In the realm of finance, many of the firms you hear about are developing solutions for both consumers and corporations. Today, a company hoping to serve the most important financial services users of all – the major banks and how they transfer money — announced a large amount of investment to expand on that potential. Capitolis, which is developing new technology to solve how money is moved around in the capital markets in order to speed up and simplify how banks deal with one another, has secured $110 million in a Series D financing valued at $1.6 billion, according to the US/Israeli business. With this current round, the business has now raised a total of $280 million.
Capitol already has over 100 significant banks on board, and it claims to have transacted over $60 billion “notional” from over 30 investors and optimized over $13 trillion in deals using its “compression and novation engine” – all of which are up over the previous year, when it previously raised money. More directly, its technology has been put to use in a very timely scenario: last week, it announced that “a large network of global banks” were using its compression technology to reduce their exposure to Russian rubles — a move related to global sanctions on Russia and its financial institutions following its unprovoked attacks on Ukraine.
Building the solution to limit ruble exposure was a first for the firm, and it was something it did in response to these banks approaching it. “Capitalism was able to decrease these huge exposures while also promoting financial soundness and stability for the benefit of the whole capital markets system,” the company stated. That high-profile, time-sensitive feature of Capitolis’ work emphasizes the startup’s market position and explains why it’s getting the kind of money it is.
This round is led by Canapi Ventures, 9Yards Capital, and SVB Capital, with a16z, Index Ventures, Sequoia Capital, S Capital, Spark Capital, Citi, State Street — a name that’s been in the news a lot lately for its investigations into Russian oligarchs and the elusive, global movement of their money — and J.P. Morgan also participating. With this investment, former US Under Secretary of the Treasury for Domestic Finance and Counselor to the Secretary of the Treasury Jeffrey Goldstein and former UK Chancellor of the Exchequer George Osborne will join Capitolis’ board of directors. (They are a senior consultant at Canapi and a founding partner at 9Yards, respectively.)
The case of the Russian currency exemplifies the problem that Capitolis has identified and is working to solve, and it is one that is inherent to any legacy financial service. Capital markets are focused on large sums of money handled through foreign exchange, equity swaps, and other major capital transactions typical of big banks. However, at the end of the day, many of the systems in place that big banks use to make these transactions are based on old infrastructure, with money moving through multiple transaction points that can cause delays and, thus, costs.
Indeed, the problem is so serious that when Russia’s withdrawal from the SWIFT banking network was originally considered, many experts predicted that it would be impossible to implement in a timely manner. While this may be true, the Capitol is solution demonstrates how you may start the process in a fresh way and move it forward more quickly. Its solution “allows 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 limit market growth,” according to the company.
The important term here is “democratizing,” and it’s an intriguing approach considering other recent advancements in the field of decentralized banking. Capitolis’ approach is based on proprietary algorithms, according to which institutions such as banks, hedge funds, and asset managers can delete, transfer, or construct trading positions by partnering with other financial institutions, resulting in a greater pool of money and credit lines. Capitolis’ CEO, Gil Mandelzis, stated in a statement, “We are now going to the next phase of growth for Capitol is as we grow exponentially year after year and bring additional innovation for capital markets.” “The capital marketplace firm has already transacted $60 billion in notional from over 30 investors two years after its start.
Capitolis’ compression and novation engine has optimized over $13 trillion in deals for over 100 financial firms. Our goal is coming to fruition, and we’re excited to supercharge our market in the months and years ahead.” It’s worth noting that Mandelzis and Tom Glocer co-founded the firm (the ex-head of Thomson Reuters who is a director at Morgan Stanley and also invests and co-founds other fintech startups).