Olsen’s connections with European banks helped in arranging both types of sales. They hadn’t heard of Oanda before, but they were excited by the prospect of getting several hundred orders a day, and offered to do the trades at very thin spreads. Oanda also approached Canadian banks, and Stumm now laughs at the reception he received: The Canadians quoted spreads that were much larger. “They just don’t get it and still don’t,” he says.
Employees were another chronic source of stress for Stumm. One Thursday in August, 2006, three members of Oanda’s 15-person technical team in Toronto quit, including two of the firm’s original four engineers. They were dissatisfied with their pay and the constant pressure. Stumm figured it was necessary to review the computer code for the entire trading system. He offered the remaining programmers $10,000 apiece if they could do it within a week. The first week was frenzied, with the remaining team working pretty much around the clock. But it then took years to completely replace all the previous code.
Despite that bump, Oanda kept growing, and Stumm and Olsen were eager to raise more capital. In early 2007, some serious U.S. private equity investors started sniffing around the company. So the duo hired Allen & Co., a boutique Wall Street investment bank, to seek out offers. When asked why Oanda didn’t approach any Canadian banks or investment dealers for help with financing, Stumm smiles. “I still don’t think Canadian banks think we’re for real.”
That September, Oanda announced that a consortium of big-name U.S. investors had invested $100 million in the company for a 20% stake. That meant that the firm as a whole was worth about $500 million. The group was led by Silicon Valley venture capital giant New Enterprise Associates (NEA), and included Legg Mason, T. Rowe Price and Cascade Investment LLC, which holds most of Bill Gates’s personal investments.
As is usually the case with big venture capital and private equity investments, the investors got representation on the company’s board. Krishna Kolluri, a general partner at NEA, was appointed as a director. “We look forward to a long and successful relationship with this outstanding team,” he said in the press release announcing the deal.
Kolluri got the “successful” part of the relationship right, but not the “long.” Second-stage private investors typically try to help whip a growing company into shape and polish it up for an IPO, and part of that job often involves managing the egos of the founders.
Olsen and Stumm ought to have realized that their days running the firm were numbered. That said, it was hard to see what was coming, both within Oanda and in the marketplace. The company has continued to expand its business and innovate. In 2008, Oanda announced that it had “broken the sound barrier,” by lowering its standard spread on U.S. dollar/euro trades to less than one-100ths of a percentage point. It is the largest retail forex dealer registered with the U.S. Commodity Futures Trading Commission, with about 17% of the U.S. retail currency trading market (by number of clients) as of last October.
But 2007 turned out to be the peak in global financial markets generally. Although Oanda was not slammed directly by the collapse in stock markets and real estate values in 2008 and 2009, the forex business has become tougher and more competitive. And the market for tech IPOs has cooled. Oanda may be worth substantially less than $500 million in the current climate. Many of the online forex trading upstarts that launched around the same time it did have gone out of business.
Last May, both Olsen and Stumm stepped down. Olsen has other businesses in Europe that needed more attention. Stumm was getting tired of running the firm with the board looking over his shoulder, insiders say. Kwamina Duker—who prefers being called just K in all company communications—was named as Stumm’s successor. Duker had been managing Oanda’s Asia-Pacific division since 2008, and had headed up Deustche Bank’s Asia-Pacific electronic foreign exchange business before that.
Stumm declines to discuss the specifics of his departure. Long-time friends and associates say he seems to be mellow these days, although his mood can still sometimes shift quickly from jovial and charming to arrogant and dismissive. When asked what he’ll do next, there’s no definitive answer. “I neglected the university, so I’m getting more involved in research,” he says. “I don’t see myself doing another start-up, but I love the entrepreneurial environment, and I love giving advice.”
If and when Oanda goes public and Stumm cashes out, he will have a fortune. The sidelines are often the calmest and most rewarding place for a visionary to end up.