Clear streetwho says it is building “modern infrastructure” for capital markets, raised $270 million in the second tranche of a Series B funding round at a valuation of $2 billion.
Growth stock company Prisma capital led the funding, bringing the round total to $435 million. New York-based Clear Street raised the first installment of the round in May 2022 at a valuation of $1.7 billion. Prysm also led that first tranche, the company’s first round of funding raised from outside investors. Until last year, Clear Street only worked with capital from the co-founders.
The company was founded in 2018 with a mission “to replace the aging infrastructure used in the capital markets”, for starters a prime brokerage platform for institutional investors, said Chris Pento, co-founder and CEO.
“The US public securities industry, which trades trillions of dollars a day, still relies on mainframe technology from the 1980s. These legacy systems are anchored in manual processes and isolated data, resulting in costly errors and costly technical debt,” he said. “For many companies, replacing these aging systems would be like removing the engine from an aircraft in flight. It is time consuming and difficult to implement with fragmented technology.”
Clear Street has built its cloud-native brokerage and clearing system from scratch – including integrations with central clearing houses and developing APIs – with the goal of “maximizing returns while minimizing risk and costs” for its clients by providing them with “everything they need”. must clear, hold and fund U.S. stocks and options,” said Sachin Kumar, co-founder and CTO.
Those clients include about 200 institutional investors and hundreds of smaller active trading entities, according to COO Andy Volz, who declined to name names, saying those clients “prefer anonymity.” In the long term, the company’s goal is to serve different types of investors across multiple asset classes globally.
Clear Street executives declined to provide hard revenue numbers, but took note over the past year, the company saw the number of institutional clients on its platform grow by 500%. Meanwhile, daily transaction volume increased by more than 300% and funding balances by nearly 150%, they said. The company claims its primary clearing platform handles 2.5% of gross nominal U.S. equity volume, which equates to approximately $10 billion in daily nominal trading value of U.S. equities, according to executives.
The company makes money by charging fees for transactions and financing securities on the public market.
“We feel this structure is more aligned than other options in today’s markets,” Volz said.
currently, the company has about 400 employees today, up from about 325 in April 2022.
In the past year, Clear Street launched capital raising and repo activities. It also made what it describes as “most important hires in Europe and in the derivatives space.” The company plans to use its new capital to expand into new markets and asset classes and expand its product offerings to support the clearing needs of market makers, which it sees as “an important area of growth”.
Matt Roberts, co-founder and partner at Prysm Capital, believes Clear Street is unique in terms of its platform’s “differentiated user experience, real-time risk analysis and tools, and scalability”.
Other backers in the company included NextGen Venture Partners, IMC Investments, Walleye Capital, Belvedere, NEAR Foundation, McLaren Strategic Ventures and Validus Growth Investors. In February, Clear Street announced that it was a secret strategic investment from IMC Investments, the venture capital arm of IMC, a proprietary trading firm and global market maker.
In all, Clear Street says it has $700 million “in capital,” including the outside raise. Prior to raising equity investment, Clear Street says it has raised debt from insurance companies and regional banks. Prysm retains a minority stake in the company.
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