The three founders Franz Liebermann, Marius Siegert and Marc Schmid (from left to right)

Sub Capitals Wants Fair Financial Markets Through Artificial Intelligence

Sub Capitals is a Munich-based fintech startup that wants to make artificial intelligence (AI) available for private investors in financial markets. The three founders are building a platform that follows an AI-optimized investment approach. Co-founder and CFO Franz Liebermann answered our Seven Questions.

Munich Startup: Who are you and what does Sub Capitals do? Please introduce yourselves!

Franz Liebermann, Sub Capitals: We are Marius Siegert, Marc Schmid and Franz Liebermann, the founders of Sub Capitals. At Sub Capitals, we’ve been developing automated trading systems with help from machine learning since 2017. The aim is to develop a long-term, fair product for private investors to achieve a greater degree of equality in financial markets as well as financial inclusion.

The first fundamental building blocks were put in place by Marius Siegert. Seven years ago, he had already started actively using his first trading strategies on the stock market. As a result, he saw the obstacles and problems involved in investing in financial markets very early on. He therefore made it his goal to reduce those obstacles for all of us, and wanted to make it possible to autonomously invest in financial markets with AI.

Marius’ first attempts and strategies along with continuous optimization of the investment approach remain the foundation of our product to this day. As one of his first comrades-in-arms, Marc Schmid shared the Sub Capitals vision from very early on. He had already gained extensive experience in the first machine learning projects in the industry. And through his master’s program in information technology and mechatronics at the Technical University of Munich, he was able to adapt his expertise to focus on financial markets. As their venture became increasingly tangible, they found support among their circle of friends early on, from me, Franz Liebermann. I had already started my own software company and was looking for a new challenge. I supported them with setting up the company in the beginning and then finally got entirely on board with the venture.

The three of us now sit side by side with our other team members in our office on Lothstraße at the Strascheg Center for Entrepreneurship.

Sub Capitals wants to make AI more widely accessible in the financial sector

Munich Startup: What problem does your startup solve?

Sub Capitals: Groundbreaking results have been achieved with artificial intelligence in recent years, and the technology still has enormous potential. And yet AI is still only accessible to very few people. Especially in the financial industry, only institutional investors have access to it. This has many reasons, such as a lack of know-how and resources, or too little time in the everyday lives of private investors. The result is a major imbalance that puts private investors at a disadvantage.

Sub Capitals has therefore made the democratization of AI for private investors its mission to counteract the inequality in financial markets and give the general public better and fairer access to AI in the financial industry.

Munich Startup: But that’s nothing out of the box!

Sub Capitals: It’s true, artificial intelligence has been used for quite a long time in analysis processes and trading decisions by institutional investors, such as banks and companies. But we’ve seen very little development in the private domain. There are some initial approaches from ‘robo advisors,’ which integrate algorithms based on machine learning into their investment decisions.

But systems based exclusively on AI are only available in the form of certificates or as hedge funds. The option of managing your own portfolio directly through an AI trading system is still in a very early stage, which is why it isn’t established on the market yet.

What we’re seeing more and more is that the neo-brokerage era is significantly advancing the first approaches for the democratization of financial markets. Neo-brokers are a new generation of online brokers who significantly lower the barriers to entry to investing by providing easily accessible and affordable offers. The most well-known examples in the German-speaking realm are Scalable Capital from Munich, or Trade Republic, who also have their roots in Munich.

This is where we at Sub Capitals see a good opportunity to make investing based on this technology accessible to a broader audience in the future by providing a product based solely on artificial intelligence and our neo-investing approach.

A solid foundation after many failed attempts

Munich Startup: What have been your three biggest challenges so far?

Sub Capitals: The first issue to mention here is team building. Building a diverse portfolio is easier than bringing different individuals together in an evolving team! We’re extremely proud of our team, which is still relatively small and includes six highly motivated entrepreneurs, and is also constantly growing.

The most difficult and time-consuming issue was building our existing AI trading system. We developed the system based on scientific knowledge with consistent iterations and many failed attempts. It now constitutes the solid foundation of our entire endeavor.

The third issue to mention is the continuous search for cooperation partners. We decided on a B2B business model so businesses can offer customers the service on their existing account. We’ve already been able to win over the first cooperating banks and brokers with our idea. However, we’re looking for further strategic partners who we can work with to make our trading strategies, and with them AI, accessible to their customers.

Munich Startup: Where would you like to be in one year, and where in five years?

Sub Capitals: For a little over a year now, our algorithms have functioned according to our expectations. Just a few weeks ago, we successfully implemented our brand launch, and we’re aiming for our first round of financing in six months. Looking ahead one year, we’ll already be managing the first customers’ funds with our AI. And in five years, our neo-investing will be established as a new market segment in the realm of ‘private investors.’

Munich Startup: What do you think about Munich as a startup location?

Sub Capitals: Due to our distinctly science-based approach and its development close to educational institutions, we were fundamentally influenced by our studies at TU Munich and the Hochschule München University of Applied Sciences. As a result, we see the founding location and ecosystem in Munich as extremely promising for our endeavor and can very much see ourselves continuing to expand our Europe-wide network from here.

Munich Startup: Risk or security?

Sub Capitals: Without having to think about it for long: always security! We’re not big fans of risk, which is why we let our AI take care of all of our trading decisions on financial markets. AI can make an entirely rational decision that’s calculated to be the best one. Especially when considering our future customers, we always put security before risk in order to establish a lucrative service for everyone over the long term.