PFITR ready to disrupt bond market one year after graduating from Venture Center’s FinTech boot camp

by Wesley Brown ([email protected]) 968 views 

Nearly one year after graduating from the first FinTech Accelerator program at Little Rock’s Venture Center, the company known as PFITR, or Public Funds Investment Tracking & Reporting, has made full use of the city’s budding technology startup ecosystem ahead of the launch of its first revenue-generating product.

Following a “dress rehearsal” on Tuesday, the FinTech founders from two international and eight U.S. teams will complete the VC FinTech Accelerator program and present their companies to more than 350 investors, financial services executives and community leaders during Demo Day on Wednesday (July 26) at the Clinton Presidential Center. Gov. Asa Hutchinson will offer the keynote speech in the afternoon.

This time last year, Koetting PFITR (originally Public Funds Investment Tracking & Reporting) was one of 10 companies selected from 150 candidates to be part of the Venture Center’s intensive summer long training program. In addition to establishing a relationship with the program’s sponsor, Jacksonville, Fla.-based financial services giant FIS, companies in the accelerator program benefit from relationships that have been developed with Little Rock-based Stephens Inc. and local banking executives.

PFITR founder and CEO Jim Koetting said after participating in the Venture Center’s first training program last year he has been fully introduced to many of the state’s leading business leaders, policymakers, and banking and technology executives. From those relationships and experiences, he has gained a new appreciation for the startup’s full potential.

Still, like many successful entrepreneurs, the idea for PFITR’s flagship product has come out of several years of trial and error. In fact, the genesis of PFITR’s birth can be traced back to the Sept. 11 attacks and near collapse of U.S. financial markets in 2001 and the difficult years for the nation’s economy following the tragedy.

“It was kind of a bad time for investments (because) no one was investing and the stock market was terrible,” said the former Raymond James securities adviser. “I knew enough of the bond business just to be dangerous.”

Taking advice from another Raymond James bond broker he said was working 12 hours a week “playing a lot of golf” and making $500,000 year, Koetting said he immersed himself into learning everything he could about the bond market. What he found, he said, was eye-opening.

“It’s a $100 trillion market,” Koetting exclaimed. “The stock market follows the bond business, the Fed follows bond business … and all interest rates are set on the bond market. It affects your taxes; it affects everything and every walk of life.”

However, Koetting said most money managers and portfolio advisers for municipalities, state and federal government funds, banking and wealth management firms, and other investment vehicles are uneducated about bond investing.

“I would see these people, especially in government, where they would have a $50 million, $100 million or even a billion-dollar portfolio and I assumed they would know a little bit about (bonds), but I was amazed they didn’t,” he said.

After walking into a Target store and seeing a copy of a book in the well-known “Dummies” series on business organizational skills, Koetting came up with the idea to write a book that would easily explain bond investing in a way that an eighth-grader would understand. And after working with global book publisher John Wiley & Sons over the next several months, Koetting’s “Public Fund Investing for Dummies” debuted in 2007 offering advice on developing and creating a strategy for an organization’s investment policy.

After giving away more than 15,000 copies of his book, Koetting said he then began getting speaking engagements and consulting work about the same time the bond market tanked as the failure of mortgage backed securities helped to trigger the Great Recession. Still, the St. Louis native said in working to educate investors about risk associated with bond investing, he quickly found there was no technology in the marketplace to arm money managers with pricing information about government bond issues and debt securities offerings.

“What amazed me is that on the Internet you can find a price for anything – except for the bonds. And to get that pricing data, you are going to pay a fortune,” he said.

Realizing there was a need in the marketplace for a digital tool that provides novice bond investors with tools that provide transparent, real market data at an affordable cost, through a user-friendly app, Koetting worked with his software team to come up with the company’s new Bond Price Validation tool.

Last week, the company unveiled the beta version of its new tool during a presentation at the Tech Park attended by Arkansas Treasurer Dennis Milligan. At the company’s website, subscription plans for the online bond pricing product range from nearly $99 a day to $999 per month.

Eileen Devereux, the company’s sales operation manager, said the tool is now in the final testing stage with an expected launch date sometime in August. “We are thinking early August, but it depends on making sure the software is properly working,” she said.

Once launched, Koetting said the startup’s new online technology would allow everyone from institutional investors to small portfolio managers at community banks, credit unions, municipalities and local governments to get access to real-time, bond market data.

“That sounds very logical if you are buying a stock, but for bonds – forget it,” he said. “Now, we have the access to do that.”

Calling the company’s product the “Kelley Blue Book” of the bond market, Koetting said PFITR’s database will allow its subscribers to access so-called CUSIPs, which are identification numbers provided by the Committee on Uniform Securities Identification Procedures’ that classifies most financial instruments in the U.S. and Canada, including stocks, commercial paper, and U.S. government and municipal bonds.

The tool will work similarly to online stock market tools where real-time financial information can be accessed on any company by entering a stock symbol, Koetting said. It will also allow investors to assess risk in the bond market based on certain events such as rising and falling interest rates, he said.

Koetting and Devereux acknowledged that PFITR’S local operations are definitely starting to pick up steam four years after the company was founded in St. Louis. Koetting is in the process of moving his company and his family from the Missouri city to Little Rock. He has raised more than $350,000 in early stage funding from four different sources, and gained access to the area’s vast knowledge in institutional investing and the bond market.

In fact, PFITR was one of the first tenants to sign a lease in April in the newly renovated Little Rock Technology Park, which formerly housed two partnerships owned by Stephen Inc.’s CEO and Arkansas billionaire and bond financier Warren Stephens. There, Devereux now works out of the company’s temporary space at the downtown tech village.

Koetting also cited the support his company and other FinTech startups in Arkansas received from FIS CEO Gary Norcross, who heads the former Little Rock-based Fortune 500 financial technology giant that backs the Venture Center’s program. The PFITR founder also said Gov. Asa Hutchinson’s support of the local startup community makes Arkansas fertile ground to grow his company.

“I’m uprooting my family, and we are from St. Louis, to Little Rock and selling our home, because we think this is the best place to build our company right now. There is an incredible amount of support here,” said Koetting, who has touted the company’s five-year revenue potential at $60 million with 100 employees.

In addition of taking advantage of the city’s deep bench in the bond market and banking and financial services sector, Koetting said PFITR has taken full advantage of the growing downtown entrepreneurial ecosystem at the city’s Tech Park, which is also home to nearly two dozen other startup firms.

PFITR also gets administrative support from the University of Arkansas at Little Rock’s Small Business and Technology Development Center and an advisory team that includes experts and top executives from the public and private sector. The company hired seven employees from Hyderabad, India-based Hexanika – another graduate of the Venture Center’s 2016 FinTech program – to serve as its software development team.

Nicolas Mayerhoeffer, spokesman for the UALR business center, said the university-based economic development program assists well-established and new businesses such as PFITR with every aspect of business creation, management and operation, including making funding pitches to potential investors.

“They are a great story, and I think they are going to be one of Arkansas’ most successful startups,” Mayerhoeffer said.