Atreyu is offering preferred equity priced at $24.99 each. The valuation for the company in this round is $24 million. While that figure is very high in comparison to other startups currently raising capital, the revenue multiple is actually quite attractive. Atreyu took in nearly $4 million in its most recent fiscal year, making the revenue-to-valuation multiple just under 8x. Balancing this seemingly high valuation against the attractive revenue multiple, Atreyu’s price score is slightly above average.

The market that Atreyu operates in is rather opaque. Yes, global markets for securities trading are the largest markets on the planet. However, the revenue and the algorithmic trading market is not all that great. According to one source, the industry was worth $11.1 billion in 2019. By 2024, it is expected to grow to $18.8 billion, implying an annualized growth rate of 11.1%. A second source indicates that the market should grow at a 10.7% rate, climbing from $9.53 billion in 2018 to $21.52 billion by 2026. A third source matched that growth rate expectation, but with the industry growing from $10.35 billion in 2018 to $25.26 billion by 2027. None of these estimates show a very sizable market, though the double digit growth rate is somewhat encouraging. Due to these factors, the market score for Atreyu is its lowest across all five metrics.

The market opportunity for Atreyu may be weak, but the team running the company is strong. At the helm of the company is founder and CEO George Kledaras. Previously, he worked as a founder and director of FIX Flyer where he focused on reinventing electronic trading infrastructure to meet the shifting needs caused by algorithmic trading. Prior to that, Kledaras was the Chairman of the Advisory Council for Lehigh University’s Rossin College of Engineering. He has also worked as an adjunct professor at Fordham University. In particular, he taught entrepreneurship for their Graduate School of Business. Prior to those engagements, Kledaras was the founding director of a firm called Quadriserr, which focused on creating an automated securities lending marketplace. He also previously was the founder and CEO of Javelin Technologies, an electronic trading software business. This long list of credentials shows a long time of dedication to electronic securities trading. His first post related to this field, in fact, was with a financial data firm named Telerate that he worked at in the late 1980s.

Though Kledaras is the key figure at Atreyu, there are other important individuals. One of these is Jogi Narain, the company’s CTO. Previously, Narain was a partner and CTO at FGS Capital which provided clients with trading technology. Before that, he was a director at Standard Chartered Bank where he worked on the firm’s public-facing trading platform. Narain also spent time at Goldman Sachs — working on its trading system for high frequency algorithmic trading — and the London Stock Exchange. 

The other key individual at Atreyu is Sharon Lawrence. She currently operates as the company’s client operations manager. Previously, she was a consultant at BIDS Trading, where she focused on the client onboarding process. Before that, she worked as a managing director for Citigroup. Her emphasis there was on US execution strategies for equities markets. Prior to that, she was a managing director at Salomon Smith Barney.

This team is highly qualified for the work that they are currently engaged in. Kledaras brings both ample industry expertise and past entrepreneurial experience. As such, Atreyu’s team score is very high.

Prospective investors should consider Atreyu to be a highly differentiated firm. Today, essentially all quality algorithmic trading is left at the hands of major market firms. To compete with them would cost many investors more money than they have to work with. Historically, this has led the investors who could afford those firms’ services to pay them hefty fees to manage their money. While individual investors and small firms can technically still trade using algorithms, they lack the wholesale pricing that Atreyu offers. Perhaps more importantly, they also lack the low latency environment that the company provides. The absence of this environment means that any potential value captured by an algorithm could disappear before a trade can be completed, effectively rendering algorithmic trading pointless. Atreyu has addressed this problem by creating a robust, low latency environment that is available for use by investors. Its platform opens algorithmic trading up to more than just the major firms, and the company has secured patents for its technology. All these impressive factors yield Atreyu with a strong differentiators score.

Undoubtedly the strongest area for Atreyu is its performance. Since its inception, the company has seen tremendous traction. Its platform is live and generating revenue. The company has more than 150 traders using its services, and it is currently onboarding several others. The company expects at least nine new client accounts this year, plus it has many others in the pipeline. Examples of clients coming on board include a Chicago quant fund that completes 500,000 contracts per month and a machine learning black box trading outlet.

Naturally, with this traction has come revenue. In 2018, the company generated $1.47 million in revenue. This amount more than doubled to $3.99 million in 2019. Also during this time frame, the company’s net loss improved, moving from $1.92 million to $1.03 million. Its operating cash flow followed a similar path, improving from a net outflow of $1.46 million in 2018 to $1.01 million in 2019. Management has not provided significant financial details for the company’s 2020 fiscal year. However, they did state that revenue was around $6 million. For 2021, the company expects revenue to climb to $11 million, and for 2022, they expect more than $16 million. Naturally, investors should take projections with a grain of salt. However, given the company’s recent history, this kind of growth does not seem unreasonable.

Based on all of this data, Atreyu scored near perfect in the performance metric.

Atreyu’s risk profile is close to average. Only three categories of risk were elevated: team, market, and financial. On the team side, Atreyu is a single-founder entity. Without Kledaras, the enterprise risks falling apart entirely. For the market, Atreyu faces risk because its target market is still small and niche in nature. However, the greatest risk came on the financial side. This can be chalked up to the fact that the company’s gross profit margin is low at about 21%. Though high for some industries, this is a very low figure for a software company. 

At present, there are not a lot of negative things working against Atreyu. Concerns are mostly limited to the market and some aspects of its financial performance. For instance, the algorithmic trading market opportunity is rather small. If it does not grow as rapidly as projected, Atreyu could find itself limited to an undersized opportunity. Finally, the business is generating net loss and net operating cash outflows. That is to be expected for any startup, but the losses are not insignificant — at some point they need to turn to profits.

There are many positive things that investors should consider with Atreyu. First and foremost, the team has tremendous experience in this space. As industry experts, they are highly qualified to lead a company like Atreyu. The product is also highly differentiated from what is currently out there and addresses a distinct need in the algorithmic trading space. Atreyu is generating significant revenue, and that revenue continues to grow at a rapid pace. These are all excellent points that prospective investors should keep in mind.

Taking all things together, it is clear that Atreyu is an interesting and dynamic business. It has created a low latency platform for investors and small firms to use for algorithmic trading. This platform is highly differentiated in the current algorithmic trading space, and patents help give it crucial defensibility. The management team at Atreyu is highly qualified, and they have done a fantastic job getting the firm to where it is today. Although the company is targeting a small, niche market, its early and growing revenue indicates that it is well-positioned to capture a significant portion of said market. Due to all these positive factors, Atreyu is a Deal to Watch at this time.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com. 

Analysis written by Daniel Jones.