Ancoa post-mortem: Spend was over four times greater than revenue

Dan Barnes

Ancoa, the troubled market surveillance firm that went into administration on 5 May 2017, had an average monthly spend of £450,000 in 2017, or £5.4 million annually, against projected annual revenues of £1.3 million, according to the administrators report filed on 7 June 2017.

In the first quarter of 2017 the firm was reported by several customers to have been struggling to get its system to work effectively, which may have contributed to an apparently unforeseen and significant rise in costs from the end of 2016. The firms administrators report that it was “over reliant on outsourcing and contractors which added to costs.”

Ancoa had driven revenue from £80,000 in 2013 to £1.1 million in 2016, the same year it won several awards from the industry press. In September 2016 it secured bridge funding of £2 million from associates intended to be used until it broke even, which was predicted to happen at the end of 2017.

However just five months later in March 2017, at which point the firms had 20 clients, “the company started to suffer from a severe cash flow shortage and began to receive pressure from supplier and clients,” according to administrators Leonard Curtis.

It had outstanding debts of £275,000 at this point, relating to upfront payments, with average monthly costs of £450,000. The firm’s management realised it had insufficient funds to pay its suppliers or payroll for the end of April, and in a meeting on 14 April 2017 resolved the firm was insolvent.


Worried customers

Customers had reported to The DESK in late March that Kurt Vandebroek had stepped down as CEO. The administrators noted that after his appointment in 2014 and an initial £2 million of fund raising that June, “sales figures grew year-on-year but expenses grew even faster, both on the product and the operations side of the business.”

By the time he stood down, concerns had grown that the firm’s surveillance system suffered from performance limitations.

Having spoken with a number of clients, several voiced concerns to The DESK that in some cases the surveillance platform was struggling to handle data sent to it by clients.

Claims include:

  • The system failing to process large T+1 and historical datasets in full
  • The real-time service struggling to process the required number of transactions per minute

Considerable work is said to have been put into overcoming performance issues. One client reported that Ancoa “work very hard and are very focussed” in trying to resolve the alleged problems. Issues were not universal; one client reported no problems and success in processing high volumes of data.

However there were concerns about the resources required in order to re-engineer the system, which would have contributed to the firm’s rising cost base.

In response to the reports an Ancoa spokesperson said on 10 April 2017, “We are aware of allegations made against the performance of the Ancoa platform in the market and we are taking all allegations very seriously. We have taken proactive steps to address any concerns or questions our customers may have and welcome any and all communications.”

The statement went on, “Our technology and processes have been audited by one of the big four consultancy firms to confirm that current allegations in the market are either fabricated, outdated or based on taking information out of context.”

Shortly after that statement was given, four days before the firm was resolved to be insolvent, co-founder and chief technology officer, Andrew Louth, was said by sources to be leaving the firm.


Cinnober steps in

Cinnober, the market technology provider, stepped in on 5 May 2017 to acquire the intellectual property, IT system, contracts, records, business information, goodwill and other effects of the firm for £265,280, transferring them to a newly-formed entity, Cinnober Surveillance. Administrators noted that Cinnober also took on “a significant amount of employee wage arrears that had accrued, and paid £34,568 to critical suppliers during the due diligence period”.

Co-founder of Ancoa and chief marketing officer Stefan Hendrickx moved across to the new entity, as did existing Ancoa clients including Convergex, MarketAxess, Linear Investments, Energie Steiermark and Cenkos Securities, according to Cinnober.

Veronica Augustsson, CEO of Cinnober, said at the time, “The [Ancoa] development team is extremely good and the technology behind it is very good. We are 100% committed to continue to serve the customers and to meet their expectation on what was sold. There will be a three-month clear-up process focussed on delivering existing commitments and then we will have a refresh on sales, with a stable product and a more organised way of running a company.”

Ancoa was founded by Louth and Hendrickx in 2010. In September 2015 it closed a Series-A funding round, which had brought its total investment to £4.145 million, with investors in the firm including Buysse & Partners, LRM Capital, SmartFin Capital, Velocity Capital and Ancoa’s management team as well as a number of high-net worth individuals and family offices.