Munich Startup: As we last spokeYou said that Sub Capitals wants to achieve greater equality in the financial markets and establish AI investing. Were you able to achieve this goal?
Franz Liebermann, Sub Capitals: I would say: Yes, in part. The road to greater equality is long, even in the financial markets. What I can say with certainty is that we have laid an important foundation for this with our launch. We have lowered the entry barrier for investing with AI from several million to 100 euros. Now, step by step, more equal opportunities are being introduced into the market because private investors have access to an asset class that was previously closed to them. This type of investing is far from established. But it is a start.
“Winning the trust of the industry”
Munich Startup: What obstacles did you encounter along the way?
Marius Siegert, Sub Capitals: In our opinion, the biggest challenge for any startup is the so-called "product-market fit," which we experienced firsthand last year when launching a new fintech app. The problem wasn't the product itself, but rather financing an app in uncertain times with insanely high customer acquisition costs, the so-called CAC.
It also took some time for us to gain the trust of the industry. But after 30 months of live trading in the financial market with AI, we were able to prove that we're not a flash in the pan. Today, we're perceived as a trustworthy financial technology company, and that's opening some doors. But trust, especially in the financial industry, always takes time. That was a big learning.
Munich Startup: How has your solution evolved?
Franz Liebermann: The answer is somewhat reflected in the first part of our answer about the obstacles. After we decided to discontinue the app, it became clear to us: disruption isn't the best approach in every market. Often, as in the capital market, you have to transform the existing infrastructure rather than reinvent it. Therefore, in this industry, a very effective approach is to work with an approach called "embedded finance."
Sub Capitals: Market entry with AI certificate
At Sub Capitals, we now cover the entire value chain of data science and AI in asset management. From the data used to train the AI models to the finished trading strategies based on the AI models. The AI-based trading strategies we are now developing with the issuer of our products – UBS – are just the top end of the entire process. In addition to the launch of our AI certificate We are currently working with UBS to make the entire value chain of financial institutions in various sectors available to institutional clients via a single platform. We have already received numerous inquiries from interested clients and have initiated initial platform projects to bring trading strategies up to the latest state of the art using machine learning.
Specifically, with the product launch with UBS as the issuer, there's no longer any need to download an app; instead, every investor can purchase our product through their own broker (WKN: UBS5C2). This allows clients to embed a security invested with AI into their portfolio. We therefore leverage the client's existing infrastructure, in the spirit of "embedded finance." The product, which reflects the AI's performance, can be traded via the Frankfurt and Stuttgart stock exchanges or directly with UBS. This means that we no longer manage the entire portfolio, as previously planned in the app, but only a clearly defined portion by the client, allowing us to further diversify the portfolio because the AI can operate independently of the overall market.
More attention to human resources management
Munich Startup: And how are things looking financially for you?
Marius Siegert: We founders are investing a large portion of our time and any remaining savings in Sub Capitals. Likewise, we will invest at least 50% of our private portfolios in our new AI certificate. It's not optimal diversification, but we're confident in our approach.
If the question was more about the liquidity of Sub Capitals, we are currently very well financed and have well-known investors in the scene for our strategic direction.
Munich Startup: What learnings have you as a founding team learned so far?
Franz Liebermann: Our motto since 2017, and also in the development of AI, has been trial and error. This is the only way we've been able to stay up to date with the latest applications and research publications in such a rapidly growing field. However, the same doesn't apply to the company itself. We've now reached a size where we have to take responsibility for our employees and time financing rounds and start-ups very carefully. Unfortunately, we also had layoffs in 2022 as part of the pivot to the app. And we don't want that to happen again.
Next milestone: Solution for institutional customers
Munich Startup: What role has the Munich ecosystem played in your journey so far?
Marius Siegert: We see ourselves as a spin-off of the Technical University of Munich and the Munich University of Applied Sciences with close ties to the universities. Not only because the majority of our team comes from these universities, but also because the startup support programs of the SCE and UnternehmerTUM have helped us a great deal in the first few years after our launch. Overall, we feel very comfortable with the high concentration of asset managers here in Munich and always welcome everyone to join us for a coffee at Werk1.
Munich Startup: What milestones are you working towards next?
Franz Liebermann: As already mentioned, we are working on a solution to complement institutional investors with outdated infrastructure and limited data usage with AI in the investment process and to expand the whole into a platform solution for AI in asset management. We already have initial partners for this. However, we would like to initially focus on our market entry with our AI certificate, which brings us a step closer to our goal: greater equality in the financial markets.
