Bootstrapping a Virtualization Services Company: Chris Grandi, CEO of Abacus Group (Part 5)

Sramana Mitra: What is it about the hedge fund space in terms of work flows or virtualization? What specifically is different in that space versus other verticals?

Chris Grandi: There are really two things that make the hedge fund space different. One is the level of service. Because of what hedge fund managers do and how active they trade, everything has to work all the time. We all know that in technology, that’s not necessarily feasible, but the service level demand of giving them the best technology and the best service around that technology is higher than in any other industry I’ve ever been a part of. Correspondingly, because they’re hedge funds, their economic model is great. Their willingness to pay is higher. From the standpoint of just service levels, it’s very unique to hedge funds. If trading systems go down for 20 seconds, they could lose millions of dollars. You really have to prioritize building not only enterprise class technology, but also the various other redundancies.

The other part is security. There’s a significant magnifying glass on security everywhere. Hedge funds are certainly targets. If you look at the positions they have and the amount of assets they run, security is positively one of the most important aspects of the technology that they’re running.

Sramana Mitra: How many clients do you have today?

Chris Grandi: 250 clients.

Sramana Mitra: How big is the market? How many hedge funds are there?

Chris Grandi: We don’t look at it as far as the number of hedge funds. If you go on the Internet, you can see there’s something like 10,000 hedge funds. That number is not accurate. Anybody can call themselves a hedge fund. Two guys trading out of a garage may call themselves a hedge fund. We think that from an economic perspective, the overall market size is between $500 million to $750 million. It’s not definitely a million dollar company. I think once you start segmenting into other areas such as private equity firms or venture firms, who we do not service right now, then it becomes over a billion dollar market.

Sramana Mitra: In your sweet spot, how many of those are there?

Chris Grandi: I have no idea. I would guess there’s probably a thousand hedge funds out there that we would consider as clients. If you hear publicly that there are 10,000, we wouldn’t even work with 9,000 of them. It wouldn’t be a fit for us.

Sramana Mitra: Based on that analysis, you’re in about 25% of those.

Chris Grandi: I would say that estimate is accurate.

This segment is part 5 in the series : Bootstrapping a Virtualization Services Company: Chris Grandi, CEO of Abacus Group
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