Capitolis valued at $1.6B after raising $110M for new tech to update capital markets trading

A lot of the startups you tend to hear about in the world of fintech are building solutions for consumers and businesses. Today, a startup that’s aiming to serve the biggest financial services users of them all — the big banks themselves and how they move money — is announcing a big round of funding to double down on that opportunity.

Capitolis, which is building new tech to address how money is moved around in the capital markets to speed up and simplify how banks transact with each other, has raised $110 million, a Series D that the U.S./Israeli company said values it at $1.6 billion. This latest round brings the total raised by the startup to $280 million.

Capitolis is already working with more than 100 big banks, and it says that it has transacted over $60 billion “notional” from over 30 investors and has optimized over $13 trillion in trades through its “compression and novation engine” — all numbers that are up over the last year, when it last raised funding.

More directly, its tech has been put to work in a very timely scenario: Last week, it announced that its compression technology was being used by “a large network of global banks” in order to reduce their exposure to Russian rubles — a move related to global sanctions on Russia and its financial institutions after its unprovoked attacks on Ukraine.

Building the tool to reduce ruble exposure was a first for the startup, and it was something that it built specifically after getting approached by these banks.

“Capitolis was able to reduce these large exposures and promote financial soundness and stability for the benefit of the whole capital markets system,” it said.

That high-profile, urgent aspect of Capitolis’ work underscores the startup’s position in the market and points to why it’s attracting the funding from the caliber of investors that it is.

Canapi Ventures, 9Yards Capital, and SVB Capital (all prolific fintech investors) are leading this round, with a16z, Index Ventures, Sequoia Capital, S Capital, Spark Capital, Citi, State Street — a name that’s also been in the press a lot lately for the investigations it’s been doing into Russian oligarchs and the elusive, global movement of their money — and J.P. Morgan also participating.

Notably, with this funding, Jeffrey Goldstein, who is the former U.S. Under Secretary of the Treasury for Domestic Finance and Counselor to the Secretary of the Treasury; and George Osborne, former U.K. Chancellor of the Exchequer, are also joining Capitolis’ board. (The two are respectively a senior adviser at Canapi and founding partner at 9Yards.)

The Russian ruble example underscores the challenge that Capitolis has identified and has been addressing, and it is one that is somewhat endemic to any legacy financial service.

Capital markets focus on giant sums of money handled through foreign exchange, equity swaps and other major capital transactions typical of big banks, but at the end of the day, a lot of the systems in place that big banks use to make these transactions are based on old infrastructure, with money moving through many transaction points that can create delays and, therefore, costs.

Indeed, the problem is significant enough that when Russia’s unplugging from the SWIFT financial network was first being discussed, many said that realistically it would not be possible to truly enact quickly.

While that might well be the case, the Capitolis solution underscores how you can take a different, new approach to begin the process and get it moving faster. It describes its solution as one that “enables banks, investors and institutional clients to expand their reach through a collaboration platform and gateway to connect opportunities with a democratized model of institutional capital, safely removing barriers that would otherwise restrict growth in the market.”

Democratizing is the key word here and it’s somewhat of an interesting approach, given the other developments we’ve seen in the world of decentralized finance. Capitolis’ solution is based around proprietary algorithms, which it says let institutions like banks, hedge funds and asset managers eliminate, move or create trading positions by collaborating on those positions with other financial institutions, which in turn means a larger pool of capital and bigger credit lines.

“We are now moving to the next phase of growth for Capitolis as we grow exponentially year after year and deliver increased innovation for capital markets,” Gil Mandelzis, Capitolis’s CEO, said in a statement. “Two years after launch, the capital marketplace business has already transacted $60B+ notional from over 30 investors. Capitolis has optimized over $13 trillion in trades through its compression & novation engine, serving over 100 financial institutions. Our vision is becoming a reality and we look forward to super-charging our marketplace in the months and years to follow.” To note: Mandelzis co-founded the company with Tom Glocer (the ex-head of Thomson Reuters who is a director at Morgan Stanley and also invests and co-founds other fintech startups).

“We are thrilled to be partnering with Gil, Tom and the entire Capitolis team as they build the next generation of technology infrastructure to help support the safe, efficient growth of the capital markets,” said Canapi Ventures’ Dan Beldy in a statement. “At Canapi Ventures we are focused on great leadership teams and category defining innovations that help create a healthier, more robust and more inclusive financial ecosystem. We look forward to working with the Capitolis team as they continue to grow and create a company of great legacy and impact.”

Osborne added, in his own statement: “At 9Yards Capital we’re impressed by Capitolis and the innovation it is bringing to the task of making our financial system more secure and our capital markets more efficient.”

from https://techcrunch.com/2022/03/22/capitolis-valued-at-1-6b-after-raising-110m-for-new-tech-to-update-capital-markets-trading/