Why We Invested in Derivative Path

I’m excited to announce today that FTV Capital has led a $35 million growth equity round in, and that I have joined the board of, Derivative Path (DPI) — a leading capital markets financial technology and services company. With this additional capital, DPI plans to expand its product offerings and accelerate growth with financial institutions, end-users, and buyside clients using DPI’s interest rate derivatives and foreign exchange platform.

Derivative Path’s founders are seasoned capital markets bankers who partnered with strong technologists to create a purpose-built solution for interest rate derivative transactions. Since beginning as a leading-edge trading platform for regional banks in 2013, DPI has expanded to new capabilities and asset classes, and is now considered best-of-breed in market. In fact, DPI was recently selected as a nominee/finalist for “Risk Management Advisory Firm of the Year” in the GlobalCapital Americas Derivatives Awards 2020.

DPI is also viewed as an end-to-end solution, providing support to the back, middle and front office within one platform. Customers rely on DPI’s technology to price and execute trades, as well as for ongoing accounting and maintenance support such as payment, regulatory filings, portfolio analysis, etc., while banks partner with DPI to hedge interest rate exposure (loan-by-loan and balance sheet hedges) and generate non-interest fee income.

Given the breadth of DPI’s solutions, this investment reflects a large market opportunity with unique prospects in services, technology, and ancillary products, (FX/commodities), as well as non-bank customers like insurance and real-estate investment firms (REITs). We view their interest rate swap transactions solutions as a greenfield opportunity that is growing rapidly for DPI’s existing core target market, which consists of thousands of US banks.

Following on from our recent and largest fund close last week (read the Fund VI post from FTV’s managing director Brad Bernstein here), Derivative Path fits nicely alongside other investments we’ve made thus far in 2020. In the last 12 months alone, and despite the broader macro-economic downturn, we’ve invested in nine additional, well-positioned portfolio companies including Bought By Many, Docupace, Sysnet, Centaur Fund Servicesr and Liberis.

Though the current environment is likely to pose challenges to any business, DPI’s proven ability to partner with customers to hedge their exposure and generate non-interest income in a low-rate environment help position customers to withstand market volatility. DPI’s resiliency underscores the growing demand for best-in-class, end-to-end solutions with a clear, customer-centric focus.

We are excited for the opportunity to work with the DPI team as they forge a clear path as a market leader in the capital markets financial technology space.