The following interview is a conversation we had with Daniele Grassi, CEO, Axyon AI SRL, on our podcast Category Visionaries. You can view the full episode here: Daniele Grassi,CEO of Axyon AI: $5.5 Million Raised to Power the Future of Financial Markets with AI

Daniele Grassi
Good, good. Thanks, Brad, for having me. 

Brett
Yeah, no problem at all. Let’s go and just kick off with a quick summary of who you are and a bit more about your background. 

Daniele Grassi
Yeah, sure. Well, I’m software engineer by training. Kind of got stuck in the love of AI and finance from pretty early age. I started programming that when I was like eight, and one of my first programs was actually a simulation of a stock market. So that was probably scary saying that eight year old, but anyway, led me to then studies software engineering. But then while I was university, I found my first company to commercialize one of the software that me and one of my friends developed. Kind of a standard story. Finished university, then dedicated myself to that company with the long term idea to. I invest a lot in research and development at the crossing between AI and financial markets, which always been my two passions. And we did just that. 

Daniele Grassi
That led us to then start axion in 2016 when we saw a big opportunity coming in, which was the disruptive growth of deep learning and machine learning, advanced machine learning techniques at the time, which were mainly used for computer vision and kind of problems. What we saw was that they could have tremendous impact also in financial markets, of course, especially in trying to predict or make sense of financial markets. But you couldn’t simply take what you use in computer vision and use that. It’s a way more complex problem. So we saw the opportunity to build a new kind of foundational technology, specialized and designed for applying, employing deep learning and advanced machine learning techniques specifically for financial time series, in particular financial markets, and focus on getting the most about it without falling into the traditional traps of overfitting or data leakage. 

Daniele Grassi
The usual stuff that happens when you try to use machine learning, complex stuff. Now, we are a 30 people company. We’re based in Modena, which is in the north of Italy. It’s mainly known for brands such as Ferrari, Maserati, the ceramic industry, and the food, of course. So we are trying every day to make it known for AI. But actually, this is even not that far from reality in the sense that we are lucky enough for this area to be incredibly engineering focused due to the long term presence of this type of high quality brands in the automotive and ceramics industry. So that really pushed the whole environment to be incredibly ahead in terms of academia and research in software engineering, which led to artificial intelligence when that came back from the AI winter in the last ten years. 

 

Daniele Grassi
So now Modera is actually one of the central vaccines for AI in Europe now. 

 

Brett
AI is obviously everywhere today. What was it, November 2022? And chat GPT really came out the world. Now it seems like a big deal. It’s here to stay. It’s not going anywhere. Was it so obvious to the market in 2016? Take us back eight years ago. What were those conversations like when you were talking about AI with customers, with investors, and just other folks back then? Yeah. 

Daniele Grassi
Well, the first question we always got was very simple, what is AI? And what AI means in your name? Why are you calling yourself something AI? Right. So it was completely a different world back the time, and were just coming out from the so called AI winter, where not many of us remember that. But Aihdenhe was hyped also probably 30 years ago, in the eighties and nineties. He had some hype cycles as well in the past, when, unfortunately for that time, the computational power and techniques weren’t up to the task to maintain the promises and the imagination of many technologists of the time. So all AI concept fell back into a sort of winter for several years. 

Daniele Grassi
In 2014, 2015, new techniques came up, and in that moment, they merged and combined with the incredibly increased computational power that was appearing, which is funny enough, actually was appearing mainly driven by graphics and video games needs in terms of graphic computation. That also combined with increased amount of data generally available to companies and made suddenly all this possible. So suddenly it was really possible to extract a lot of value using machine learning techniques from large amounts of data. So when went out at that time, it was really early, and I remember going into some financial companies where they were saying, yeah, well, we know AI, we use machine learning, we use neural networks. And were asking them, yeah, but, okay, neural networks are from the seventies, which kind of neural networks are you using? 

Daniele Grassi
And they were telling us, yeah, well, two neurons, four neurons. And it was, I mean, a shock for me, because deep learning, machine learning, were talking about hundreds of neurons, several layers, so incredibly more complex systems. So we had to recover the dissatisfaction and disillusionment that the industry had from previous hypes in AI. And that was just the first obstacle. And actually, I think that things really changed just as you mentioned in November 2022 when tragedy appeared. Yeah, that really changed people’s mind. 

Brett
And what did that feel like for you in November 2022? Did you realize that at the time, in the week after it was released, did you say, okay, wow, if things are about to change, this is about to become big and our business is maybe going to get a little bit easier. Like, was it obvious to you right away? 

Daniele Grassi
No, it wasn’t obvious because at the time it wasn’t like it is today. Even Jackie, right. HlGPT 3.5 was good, but it wasn’t to the level of the new version, which is really another level. So it doesn’t really hit the point where I would said it would have had so a disruptive impact in the perception of people. That for me became apparent later with, I think was made last year, something like that, when other specific application of structure, PTA, the form of agents, starts to come up, because that really demonstrates to me the point where that reached in terms of, let’s say, emulating human reasoning, which is in my mind also the threshold that it has to surpass for people to get really engaged in it and to start even treating it differently, which means, at least for our business. 

Daniele Grassi
Then in retrospect, also the fact that suddenly AI started becoming something that is not simply found in movies, it’s not something that you hear about, it’s something that you can touch, you can talk to it. That really changed the dynamics of understanding of what an AI is and that we saw in the company after the following months. So I would say in the last twelve months, we saw really a change in tone, where before we found skepticism, we now found different emotions, such as even curiosity, but also, well, fear sometimes in terms of what can this lead to, but all this kind of new emotion that we are finding in the market when we talked about AI are actually way more conducting to being open. 

Brett
To innovation when it comes to building trust with customers. How did you build trust? If you’re selling into financial services, to asset managers, to hedge funds? I have to imagine that this is high stakes. Something goes wrong, the technology gets something wrong, that can cost them a lot of money. What do you do to build that trust that they’re okay to take that risk with a startup? 

Daniele Grassi
Well, when I started with Axonai, a very successful ex startup founder who became millionaire told me, yeah, you are getting into a ten year business. This will not be a short ride. And he was right. I didn’t understand it at the time, but it was right exactly. Because of the challenges that you are mentioning. In the financial sector, the stakes are high. And in large institutions, sometimes it’s better for the people working in it not to make mistakes rather than go beyond expectations in terms of performance. So they are generally varying when they have to adopt or they evaluate adopting and new technologies and innovation. So in our case, this meant hitting on two main elements. One is technological and scientific rigorousness. Because obviously you need to be really solid on what you do from a technological standpoint. 

Daniele Grassi
The whole process that you employ, that project you build, it has to be real. You cannot really sell smoke, okay? Because yeah, if you sell small and you ride the hype, then you may have short term success, but then if your reputation gets a hit, you’re done. So this is something that we realized from the beginning, and it wouldn’t have been even in our nature to fake until you make it right. But we had to make it before really be sure and confident enough to go out. And that’s one. And the second is start to build a track record as soon as possible. 

Daniele Grassi
So even starting small, collaborating a lot with the customers so that they get comfortable with your expertise, with your skills, with your professionalism, and work with the customers to create the first application of the technology in the form of solution, which then becomes a product. And that has been our way and it has worked. 

Brett
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Brett
When it comes to marketing this product, what are some of the approaches you’ve taken to marketing and what’s the general marketing philosophy? 

Daniele Grassi
So our sector is it entails a complex sale with a long sales cycle and so you don’t have a quick feedback in terms of your marketing activities because it takes quite some time to acquire the lead and then to move it through the pipeline, et cetera. So it’s a slow process. It is important to, in my opinion, and this is what we did to work on two areas in a very balanced way. On one side of the positioning of the company, which in our case is as always been tied to strong professionalism and scientific rigorousness. So I mean, the customer need to feel that you are sound in what you say about an advanced technology that they may not know yet or even be scared of. 

Daniele Grassi
So positioning in a certain way to ensure that also the positioning matches how you present subden directly to clients as a solid and robust potential provider. And then the lead generation, it comes in several ways in our sector it is important. You cannot really get a lot of traction if you are no one and you are not known in the business. And this is obviously a problem for our startups. So you need to be in touch and have already connected and important players of the field in your team to generate the connections and networking then lead you into the circle, let’s say. In our case that meant participating to well, at the very beginning an acceleration program run by ING in Amsterdam, which obviously got in the end ing, supporting us from a fundraising perspective. 

Daniele Grassi
And then like vouching for us somehow in terms of bringing us into the financial world. Then the same we did with UniCredit, which came on board as a second large investor in our company. So that really helps. And apart from shareholders and investors, advisors really play a role. I think it is very important for a startup to get sort of sponsorship, let’s say, from relevant person in the industry they’re selling to. And the advisor type of collaboration is often very useful in that respect, in our case later on. And we have as advisors people like Gericho Pruvka who is president of work wand and Spin, Goldman Sachs co head of Quant. So big career, or Massimo Tosato here in Italy, who has been president and CEO several very large and very important asset management companies. 

Daniele Grassi
So these kind of people really help you getting the pedigree somehow simplifying your marketing effort. 

Brett
Im sure in the early days there wasnt a lot of competition talking about AI, but id have to imagine theres probably a little bit more noise now around AI. I would guess that maybe some competitors have popped up. Im sure their technology is nowhere near as good as yours, but I would imagine theres probably some competition. How are you thinking about competition and how are you positioned in the market? 

Daniele Grassi
So yes, actually to say that the competition on the general AI level starts to come up quite early on in our journey. We kept differentiated profile from the beginning, focusing strictly on not being a consultancy company, doing consultancy work even if we develop a proprietary core technology, trying to focus on a specific segment of the market, starting from investment management, then focus specifically in one part of the investment process, which is in our case the addition of alpha, so outperformance to the investment strategies and differentiating ourselves. 

Daniele Grassi
Also because given that focus, we accrued very specific knowledge and expertise in that segment, which is very helpful, not just obviously in the creation of the value and the products as well, but also in terms of positioning, because we now, when we find competitors or other companies like pitching, maybe the same prospect, they often are not as focused as us, not as technology and value focused as us, and not scientifically sound and with a long track record as us. So being focused from the beginning of the company, right on a very specific problem, a very specific part of the value chain of the clients and getting clients early on, creation, traction and track record, that is what differentiates us today. 

Daniele Grassi
And now I always say that actually today the biggest problem from us in terms of competition are not other companies, but are not other companies that say, are serious players in Syria, but more the, let’s say the smoke again, AI smoke that is out there because now every company says they are doing some kind of AI. So that really makes the message more difficult to come out clear because you sometimes are greeted with even a little slice of skepticism that comes from hearing everybody saying they’re using AI. So you have to differentiate yourself in the depth of your knowledge and technology. But that’s the hardest bit, I guess, just, I mean, finding yourself with people that have accrued a small skepticism, not in AI, but in providers of AI solutions, because they are hearing everybody saying they’re doing AI. 

Brett
What about fundraising lessons? What did you learn about fundraising throughout this journey? 

Daniele Grassi
Fundraising? Well, first, it is true that it’s easier to get fundraising, to get funds and investments in certain parts of the world rather than in others. It’s true that being Europe is way more difficult than being in the US. It’s true that being in Italy is particularly difficult. So it is important to think about it also in terms of incorporation and the company structure, because some company structures are easier to invest in rather than other, especially in southern Europe. So that’s the first lesson. Be very mindful in how you set up your company, where do you incorporate it, etcetera. That is important because that really makes a difference in how easy you will get money afterwards. 

Daniele Grassi
Then it is important to, I know this is something that, almost a cliche, but it’s important for startups, especially at a very early stage, not to judge potential investor just by the money that they are providing to the company, because especially the first ones are the ones that can make or break, not just in the short term, but especially in the mid, in medium and long term. If you get investors at the beginning that get inevitably a larger share because they are early investors, but you got them just because they are to provide biggest buy for your buck, but then they are not providing you with any additional value, any additional networking, reputation, or on the contrary, they get to be very like intrusive, et cetera, then you’re really setting yourself up for a difficult journey. 

Daniele Grassi
So really do your due diligence on the investors, not just from the foremost endpoint, but also in terms of their reputation, their views, how they will provide additional value to your company, how they want to be involved. This is everything. All this is very important to have it clear from the beginning. 

Brett
Final question for you, let’s zoom out three to five years into the future. What’s the big picture vision look like? 

Daniele Grassi
Well, for me, so in the end, what we do is providing an AI component to the investment process that adds on alpha, so performance to the strategies of our clients, to the investment strategy of our clients. When we started, there was practically no one using AI. There were obviously quantitative approaches through investment management. For me, in five years, AI would be an essential and core component of any investment strategy, not just the quant based ones, but also discretionary ones, simply because if you won’t have it, you will start from the back. From the beginning. It would not just be a matter of like having AI to get energy, would be a matter of having AI to stay in the game. And this will happen very early, but we will see the full blown effect of this in five years. 

Daniele Grassi
And it’s the same as in other areas, other industries like were seeing with chalgpt. Now, for some areas, it’s like big edge to being able to implement correctly. LLMs, we can get big cost savings, increased user interactions and satisfaction, but yet also for that area in five years, I mean, that would be the base from where you start. It will just be an edge that someone has. 

Brett
Amazing. I love it. Well, we are up on time here, so we’re going to have to wrap before we do. If there’s any founders that are listening in, that want to follow along with your journey, where should they go? 

Daniele Grassi
Well, they should go to our website, which is axion AI, axief, y o n dot AI, and look for us on LinkedIn. 

Brett
Amazing. Well, thank you so much for taking the time to chat with us today, especially given that it’s now 07:00 p.m. In. So we appreciate it and hope you have a great weekend. 

Daniele Grassi
Great. Thanks for having me and have a great weekend. You too. 

Brett
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