Founder David Trainer
DAVID TRAINER, founder and CEO of investment research analytics player New Constructs LLC, said his emergence from the SixThirty FinTech accelerator in St. Louis coincides with "a huge tailwind" generated by increased regulatory scrutiny of investment advisors.
Trainer told VNC that his 13-year-old firm, based in Brentwood near Nashville, is "closing a lot of business in St. Louis," in large measure due to having gained an accelerator berth, which afforded him access to customers via SixThirty's business network, as well as $100K investment by the accelerator.
SixThirty cohort companies are under no obligation to headquarter in St. Louis, though Trainer said SixThirty makes that option very attractive, particularly in terms of opening doors to St. Louis-area financial institutions and advisors.
Trainer, 42, emphasized that New Constructs and the sector overall stand to benefit from increased awareness of the inadequacy of most financial-diligence efforts, the deep flaws of which having been brought into sharper focus by White House and regulatory initiatives.
New Constructs' technology enables users to sift companies' published financial reports with what Trainer believes is unprecedented precision, to give its customers a truer picture of a corporation's economics, including earnings quality, valuation and related metrics.
Individual investors in New Constructs include perennial Angels Lucius Burch III, Bill Spitz, Richard Patton, Fred Goad, Jim Kever and Frank Bumstead, among others, he said. Nashville-based Solidus, a private equity firm, has also long been aboard.
"The jury is out" regarding whether or not New Constructs needs further outside investors, which would translate into further dilution for existing equity-holders, said Trainer, who declined to discuss revenue or profitability.
Trainer noted that the company now has a dozen full-time workers, including eight analysts, and is close to adding "two or three" additional staff.
He said he's "always looking" to add "talented software engineers who have interest in the financial markets and in improving the integrity of capital markets," as well as Finance students or recent Finance graduates.
Trainer said concern for preserving or strengthening capital markets' integrity has been an entrepreneurial driver for him, all along.
Asked to elaborate on that concern, he said New Constructs represents "a new frontier in fundamental data. Traditional data feeds are not reliable," largely because, to minimize operating costs, many such offerings are produced off-shore by "poorly trained and poorly educated" workers with little access to advanced technologies.
He continued: "Most investors do not realize how much important information gets buried in financial footnotes. In large part, footnotes get overlooked because they are buried in 200-plus pages of legalese in annual reports. As more advisors aim to meet [increased] fiduciary responsibilities, they will need tools like ours to properly disclose the risk of investments to their clients. Reading an annual report has become impractical for humans, which is why we created technology to help us do it. Our technology leverages the top accounting and finance minds in the business to parse thru 1,000s of pages in just seconds."
Trainer noted that his company has parsed more than 75,000 annual reports in past decade or so, yielding "the best repository of accounting loopholes in the business," a collection that is used to help alert its users to companies' distorted analyses.
VNC research confirms that New Constructs' sector competitors include incumbents Compustat (S&P-McGrawHill) and Worldscope (Thomson Reuters).
In addition to leading New Constructs, Trainer is managing partner of Brentwood-based Novo Capital Management LLC, which manages a hedge fund. Less than six months ago, in September 2014, Novo Capital affiliate Novo Fund reported it had raised nearly $12.2MM.
Asked about advisors for his two businesses, Trainer said New Constructs receives legal services from Nashville attorney Derek Hughey; and, the company relies on Franklin-based Puryear Hamilton Hausman & Wood for accounting services. Novo, meanwhile, is advised by attorneys with New York- and Washington, D.C.-based Seward & Kissel, and by accountants with Elliott Davis Decosimo.
Trainer and others have recently participated in efforts by Nashville's FinTech community to explore local FinTech venture-development strategies. He participated in a Feb. 13th panel discussion on the topic, which was sponsored by VNC and FT Partners, the Bay Area Fintech banker.
Trainer also is a member of the Investor Advisory Committee of the Financial Standards Accounting Board (FASB); and, he regularly contributes to coverage and columns published for readers of Forbes, Barron's and other financial media.
Prior to forming New Constructs, he held a series of senior analyst and analyst positions with Credit Suisse First Boston and Epoch Partners, according to his LinkedIn page.
Trainer, his wife and their three young boys live in Davidson County. VNC