Mike Manning, DealVector co-founder and ceo, and Dave Jefferds, co-founder and coo, answer SCI's questions

Q: How and when did DealVector become involved in the structured finance markets?
MM: The system has been live for two months or so, although of course we have been developing for longer than that. We really are filling a gap in the market and providing a service that investors tell us they have been crying out for.

DealVector is 'LinkedIn' for assets. We allow investors in CDOs, CLOs, derivatives, hedge funds and other alternative assets to find other members of their deals for the first time. Investors do not typically know who else is in their deal, but in many cases they need to get in contact with each other - if they want to restructure or call a deal, for example.

Q: How do you differentiate yourself from your competitors?
MM: It is a Silicon Valley approach to a Wall Street problem. Here in California, we do not tend to think beyond the IPO. But IPOs are a fraction equities markets, and equities are a fraction of the fixed income markets.

The fixed income markets, however, require domain-specific knowledge that people out here just do not have. Conversely, on Wall Street people do not think about building community-based websites to address information asymmetries, so we are combining our expertise to give the best of both worlds.

DJ: There is nobody else doing what we do and I cannot think of many other attempts to do it either. The product is well fit to the needs of the financial community. You cannot just create an entirely open system like a social network and expect it to be applicable to the financial community.

Obviously investors do not want their entire portfolio to be open to their competitors to view online, so with our system we have made sure that this is simply not possible. You also do not want to be chasing people on the phone all the time, so our system allows you to narrow-cast your outbound and inbound messaging into the tightly defined group you want to target.

Q: What are your key areas of focus today?
DJ: Part of our solution is a 'less-is-more' approach. That is part of what makes it work. We are not trying to set up another big trading platform; we just want to be a relationship conduit and we do not look to control the relationship once it has been established.

Users can treat us like a smart phonebook. They input the kind of users they want to communicate with and the deal that is relevant to that communication. That means you may be open to talking to anyone in the market or you may just want to talk to other investors or just the trustee or somebody else.

Once you have narrowed it down by deal and user type, you can open a dialogue with other members under the cover of an anonymised numeric ID. While you do not know the identity of the person with whom you are communicating - and they do not know yours - you can still be confident that they are legitimate deal participants, because part of DealVector's service is that we validate network members.

If two parties mutually decide that they want to "drop the mask", we will simultaneously share contact information though our 'contact escrow' feature. They can then take it offline and communicate however they want.

MM: Like all networks, one of the things we face is a chicken-and-egg issue. One of the ways we have tackled that chicken-and-egg issue is by pre-marketing the platform before going live. That has allowed us to sign up about two dozen top-tier clients to the platform, including: insurers such as Ambac, MBIA and Assured Guaranty; hedge funds like Eton Park, Pine River and Tetragon; and advisors and brokers like Perella Weinberg and Guggenheim Securities.

The response has been remarkably good. I expected that the top-tier firms might be reluctant to embrace a democratisation of information flow, but actually it turns out that everyone views the lack of information in the market as a problem.

It is effectively a tax on the market that manifests itself in the form of deals that do not happen and restructurings that cannot be done. So our experience has been that the idea of bringing increased efficiency to communications is being embraced by a wide variety of market participants, because there is a view that this will make these markets more attractive and help them grow.

Q: What is your strategy going forward?
MM: The next big step for us is to complete our capital raise, which we are in the middle of at the moment. We are raising money in order to scale up and job number one is to get more people on the platform.

We believe people will be open to joining because we are giving them a chance to change the market dynamics and make them function better. We are passionate about this, so we want to talk to as many people about it as we can.

While the site is fully functional and supporting deals and messaging right now, we will also continue to add new products. There will be new offerings according to what people tell us they want.

Q: What major developments do you need/expect from the market in the future?
DJ: Well, we see ourselves as a major development in the market, of course. But, in terms of market evolution, there is clearly a bifurcation in the structured market between CLOs which are booming and other sectors that are still lagging. We have a real, direct application with respect to helping new issuers in the market.

On the secondary side, there is still a lot that is in work-out mode. We think we can help facilitate the market moving forward in a more constructive way. It is surprising how often you cannot connect with the people you need to connect with and, if we can fix that problem, then I think that would be a big development for the market.

MM: With CLO 2.0 coming out, there have been a lot of changes to deals to make them more robust. But we think there is also an opportunity for issuers and managers to adopt our product at the outset of a deal and encourage investors to sign on to it.

That would be another link in the chain to strengthen the resilience of our market. That is the thing we would most like to see: new issuers as they come to market promoting this idea as an adjunct to all the other things the market is putting in place.

JL