Capitolis, the financial services technology provider established by former Traiana CEO and head of EBS Brokertec, Gil Mandelzis; former CEO of Thomson Reuters, Tom Glocer; and Igor Teleshevsky, also formerly of Traiana, says it has secured two rounds of financing, a Series A investment of $20 million led by Index Ventures, and a prior $9 million Seed round led by Sequoia Capital.
Capitolis is designing multiple new products and services to address capital markets constraints, initially in equities and foreign exchange. The first three products to be rolled out in the coming months are Capitolis Switch, Capitolis Novation and Capitolis Finance.
The Switch product will bring together clients, balance sheet providers and trade processors to allow the most efficient providers of execution and balance sheet services to leverage their strengths and to capture new opportunities. Mandelzis, who is CEO of Capitolis, says the firm has been working with three firms and intends to roll out the product officially in the coming months.
Capitolis Novation could provide significant capital efficiencies for the FX market as it will help the market to automate what is currently a very manual workflow in FX novation, thereby, the firm says, enabling true risk transfer. Capitolis Novation will help mitigate inefficiencies linked to reserved regulatory capital, tightening client credit capacity, and costs resulting from the manual process.
Finally, in the first three products likely to be rolled out, Capitolis Finance utilises what it terms a unique, market risk-flat investment structure, in which it unites the demand for attractive short-term investment returns with the desire of global banks to improve their client trading franchises. “This catalyses the use of modern, technology-driven solutions to transform some of the largest and most important global financial services markets,” the firm says.
“We believe there is a significant and untapped opportunity to better distribute capital through the system which can be unlocked by the appropriate products, skills, experience and focus that Capitolis brings,” says Mandelzis. “We have seen a very positive response from our partner banks, institutional investors and clients who understand the benefits of the approach that we are leading. And we have assembled an extraordinarily capable team with a range of skills and talents to help achieve this.
“I strongly believe in the power of the shared economy and the innovation that fintech can bring to capital markets,” he continues. “Balance sheets are important to banks’ financial markets businesses but how they are currently managed is less than optimal, there are constraints when demand is high and spare capacity when it is low. We believe we can help them manage their balance sheet in a different fashion through a move towards on-demand financing and leveraging. This will enable them to better service their clients.”
Mandelzis stresses that the financing comes at a critical time for the firm as it strives to deliver its first products. “Our management structure is largely in place, we have combined people with a deep understanding and relevant experience in capital markets with those who equally really understand and have helped drive transformation in the peer-to-peer and fintech space,” he explains. “This is not just about FX and equities – it across the wider global markets.
“The timing of this investment is great because we can leverage our structure and really focus on developing meaningful products. Our concepts resound with people and there is a lot of interest in what we are doing, but we have to execute and prove their value. If we can show people our ideas are effective and really work, we will, I believe, be laying the foundations for serious growth.”
Capitolis’ management structure sees Justin Klug, formerly of Credit Suisse and Bank of America Merrill Lynch, Joseph Tarditi, former managing director and head of US short rate sales at Bank of America Merrill Lynch, and David Lamb, formerly of Morgan Stanley and Citi, join Mandelzis. Also at the firm are financial technology veterans Illit Geller, formerly co-founder and CEO of TradAir and head of business development at Traiana; and Ben Tobin, formerly EMEA sales director at EBS BrokerTec and previously also at Traiana.
Certainly, the new investors in Capitolis are bullish over its prospects. “Capitolis has a bold vision, rethinking the way markets operate,” says Jan Hammer, partner at Index Ventures, a venture capital firm that has backed leading fintech firms including Adyen, Funding Circle, Robinhood and TransferWise. “Capitolis has the potential to have a lasting positive impact on the capital markets, increasing the availability of financing while reducing the associated cost.”
Meanwhile, Haim Sadger, partner at Sequoia Capital, which also invested in Traiana, adds, “Gil is the type of founder who can transform industries, and we’re thrilled to be in business with him again. We believe Gil’s vision for Capitolis can reshape the capital markets and unlock huge potential.”
For Mandelzis, the investment also provides the luxury of time. “Change takes time, I understand that, having been through it in previous positions,” he says. “This investment means we can focus on developing areas of the business that others may overlook, all of which helps us build a stronger overall offering. We want to build a product set that helps people on all sides manage and operate their businesses more effectively.”
Glocer, who is executive chairman of Capitolis, is optimistic, saying, “In my long experience in financial markets it is rare to find a company that solves both a focused set of complex capital markets problems and at the same time presents a substantial long-term growth opportunity. We have assembled an exceptional team who bring the perfect capital markets, technology and start-up experience to deliver on this ambition.”
In welcoming the investment, Mandelzia concludes, “Sequoia Capital and Index Ventures have been supportive partners who work with ambitious entrepreneurs, understand technology disruption and most importantly our vision. We’re grateful for their investment which will enable us to further develop our product offering and strengthen our resources to take Capitolis to the next stage in its strategic ambition.
“We wanted to work with partners who both shared our vision and had an equal or more experience in supporting transformative businesses, ideas and technology and in Sequoia and Index, we have found that.”