliated broker-dealers, the market segment where Streampoint has found its early adopters. Winz says the company’s target market is the top 1,000 broker-dealer firms in the United States.

The number of companies using the software is growing. AFS Brokerage, a third-party marketing firm in Englewood, started using Investment Streampoint last April. Other companies using it include Huntington Investment Co., a subsidiary of Columbus, Ohio-based Huntington Bancorp; People’s Securities Inc., a unit of People’s Bank, Bridgeport, Conn.; and Gateway Investment Services Inc., a subsidiary of Fidelity Federal in Los Angeles.

Streampoint Financial expects to sign up eight more customers this year, generating at least $12 million in bookings.

The company announced last August that it completed a $700,000 round of angel financing. In addition to the $3.5 million announced last month, Streampoint is in the process of raising approximately $3 million in additional capital to round out its preferred B round of funding, according to Richard Scheig, vice president of sales and marketing for Streampoint.

Scheig said Streampoint plans to introduce an online solution for both new account creation and compliance at the point-of-sale features during the fourth quarter of 2001.

Scheig said before the company moves on to serve financial industry segments, it first wants to fully penetrate the broker-dealer market in the next year.

Streampoint is anticipating the rollout of its systems in an online brokerage environment, which will capitalize on the recently approved digital signature legislation. Future plans also include workflow solutions for other segments of the financial industry such as pension, insurance and trust services.