The Harvard MBAs Trying To Upend Stock API Investing

It’s not that Y-Combinator hates MBAs. The Silicon Valley-based accelerator just doesn’t prefer teams of them. Still, when Steve Zheng and Olivier Porte — both MBAs from Harvard Business School — were prepping for their interview for placement in this summer’s Y-Combinator class of startups, they went to HBS entrepreneurship professor Jeff Bussgang for some advice.

“Jeff told us, ‘Don’t wear your HBS jackets to the interview. They hate MBAs,'” Zheng says.

Of course, during the vetting process before selection, Y-Combinator decision-makers found out both Zheng and Porte were going to be graduating with MBAs from HBS. But that didn’t stop them from selecting the duo’s startup, Alpha Vantage, which provides “affordable, low-friction” API access to financial market data. Y-Combinator’s acceptance rate is believed to be around 1.5% — much lower than acceptance rates at HBS and Stanford’s Graduate School of Business, Zheng points out.

A TWO-YEAR VACATION, OR AN OPPORTUNITY TO ‘BUILD SOMETHING’

After graduating from MIT with bachelor’s and master’s degrees in computer science, Zheng was accepted into Harvard Business School’s 2+2 program. As a program manager at Microsoft’s Silicon Valley office, he spent the first two years fighting the uphill battle to make Bing a better search engine than Google. “You know, Microsoft Bing. It’s the search engine that nobody uses,” Zheng quips. “So it was an uphill battle for two years.”

Zheng says he knew he wanted to work on a project while completing his MBA before arriving in Boston. “I thought to myself, ‘Instead of taking a vacation for two years, why don’t I try to build something?'” Zheng, 28, recalls.

Dabbling in stocks and cryptocurrencies as a hobby, he noticed a pain point.

“Apart from Bloomberg, which charges thousands of dollars per year for this subscription, there is simply no affordable or accessible stock data feeds for individual investors like me that want to use data to make their investment decisions,” Zheng points out. So he decided to make one.

HBS’ ROLL IN THE ALPHA VANTAGE’S DEVELOPMENT

Alpha Vantage’s technology helps software engineers and investors make savvy and data-driven decisions with financial market data in stocks, currencies, cryptocurrencies, and quantitative trading signals. Developers create digital assets for iOS and Android apps, which in turn, help investors make decisions. Zheng launched the company in March of 2017 and they currently have more than 100,000 registered users making more than 300 million API requests on a daily basis. If users are making high amounts of API requests, they are charged a small fee, which is how the team plan on monetizing the venture.

Zheng credits HBS’s growing entrepreneurship ecosystem for much of his venture’s early success. “HBS is becoming more and more intertwined with the rest of campus,” he says, noting the school’s joint MS program with the engineering school. In particular, Zheng says he got significant help from technical experts that regularly come from the engineering school to HBS to coach students. Also, Zheng says, he was able to intern at Twilio during the summer between his first and second years, which was assisted by HBS’s career office.

CLOSED-DOOR TUESDAY DINNERS WITH TOP EXECS

The internship combined with Zheng’s budding coding skills helped the team place second at last springs New Venture Competition at HBS. It also helped them catch the eyes of Y-Combinator. The accelerator’s aversion to MBAs comes down to two main themes, Zheng believes. First, he says, they generally don’t think MBAs know the difference between market research and building the product. Second, even if MBAs know how to build products, they generally have troubles finding the technical partners to team up with.

These were two themes, Zheng says they needed to overcome during the interview process, which included a lengthy Skype interview and then a 10-minute interview at Y-Combinator’s headquarters that included just three questions. Zheng says the team interviewed in the afternoon and by 6 p.m., they had heard back that Y-Combinator would accept them and offered $120,000 in investment for 7% of company. The team had to give them an answer by that night.

Zheng says Y-Combinator has a very clear philosophy on what founders should and should not do. “They force us to say no to any investors over the next three months,” he says. “They believe fundraising is a huge distraction that keeps you from building the company.” So the team has been focusing on just that. Y-Combinator’s Tuesday night dinners have also been particularly helpful, Zheng says. Each Tuesday, execs from companies come in to speak to the teams. So far, Zheng says, they have listened to execs from high profile Silicon Valley-based companies. “We’re not even allowed to bring significant others to these dinners,” Zheng says.

TAKING MORE ‘MBA-ISH CLASSES’

An MBA education has taught Zheng and the team how to do market research, and formulate and test hypotheses based on that data. But, Zheng says, if doing it again, he would take more classes outside of the entrepreneurship-focus. For example, taking more “MBA-ish classes” that would have assisted more in the growth and sales that they are now trying to do.

As for launching a company while in B-school, Zheng says it’s not for everyone.

“An MBA itself is a negative cash flow,” he points out.

But, if there are minimal student loans and climbing the career ladder is not an aspiration, launching a venture while earning an MBA can be a good thing, Zheng says.

“It’s a good option if you do need to pay back student loans or aspire to go up the career ladder.”

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