Not Boring Memo: Composer

the problem was: there isn’t an easy way for a relatively savvy investor to get the type of market-beating risk-adjusted returns that hedge funds and their clients have access to.

Robinhood, on the other hand, gives people control... maybe too much control. And so far, people are loving it. Robinhood has added 3 million accounts since the beginning of COVID, and those accounts are trading frequently.

Robinhood right now is like a hot Blackjack table. Everyone is winning, and the people who are losing are losing so spectacularly that it heightens the experience for everyone. When the table cools down -- markets don’t normally stay on runs like the one they’re on right now -- and things become a lot less volatile, a lot of the thrill-seekers will... See more

Composer’s mission is to close the gap in return on capital through the power of well-designed software. Today, an adult with world-average wealth grows his or her wealth by just 2.1% per year while the top 1/(20 million) grow their wealth by 6.4% every year!

Then, Composer will make money the old-fashioned way: by charging customers for the product. Customers can paper trade and back test for free, but will pay $30/month for brokerage integrations that allow them to trade real money.

Wealthfront has stalled out around $21 billion in assets under management (AUM) as it faces stiff competition from well-funded incumbents, and it still loses a lot of money. It charges only 0.25% of every dollar it manages for accounts with over $5,000.

To acquire early customers, Composer is building a free backtesting tool to piggyback on an existing behavior: namely, sharing backtests on Reddit and in more verticalized finance networks like CommonStock, and group chats, where investment banter happens today.

But there is a hole in the market for more sophisticated investors and those who are ready to graduate from Wealthfront and Robinhood. Just as many B2B SaaS companies took inspiration from consumer software -- the “consumerization of enterprise SaaS” -- Composer is building a prosumer investing product with a consumer-quality UI and professional-gr... See more