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FinTech Innovation Lab Launch Event – June 2, 2011

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The new FinTech Innovation Lab, an annual program run by the New York City Investment Fund and Accenture, had their launch event on Thursday night. It attracted a very high quality crowd of senior executives from major investment banks and members of the innovation community — two groups that don’t normally mingle.

One peculiar note: they didn’t disclose the companies selected. I spoke with the CEO of one of the chosen companies, who told me he was told to keep his selection confidential. This is definitely not the norm in accelerator programs; I’d be curious to know the logic.

My rough notes follow:

Mike Dubno, CIO, Global Markets and Research Technology & Operations, Bank of America

Previously CTO, Goldman Sachs. After Goldman, ran startup Gadgetoff, which brought together inventors and entrepreneurs.

Introductory remarks. Very enthusiastic about the potential for the NY tech ecosystem, leveraging our strength in finance.

Maria Gotsch

Our goal is to make an innovation center comparable to CA. Leveraging our strength in financial services.

Planning demo day July 22, and a Big Data day in the fall.

Panel:

Cary Davis, Managing Director, Warburg Pincus, Moderator:

Ben Fried, Chief Information Officer, Google, runs in-house technology. Formerly MS IT department.
Andy Brown, Chief Technology Officer, UBS
Tim Lyons, Senior Vice President, Technology Innovation Portfolio, Bank of America . Does R&D/biz dev services for company. 15 yrs at MS.

Adrian Kunzle, Head of Firmwide Engineering & Architecture (CTO), JP Morgan Chase.

DAVIS: What is the #1 emerging trend?

KUNZLE: Mobile. The back-end systems look the same as before, but aren’t tuned for the needs of mobile. We’re researching how to enable salesforces.

We might develop ipad trading applications for customers, but not internally.

We certainly want to enable internal employees to be more efficient. “Everyone is bringing them in nowadays”.

BROWN: Mobile is a delivery channel for capability. We’re advising and relationship management, at the end of the day.

The trick is delivering business insights over this channel: use social networks to support relationship management.

LYONS: How do you grow the customer relationship thru these channels?

FRIED: I look forward to Google Wallet simplifying my life. The cellphone is the 1st new thing to enter the pocket since the invention of the housekey.

I see a lot of companies making a huge institutional investment in the equivalent of Apple IIs and Visicalc. I think android / 4g networks will take over tablets.

BROWN: Cost of managing a data store is negligible. Most people are downloading more than they have to.

FRIED: Non-structured operations on data are as least as powerful as structured operations. Especially with machine learning techniques.

DAVIS: Comment on consumerization of enterprise computing. How are you allowing employees to interact with social media?

LYONS: We allow them to use social media on their personal devices (laughter).

FRIED: Prevalent notion of a corporate network is very antiquated: a firewall around it and unlimited communication within . This is ostriches with heads in the sand, on a dessert island with the water lapping up.

BROWN: the notion of perimeter-based defense is gone. We need to start thinking like the NSA. Assume you’ve been compromised. Assume the device connecting to your website is compromised.

BROWN: Impersonation on social networks is a big problem. Ask the senator who was on TV.

The water has already come over the damn. Consumers have 7-10meg on them. Social networking is governed by SEC 17a4, and SEC hasn’t opined on this.

How do you use the social network as part of the relationship network?

4-5 companies are doing ‘facebook for business’.

LYONS: Internal use of this is not fully played out. We’re locking down more doors so you can’t get outside. A whole bunch of your corporate communication/interaction is going to happen on these impromptu networks. You have to build systems internally that are as good as what’s available externally.

BROWN: Not clear if you can build anything on the inside of the same scale / quality as Facebook/Google/Twitter, because you don’t have as big a market.

DAVIS: How do you think about buying from smaller/emerging companies?

LYONS: You have to encourage companies to pay attention to these entrepreneurs. At my prior company, we structured programs to encourage doing business with smaller companies.

KUNZLE: Push us for fast decision. Sales cycle can often go into something like co-development. 2-18 month sales cycle.

FRIED: You need to identify the business value at the beginning.

Find the thing that makes peoples’ eyes light up.

Companies that ask ‘what are the problems’ are the ones that are successful.

DAVIS: What are your problems?

BROWN: Real time intra-day risk. End of day is fairly easy, but not real time.

Video platform that works well inside the enterprise, but doesn’t require $500K telepresence rooms, but allow a lot of mobility / flexibility.

KUNZLE: Decent digital rights management, which moves around with a doc, and works on ipads/ iphones.

LYONS: There’s some immaturity around how large enterprises adopt these technologies. Reminds me of early days of Unix, when you had to have data scientists. A lot of new capabilities emerging around Hadoop.

DAVIS: What services in the cloud are you using?

LYONS: We already use these systems for HR, payroll, Salesforce.com, etc. Clearly there are more scenarios.

LYONS: Cloud providers are ahead of the game, because they assume they’ll be attacked every day. Corporates don’t. The cloud grows/shrinks as you need it. The programming paradigms to take advantage of the cloud are one of the biggest challenges we have.

Packaged platforms (Force.com/EC2/Azure) are much more likely to succeed than a pure infrastructure play. Do you want to have virtualization to reduce the number of servers to minimum possible? Google is essentially platform as a service. Appliances will go into the enterprise. Java/Azure appliances will come in . If we give programmers something that scales out of the box, knows when it will hit an infrastructure limit and scales itself out, that’s powerful.

FRIED: Cloud starts from a macroeconomic observation. A few companies (Google, Amazon, MSFT) have compute economies of scale that no other entity can touch, including government. Google sites its facilities next to full
y depreciated hydroelectric dams, to lower our electrical costs. We design them grounds-up optimized for our particular needs. I talk with a few people who want to ‘build a private cloud’. That’s like labeling your security guards a ‘private army.’

For the last 3 years, almost every internal app at Google is built, not bought. We build on our platform as a service. I haven’t had a single sysadmin, or a day of downtime.

I get a lot of complaints from developers, because this may not be as convenient as what they had before.

Ex: we recently changed our remote access capability in 1 day. It didn’t cause a burp.

KUNZLE: We’re tracking 14,000 apps.

BROWN: There are going to be a lot of post-credit-crisis regulatory changes particularly around risk. Most of these changes will be announced in the next few months, so you have to move fast.

Tal Liani, Managing Director, Equities Research-Communications Equipment, Bank of America

comments on current state of the market

I’m “sort of” head of tech research. I want to speak about an interesting phenomena happening in the public markets. When I started covering space, comm. companies were trading at 50 P/E, then down to 30, now down to 8.

HP 8x P/E

Apple 11-12x P/E. Apple, HP, Microsoft, all about the same

When I virtualize, eventually I’m going to buy less. Price/bandwidth is plummeting. The public markets are forecasting that.

The assumption is that big companies can’t grow, and that’s why we’re seeing a massive contraction of multiples.

Riverbed is trading at 35 P/E. 7 years old. Penetration rate in branches about 15%.

If you took a basket and invested in mid-cap growth in tech, each individual company will be much riskier than Cisco. However, a mid-cap growth basket will always outperform large-cap growth.

Every 3 years in optical networking, capacity goes up 4-10x, and prices go up 30%. Think of what happens to margins in these companies. So, you’re never profitable.

Good VCs add value: they make the cycles short.

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