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Eon-Labs KB

EonLabs Financial Proposal 1.11

Source: Notion | Last edited: 2022-12-30 | ID: 1007bf64-d1c...

2022-12-27 1.1 published by 🦄

Eon Labs currently only has one source of revenue: fees from well-performing models, specifically Enigma. While this has worked well in the past, we may experience years of low performance based on bad market conditions, making financial planning and growth difficult. This leads to the following conclusions:

  1. A recurring revenue stream would be ideal

  2. Funding (venture capital, etc.) would be helpful

Venture capital funding for a quant research firm is a difficult proposition, because Venture capital is mostly interested in 10x growth and an eventual exit, by either going public or being acquired. Thus, EonLabs in its current form is unlikely to be attractive to Venture capital.

However, Eon Labs may be very attractive (eventually) to large financial research firms such as Renaissance Tech, Two Sigma, Jump, Mann Group Research, etc. However, it is unlikely these types of investors would buy only a percentage of the company, instead of demanding 100%. Thus, if an eventual exit like this is desired, we must maximize EonLabs valuation in order to sell for as much as possible. The valuation would originate from revenues, valuable intellectual property, AUM, as well as performance track records, etc.

**The Role of Axon **

Axon as the flagship fund that uses the EonLabs models will be an important revenue generator for Eon. Further, Axon will likely invest many of its profits into Eon Labs, as it has a vested interest in doing so. Thus the success of Axon, in terms of AUM and performance is directly correlated with Eon Lab’s success. Axon, in other words, could take over as an early Venture Capital funding partner for Eon, as its incentives are completely aligned with those of Eon Labs.

**Development of Revenue Generating Products **

The following is a short list of products that could be developed specifically in order to achieve revenue growth:

  • Licensing Strategies to Institutions and Exchanges. Strategies like market making, or a general quantitative, stable approach could be licensed to exchanges like crypto(dot)com or other, smaller exchanges, in order to stabilize their order books, increase the depth of their markets, or improve risk.
  • A subscription-based API or interface that shows our trade signals (slightly delayed, perhaps). This could be useful for individual traders, and we could build an entire community around this. Further, this could help us as well. If the community of traders is big enough, then this would make us automatically front-run them (we should check if and where this is legal…).
  • Our own exchange: Implementing either a centralized or decentralized exchange is an ideal way to kill two birds with one stone: it could generate revenues, and at the same time it is a much more investable product for venture capital etc.
  • Partnering with an existing exchange to launch public products there. This may be a higher hanging-fruit as launching financial products is difficult and involves much regulation and bureaucracy. However, it should be considered in the long run.
  • 🐉 Fintech AI as a no-code SaaS: e.g. 🇬🇧 CausaLens enjoys a valuation of 250 million. Here’s how much they charge per client:
    • “We offer our causaLens platform to data science teams at the likes of Jump Trading, Tibra and TIAA where they utilise our technology in their trading strategies. The cost of licensing the platform starts from 108,000USDperannum(for3usersonacloudwehost).Thereisanadditional108,000 USD per annum (for 3 users on a cloud we host). There is an additional 100k per annum cost for on-prem deployment.”