UK Fintech Startup Synthera Raises €1.7M to Transform Financial Risk Analysis

A fintech startup based in the UK, Synthera has succeeded in raising €1.7 million in pre-seed funding. Motive Ventures topped this round while seeing significant participation from other investors, including Entrepreneur First, Transpose Platform, KDX, BuenTrip Ventures, Robin Capital, Angel Invest, and several notable financial sector angel investors.

Founded in 2024, Synthera is focused on revolutionizing the way financial institutions approach market risk by using synthetic data to overcome the limitations of traditional financial models. According to Mariana Barona, Co-Founder and CEO of Synthera, new funding will help bring the company’s solution to market, allowing investment teams to make more informed, data-driven decisions when navigating complex market risks.

For many decades, traditional financial risk management tools, including both Monte Carlo simulations and historical data models, have been a core method of analysis for the financial sector. However, these tools are limited in their capacity. They hardly capture sudden, dynamic market shifts and frequently overlook non-linear correlations, leaving investors open to unforeseen risks. Synthera aims to bridge the gaps by using synthetic data, creating more accurate and adaptable risk models.

Synthetic data refers to the artificially generated datasets that mimic the properties of real-world data without using actual market data. This allows Synthera to generate realistic, diverse market scenarios that reflect a wide range of potential market conditions. Unlike traditional models, which usually rely on historical data, Synthera’s technology can simulate future market dynamics, offering a more dynamic, flexible approach to risk management.

The company’s technology works with the financial instruments, including equities, fixed income, commodities, and foreign exchange. With its synthetic data, Synthera provides financial institutions with their ability to identify “tail risks.” Tail risks are rare, extreme events that would have a deep impact on portfolios. The technology also unearths the non-linear patterns that exist within the market while allowing the backtesting across thousands of unique trajectories, which could not have been simulated by more traditional models.

Michael Hock, Partner at Motive Ventures, emphasized the importance of Synthera’s solution in addressing a fundamental challenge in the financial sector. He explained that historical data and traditional models often fail to account for the complexities of modern financial markets. By integrating generative AI into its approach, Synthera is offering financial institutions a tool to improve risk management and optimize portfolio outcomes. “We’re proud to back such a visionary team,” Hock said.

These funds will be used to speed up the development of the Synthera product, grow the size of its engineering and data science teams, and form strategic collaborations with leading financial institutions. Synthera will pilot its technology with hedge funds, asset managers, pension funds, and banks. The company has ambitions to become a leading player in financial risk management through facilitating better forecasting and managing future risks for firms.

Such innovation would transform how financial institutions make risk assessments. Synthera’s technology would shift from static historical datasets to synthetic data, enabling firms to anticipate and identify potential risks before manifestation. This is necessary in today’s fast-moving and volatile financial markets, where the usual traditional models fail to provide a more comprehensive view of the risk.

Synthera’s also able to produce thousands of simulated scenarios of market conditions, which affords much more granular insight into potential risk factors on which firms can make better-informed decisions. For instance, hedge funds and asset managers could run their portfolios through Synthera’s platform stressing them out under a range of possible market conditions, like sudden crashes or unexpected shifts in interest rates. This would enable them to have a much deeper understanding of their exposure to such events and adjust the strategies accordingly.

The financial sector has increasingly recognized the need for advanced risk management tools, as markets have become increasingly complex and unpredictable. Thus, Synthera’s solution is being sought after with the aim of improving on risk mitigation strategies and equipping firms with what they need to navigate today’s markets. By using synthesized data to mimic future market dynamics, Synthera is providing a more forward-looking approach toward risk management than the traditional models used, which reflect past performance.

As the company develops its product further and expands its team, Synthera also expects to gain a position among the leaders in the shift of the financial industry toward more advanced risk management techniques. Pre-seed investment will give it a head start to take its innovative technology into the market and sharpen its platform. Synthera’s synthetic data-driven approach could redefine how financial institutions approach risk analysis and will enable firms to predict market shifts with better accuracy and confidence.

source: eu.startups