00:00:00 · Annanay Kapila
[00:00:00] S0: I've worked as a quant in high frequency trading. 10 to $100,000,000,000 a day, just, you know, the strategies that I was responsible for. $10,000,000,000 a day is roughly the GDP of France. I was earning big fat paychecks as well, but I felt that I was wasting my life. High frequency trading is all about exploiting market inefficiencies. I saw how much money we were making due to simple structural design flaws in existing markets. People in trading just wanna make money so they can earn big bonuses. Right? I'm Annanay. I'm founder and CEO of QFEX. I used to work in the quant finance sector before I realized a lot of financial markets infrastructure is broken, and now we're building the next twenty four seven global stock exchange, which is going to revolutionize trading. We had two major funds. One was General Catalyst, one was Nexus Venture Partners, around close to 95,000,000 valuation. If we weren't making any revenues, we were pre revenue, raising 95,000,000 valuation. The only point in raising venture money is if you can be massive, right, like truly massive, then a VC will find it very hard to say no. There's certainly a lot of people in The US. I feel a lot of them could be kind of pursuing an entrepreneurial path because their future is so set. And for me, was really obvious to see given my background. You know, obviously, was born in India, then my friends came to The UK. You know, they left behind a lot in India to kind of start over in The UK. I studied maths at university. I started thinking about what I wanted to do with my life towards the end of my time at Cambridge. We weren't very wealthy growing up and, job in quantitative finance, quant trading. It just paid a lot of money. I had an option to do a PhD as well, something more impactful, but, like, the the money was too good to pass up. And after I left Cambridge 2020, I worked at a Dutch high frequency trading firm called Flow Traders for a year, and then I got headhunted to an American firm called Tower Research Capital where I worked for almost three years. When you work as a trader as a quant, first thing I do when I get in, you know, not even when I get in. When I wake up, I have my work laptop, I check how much money we've made. In quant, everything is data driven, and you're not doing trading by talking to people. You're just looking at data, you're trading from data.
00:01:53 · Annanay Kapila
People ask me for, like, a real world analogy. I often say it's like running a car dealership. Somebody runs a car dealership. You can sell your car to them. You can buy a car from them, and their job is basically to kind of have an inventory of cars ready to sell, and they buy cars at a little... Slightly lower price and sell cars at a slightly higher price. And the reason Quant Finance is able to make so much money is because so much volume trades in the market. You know? The S and P 500 future on CME, that's one future, one product, trades $500,000,000,000 a day. That's like more than the GDP of any country. But I think there's a lot of cognitive dissonance amongst quants and traders that they've kind of convinced themselves because they're earning big fat paychecks, and, I was earning big fat paychecks as well, that, hey. You know, we're we're making a lot of money. We must be doing something good for the world. High frequency trading is all about exploiting market inefficiencies, like futures that expire, for example. You know? S and P futures expire every three months because that coincides with the time of the harvest for certain crops in the Midwest. There's no need for them to expire. If they expire, what happens is people have to sell the future, buy the next one. They pay transaction costs every time they trade. They lose money and high frequency traders make the other side of the money. No one in quant trading wakes up in the morning and they think, oh, how do I make the markets more efficient today? How do I lower cost of consumers every day? People in trading just wanna make money so they can earn big bonuses. And I think Tower has really, really high quality of talent. So, you know, a lot of my colleagues were international Math Olympiad medal winners. There's this entrance exam in India for, like, the top technical universities called IIT. A lot of them were ranked in kind of the top 50 in India when they did they did this test. They're stuck in the same golden handcuffs. You know, they're they're getting paid too much, basically, and they don't wanna leave. Quant Finance has sequestered a lot of very talented people in an industry that basically adds no value to the world. And that was really the source of the guilt. I felt that I was wasting my life. Think carefully why you're doing it.
00:03:44 · Annanay Kapila
Think about, honestly, is is this what you wanna be doing in five, seven years' time? Almost nobody I spoke to said they would still be in the job in five years' time. A lot of them were like two, three years, and I'll go do something else. Like, you know, they're still there. So are they still there because they want to be there, or are they still there because they failed to reevaluate? Towards the end of my time at Tower, a bunch of things happened in life that kind of aligned that made me think that maybe I should leave this and and build a startup. FTX was a very profitable business. You were backed by Sequoia, very high valuation. I don't wanna defend and say, you know, what he did a good thing, well, that end justifies the means. I think what he did was fairly wrong. He does deserve to be imprisoned. But I think on the innovation side, it's a very successful company. A lot of the products that they made was actually really good. I think another really interesting thing is that FTX did try to go down the path of US licensing and US regulation. FTX purchased an exchange in The US. Interestingly, I'd already had the idea to do this exchange, whereas now QFEX, like, about six months before. I have, a burning desire to improve the markets because I've worked on the other side of the markets as a quant in high frequency trading. And I thought, if the aim really is to make markets more efficient, why don't you just improve the nature of the market and improve the nature of the design so that high frequency trading firms don't make all this money, which they're just extracting from investors, and the market just becomes fairer that way? Towards the end of twenty twenty four, early twenty twenty five, I kinda pitched this idea to my cofounder, one of my best friends. We've known each other for a very long time, I guess, like, since we were 18 pretty much. Josh worked at Citadel, but on the engineering side, he didn't know anything about the exchange side of things. Right? He just called messages like, hey. You know, I have this, like, crazy idea. I was like, you know, this is so obviously like a better market design that there's no way it doesn't exist in five or ten years' time. Right? And either the incumbents get their act together or we do it. He was like, yeah. Like, let's let's do it.
00:05:35 · Annanay Kapila
He left his job at Citadel, which is one of the top hedge funds in the world. Job was going pretty well, and you had a lot of money saved up. I wouldn't be under any financial pressure. Once that side of the equation was solved for and I had some decent money in the bank, then I thought, okay. It's it's time to do something that, you know, I wanna make my life's work. I left my job in February 2025. You know, I was really getting to the point where I was thinking, hey. You know, can can anything really go wrong if I spend, you know, two, three, four, five years of my life, let's say, and and and things that don't don't really work out. You know, we applied for funding from Y Combinator. We applied. You know, Josh calls me, and I'm, like, in Austria watching some opera show. He's like, oh, we want an interview. We want an interview. We have to come. I flew the same day back to London. They ask questions that really test whether you've got into the details of understanding where the problem lies and what the why now moment is. Like, why is now the right time to build this idea? PG explained this to us. They didn't think about things like what's the probability of this idea succeeding. They just wanna know the probability is bigger than zero. Even if it's 1%, but it's a huge idea and you're a good team, they'll fund you. I'm aware that the company we're doing right now, right, it's either gonna make me like $50,000,000 or zero. Because like exchange is like... It's not like a 10,000,000 ARR business. Like, it'll never be a 10,000,000 ARR business. It's either zero or huge. And they said, is this a huge idea? And are these guys the right people to do it? The next day, we got the offer, and then we're like, okay. And now that we have funding, we can probably build it. But building in fintech is always tough because you can't launch something if it breaks to say sorry to your customers. Right? That's like a real breach of trust. The hardest day... It was during YC, actually. We'd actually launched the exchange internally, just YC. We were kind of forced by our partners to launch early because they were like, you used to do this, otherwise, you'll never get user feedback. Just just do it right right now. I like... I'm very jet lagged. So I worked with three m. My cofounder's there, he's like, oh, man. The exchange has blown up. We looked at everyone's result.
00:07:29 · Annanay Kapila, S1, S2
Like, somebody was plus $1,000,000. Somebody was minus $1,000,000. He was like, oh, man. We only gave them, a $100 to play with. Like, how has this happened? So we had to basically spend all day reconstructing what had happened, figuring out how much money everyone owed and how much they didn't owe, reimbursing some people. That was the first time we took a loss as a company where we had to say, oh, we're sorry. It says that you're minus $100, but we don't think this is right. We'll just give you a $100. Luckily, it was still small scale. It wasn't like a big loss for us. The issue was it really hit home how difficult it is to build a Ad[00:08:00] S1: Your website can do a lot more than you think. With Base 44, describe what you want in your own words and build a website that looks your way and works your way. Let people book with you or buy from you with hosting already included. Then help more people discover your site with built in search tools, social content, and Google Ads. Built the website you've got in your head on base40four. Go to base44.com. That's base44.com. Ad[00:08:30] S2: Honey, that flu keeping you up? Yeah. I don't got this. You need Nyquil intense flu. Undo your flu symptoms with Nyquil intense flu. The nighttime sniffling, aching, aching fever, best sleep with the flu medicine. You do got this. Use as directed. Keep out of reach of children.
00:08:44 · Annanay Kapila
[00:08:44] S0: Twenty four seven, perfect, fully available system that keeps track of... You if run something twenty four seven, like, anything can go wrong, anytime. Right? Lightning bolt can happen, fire in the data center, whatever. We didn't sleep properly for days after that because we were like, we don't want this to happen in life. Right? Because if we do, it's game over for us in exchange. I think the reason the partners made us do it is to make... Basically make us grow up and realize the gravity of the situation we were in. That was a really tough time. Both the best days of our life and the worst days of our life, we were working all the time, like, hundred hours a week, very focused, very frenetic. You know, there's some misconceptions maybe about how fundraising happens in Silicon Valley. It's very quick. If the check size is less than 500 k, typically, a thirty minute meeting and you get the decision, like, on the call or just after. If it's kind of a bigger check, then... Yeah. We had a first meeting and a second meeting in person, which was, you know, both of thirty minutes, let's say, roughly. And day one, we had a bunch of angels. We got some money. And then we stopped taking angel money. Yeah. Then it was about the bigger funds. So, you know, we had two major funds. One was General Catalyst. One was Nexus Venture Partners. Was around close to 95,000,000 valuation. We weren't making any revenues. We were pre revenue. The only point in raising venture money is if you can be massive. When you have to be at, like, a huge scale, then a VC will find it very hard to say no. And I think, you you guys are based in San Francisco. What was very interesting to me kind of being in London for a while, now we're in New York. In London, New York, people are very concerned with how much money someone has, how much money they make, how much money they have in their bank account, how much money they're gonna make in the future. Everything's about money. San Francisco, people really, I think, don't talk about that as much or don't think about it as much. They're much more concerned with, you know, impacts, that kind of thing. And it was really useful to live in San Francisco for, like, four months. HFT strategies don't lose money. Right? Like, you can't even lose money doing HFT.