The lessons of Optimark
The news last month that Optimark has failed in its bid to change the dynamics of US equities trading stands as a timely reminder of the difficulties e-commerce start-ups face.
Just a year ago it had deals with Nasdaq and the Pacific Exchange, had received a total of $236 million in funding from investors such as Merrill Lynch, Goldman Sachs, CSFB and PaineWebber, and from leading venture capitalists, including $100 million from Softbank. At one point it was valued close to $1 billion and was considering an IPO.
Now it's had to suspend all its US equities trading, which was eating up a large portion of its operating capital without bringing in a great deal of revenue - just $3 million in 1999, with 75% of that coming from just four users. CEO Bill Riese has stepped down and the company is seeking to re-cast itself as a consultancy. Failure in the e-commerce sphere is not unique to Optimark. In the credit markets two trading platforms, Trading Edge and LIMITrader, have suffered by being single-market platforms which launched in the year when their product, high-yield debt, nose-dived. In early summer LIMITrader's founder and CEO, Ed McGuinn, a former head of debt capital markets at Lehman Brothers, resigned.