In the early 1990s, the Chicago Mercantile Exchange was a bustling, intense arena to work in.
Don Wilson was in the midst of the chaos, trading Eurodollar options on the floor. The precocious 20-year-old had only recently graduated college and yet was receiving quite an education from the high-octane environment of the Merc. The thrill of the pit is enough to satisfy many people, but for Wilson, it was just the beginning of his fascination with trading.
After work each day, he went directly home to his studio apartment, where he’d use his enormous beige computer to chart volatility pricing, build risk software and create option-pricing models. The next day, he’d take his findings to the floor and test them. The results were encouraging.
His focus on the relationship between technology, mathematics and trading made him stand out from his peers. So in 1992, he sized up the risks and made the decision to start his own principal trading firm, DRW. Using all he’d learned from the trading floor and from his side-projects, his firm was built to place a heavy emphasis on technology.
Today, DRW doesn’t exist solely as a trading firm — it remains focused on identifying and capturing opportunities, which has led to expansion into real estate through Convexity Properties, venture capital by means of DRW Venture Capital, and cryptoassets through Cumberland.
Like Wilson in his early days of trading, employees progress their careers and carve out their place in the industry by living some core tenants of trading: being nimble, keeping an entrepreneurial mindset, taking risks, and staying at the forefront of new technologies.
Kristen manages Convexity Properties’ portfolio. She’s responsible for handling tasks like securing funding sources, financial planning, overseeing financial reporting and more.
What she’s working on now: “I recently began a major initiative to transition all Convexity reporting, which historically had been handled by DRW’s trading accountants, to my team. We now employ a real estate-specific accounting system to deliver to our users a complete and reliable reporting package each month.”
Cliff seeks out interesting companies whose missions mesh well with DRW. Then, he evaluates if those companies might serve as a strong strategic investment.
Why he chose DRW VC: “I was attracted to DRW because the firm trades and invests across a wide variety of markets, strategies and asset classes. This diversification means we have a very broad set of people that can help us find interesting companies, evaluate new products and add value to our portfolio companies after investing. Since joining DRW, I’ve benefited from a more complete view of the investment lifecycle from screening and initial investment to portfolio management and finally, helping companies exit.”
Jason and his team ensure the day-to-day tech operations at DRW flow seamlessly. There’s a wide variety of teams and industries DRW is involved with, so juggling the varied tech needs of the company is no small feat.
Why DRW is a good fit: “I’ve progressed my career by providing proactive solutions and process improvements on my team. DRW does a great job of allowing individuals to focus on ideas or projects that they are interested in.”
What does “staying nimble” mean at your company? In what ways do you personally stay flexible in your role?
Kristen: While Convexity, and real estate in general, clearly do not move as fast as the trading world, we have been able to apply those same principles to an industry that has otherwise operated in a more archaic environment. Our agility allows us to underwrite deals and make offers faster than our competition, and that has certainly provided a leg up that’s similar to how the trading business leverages its innovative personnel and technology.
Jason: One of the more enjoyable aspects of my job is having exposure to every team at DRW. Given that every team has a unique use case with their own workstations, cell phones, laptops, trading tablets, conference rooms and more, we have to engineer solutions for every single employee, learn from changes and make sure all of our approaches are scalable for the needs of the business.
Tell us about how DRW takes an entrepreneurial approach to business. How does that impact you at the individual level?
Cliff: We are looking for potentially disruptive companies that can generate an excellent return on investment after accounting for the risks inherent in early-stage technology investing. I measure our success by both the quality of the companies we support and the positive impact we have on our portfolio companies as they grow.
Real estate represents a massive portion of our country’s wealth and economic output, and there are endless opportunities for technology to solve problems in the sector. We recently led a $16 million Series B financing round for SquareFoot, a commercial real estate marketplace that connects growing companies to office spaces tailored to meet their needs. I’m actively searching for more opportunities in this space.
Kristen: At Convexity, we have had the opportunity to build this portfolio from the ground up. DRW as a whole is very entrepreneurial in spirit, and Convexity has allowed me more autonomy to assemble processes and procedures and to test those out as the team evolves. Consistent core elements running deep through all DRW businesses are trust and confidence in its employees — a rarity in today’s world.
Why is it important to stay ahead of the curve in your industry?
Jason: Technology is at a state of constant change, with new security policies, hardware, operating systems and vulnerabilities, so it is important to keep up on the pulse of tech news to ensure we stay knowledgeable and relevant on the solutions we provide. Coming from a technology background, it was eye-opening to learn that DRW invests so heavily in technology.
Cliff: We seize opportunities as soon as they arise. For example, the firm launched Cumberland in 2014 and has been at the forefront of cryptoasset trading ever since. And, during my time at DRW VC, I’ve had the opportunity to identify and explore themes in emerging areas like alternative data and real estate tech. It’s incredibly fulfilling to see this work progress from idea to research to new investments like Cuebiq, a leading location intelligence and consumer insights company, or SquareFoot.
Risk is a huge component in your industry. How does it factor into your day-to-day work?
Cliff: In venture capital, risk-taking is part of the job description — but so is identifying and managing risks. A core part of our investment process is speaking to experts within DRW and in our network to uncover unknown risk factors. DRW’s heritage is founded on prudent risk management and it’s interesting to translate that mindset to venture capital investing.
Jason: For a company in the business of managing risk, it’s critical to be at the top of our game to assist with any and all inquiries and problems that employees may encounter. And when there isn’t a fire to put out, a big project for our team is modernizing and enhancing a company-wide intranet.
Kristen: I encounter risk opportunities on a daily basis. Some are a welcome challenge, for instance: Do we push hard on a lender to secure better terms, or risk losing the deal? Others are on a larger scale, like analyzing a property as a hold-sell while putting substantial weight into subjective inputs, hoping the market moves in tandem to those assumptions.
While a significant portion of my role is self-directed and autonomous, Convexity has a team that, though lean, is particularly talented in their fields of expertise and is available at a moment’s notice when needed. Having those resources at our immediate disposal allows us to remain nimble but also calculated, which provides a certain level of comfort when taking that first step off the ledge.