A company co-founded by former Thomson Reuters boss Tom Glocer and backed by two of the technology industry’s largest venture capital firms has raised another $40m, as it pitches to help the world’s biggest banks operate more efficiently. New York-based Capitolis has attracted almost $70m from investors since it was launched two years ago by a group of former trading and financial tech executives.
The company aims to streamline the way banks and asset managers manage large and open-ended trades on capital markets. Its platform connects buyers and sellers to speed up trading processes, and to free up capital and collateral that are required to meet rules that have been toughened since the financial crisis. The investment underlines how private investors are continuing to pour money into ventures promising to shake up financial services. Funding for the fintech sector was $8.9bn in the third quarter of the year, said CB Insights, making it one of the busiest on record.
Investors have raised a total $24.6bn for new companies so far this year, but most of that has been focused on digital banking and wealth management rather than capital markets. Capitolis’s services include finding the best bank to process and manage a deal, quickly moving client assets from one legal entity to another and so-called compression, a technique designed to lower the gross value of derivatives positions by cancelling offsetting trades. In some markets, such as foreign exchange options, these processes have tended to be carried out manually, using spreadsheets and emails.
More than 50 banks and hedge funds, including HSBC, Deutsche Bank, Société Générale, BlueCrest, Brevan Howard and Citigroup already use the platform. Capitolis has recorded transaction volumes with a notional value of more than $1.5tn, with much of the business in FX options and forwards. Gil Mandelzis, Capitolis’s co-founder and chief executive, told the Financial Times that the sums so far were just a fraction of the available market. The fintech plans to move into equity swaps, he said. “There are trillions of positions and financing positions that can be optimised,” he said. “For banks, their balance sheets are a precious commodity. The fundamental rules of markets have been rewritten and now the question is what it would look like in the future.” Mr Mandelzis, a former executive at interdealer broker ICAP, said the new funds will be used to spend on technology and hiring new employees. Spark Capital and SVB Capital took part in the Series B fundraising. They were joined by existing backers S Capital, Sequoia Capital and Index Ventures.