Quantopian is a Boston-based company that aims to create a crowd-sourcedhedge fund by letting freelance quantitative analysts develop, test, and use trading algorithms to buy and sell securities.. Its primary competitors are other open source trading platforms mainly Numerai, QuantConnect, & WorldQuant.
History
Quantopian was founded in 2011 by John Fawcett and Jean Bredeche. Over its history, Quantopian has raised $48.8M from investors such as Spark Capital, Khosla Ventures, Bessemer Venture Partners, Point72 Ventures, and Andreessen Horowitz. As of July 2016, the company consisted of 45 employees, up from 20 employees in January 2014 and 12 in January 2014. As of August 2018, the company had over 210,000 members compared to 85,000 in July 2016, 20,000 in May 2014, and 10,000 in October 2013. In July 2016 Steven A. Cohen, chief executive officer of Point72 Asset Management, announced his firm will put up to $250M under the direction of algorithms managed by Quantopian and in addition make an investment in Quantopian itself. The company has funded individual algorithms with as much as $50,000,000. In February 2020 Quantopian announced it would return investors' money due to the underperformance of its investment strategies.
Business model
The company has a two-sided market business model: The first side consists of algorithm-developer members who develop and test for free, focusing on algorithm development for factors that can be added to Quantopian's offerings to institutional investors. All members can compete against other members in a series of contests called the "Quantopian Open." Anyone can join the site and enter the contests: no particular educational qualification nor work experience are required. Quantopian provides them with free data sources and tools, largely built in the Python programming language. The second side is institutional investors. Serving them will become the main focus of Quantopian. These members have their investments managed by the winning algorithms. Successful developer-members can get a royalty or commission from investor-members, who profit from the former's algorithm used with larger resources > $1M. Board member Andrew Parker claims that Quantopian is aiming for modest number of users and a large average revenue per user ; more like Bloomberg than Facebook. The business model capitalizes on a trend jokingly dubbed "the latest DIY craze" by the Wall Street Journal. Previously the company provided brokerage integrations to individual investors. These integrations were continued by the community who started the open source project In 2018, the company announced the availability of an enterprise software product for asset managers, in partnership with FactSet.
Technology
Quantopian's web-based product is written in Python. Parts of the company's technology are available under an open source license, in particular, their backtesting engine dubbed "Zipline." The uploaded algorithms of users remain the trade secrets of the individual. The company claims that its employees are forbidden from accessing the submitted algorithms and that protection is ensured by "alignment of interests," meaning that all users would leave and the company collapse if that trust were ever violated. The company does however reserve the right to review the performance and other outputs of user's algorithms. Allowing users to run arbitrary code on its servers poses some unusual cyber-security challenges.
In 2020, Quantopian maintains an all male leadership team. In 2015, Quantopian's Director of Products, Karen Rubin, used the service in a study that showed that a hypothetical portfolio of investments in women-led companies would perform three times better than an investment in an index fund based on the S&P 500 over the same period. Her study was inspired by a Credit Suisse’s Gender 3000 report, specifically that "Companies with more than one woman on the board have returned a compound 3.7% a year over those that have none..." and yet paradoxically only "12.7% of boards had gender diversity."
Writing for Wired magazine, Fawcett proposes that Quantopian be used as a MOOC-like platform for higher education.
Awards
Quantopian was ranked #98 on Forbes' 2014 "List of America's Most Promising Companies." Also in 2014, Mike Hogan of Barron's called it "Best site for quants."
