Japan’s deep learning startup Alpaca raises $1M to launch AI-based forex trading platform



See the original story in Japanese.

AlpacaDB (hereafter called ‘Alpaca’) is based out of San Mateo (Silicon Valley) and Tokyo, developing web services and apps leveraging artificial intelligence (AI) technologies. The company announced today that it has fundraised US$1 million from NEC Capital Solution, SMBC Venture Capital, Archetype Ventures (investment arm of Archetype), Shinji Kimura (noted Japanese serial entrepreneur and angel investor) and Bip Systems (Tokyo-based system integration company).

Alpaca will use the latest funds to develop a trading platform using the deep learning technology called Capitalico. The platform started its beta testing in early October aiming for public release in January next year. Our readers may recall that the company launched an image recognition and labeling platform called Labellio back in June, where their team told us that they have developed Labellio as a sort of MVP (minimum viable product), and are currently developing another monetizable service based on the technology that Labellio uses. So Capitalico is that product.

Alpaca is the successor to Ikkyo Technology, which had developed image filtering and matching service Categorific, a startup born out of Movida Japan’s 5th batch incubation program in 2014. They subsequently incorporated Alpaca in the US to better serve the global market.

Prior to founding Ikkyo Technology, Alpaca co-founder and CEO Tsuyoshi Yokokawa worked for Lehman Brothers as a trader where he was in charge of marketing and structuring financial products in the capital markets team. It seems his experience at that time is the basis of the new service development.

Yokokawa explained:

Forex traders typically use a software to analyze buying and selling decisions. However, MetaTrader, one of major softwares for us, is only compatible with Windows and requires programming in MQL (MetaQuotes Language) to operate.

It is said that only 1% of all traders can write codes in the language, so most traders need to ask someone else to program the codes to use the software. Other SaaS (software as a service) platforms such as Quantopian and QuantConnect also require users to program their algorithm. I wanted to change this situation.

Based upon image recognition deep learning technology, the Capitalico platform allows users to easily find a forex chart from an archive since 2001 as well as a live forex chart which is similar to what you have on hand. We have been told that image recognition deep learning technology can be efficiently adopted into fintech services as well as medical image analysis. I assume that the Alpaca team intends to level the forex trading field through this platform so that not only experienced trading professionals like investment bankers but also everyone can use it.

A snapshot of the Capitalico platform under development (click to enlarge)

When deep learning-based chart matching or analysis of forex charts are available for everyone, it will allow you to adopt the experience of star traders, who are now succeeding in investment, your trading operations, sort of like renowned chefs sharing their secret recipes with housewives online.

Yokokawa added:

There have been star traders. But in order to help them pop up, we need a scheme like business development or funding to support them regardless of however good their trading performance or reputation is. When ordinary people can gain access to investment criteria or a decision-making algorithm of star traders, we will be able to create a marketplace which will be like selling cooking recipes.

Under this scheme, if you make a profit using an algorithm developed by star traders, you would be able to pay a commission to them so that they would be pleased to open up their secrets to users. It would enable even amateurs to trade in a professional manner from day one.

There are 50 million forex accounts are being used for all 300 million retail investment accounts around the world. That’s why Capitalico is focused on forex trading first, before expanding to stocks, futures, ETFs (exchange traded funds) and other investment products.

In order to perform smooth service development, Matt Luckett, former general partner at a US hedge fund, joined Alpaca as advisor, while Masakazu Masujima (Mori Hamada & Matsumoto law firm), an attorney who is familiar with the fintech industry, was appointed a legal advisor. The Alpaca team is planning to attend Finance Magnates London on November 2nd and 3rd, which is an annual fintech-focused conference taking place in the global fintech hub.

To my knowledge, there are some startups with similar ideas in Israel and Europe in this sector. But I’d like to take another occasion to discuss their potential competitiveness.

Edited by “Tex” Pomeroy