The Upstarts Are Coming

Brady Dougan is starting a merchant bank.  “What’s a merchant bank?”, you might ask if you didn’t know about financial services prior to 2000.  Merchant banks were mostly consolidated after the repeal of Glass-Steagall.

Dougan was the former CEO of Credit Suisse. He successfully navigated the stormy waters of the financial crisis and kept CS out of trouble.

Merchant banks aren’t interested in dealing with consumers.  They only want to deal with businesses.  In some cases, they will accept equity instead of getting debt repaid in cash.  They work with customers that are too small for public markets.  But, those same customers are too big for things like venture debt.

Due to Sarbanes-Oxley, there are a lot of businesses out there like that.

Is he going to be successful?  Who knows?  He has the right sort of capital behind him.  He also has an advantage that other competitors didn’t have  even five years ago.  Technology.  In business to business financial technology, we are starting to see the unbundling that other industries have seen.  Just like media and other industries people are familiar with, finance has several walled gardens that can be busted open.

If Dodd-Frank gets repealed or severely watered down, it will make the marketplace more competitive.  That will help Dougan.  If Sarbanes-Oxley gets repealed or watered down, that will help him again.

Dougan sees the opportunity and so do his investors.  We see it too.  The last capital markets technological revolution manifested itself in Chicago.  It’s happening again.