Pipe co-founder raises $6M for CapStack, a bank-to-bank market geared toward ‘de-riskifying portfolios’


CapStack, a startup fashioned by Pipe co-founder Michal Cieplinski, has raised $6 million towards its effort to construct an built-in working system for banks.

In easier phrases, Cieplinski described CapStack because the “first bank-to-bank market,” giving the establishments the flexibility to share and have visibility into each other’s portfolios.

Cieplinski began CapStack in March with Tzvika Perelmuter and, curiously, says they managed to boost the capital virtually instantly after launching the corporate and proper earlier than the meltdown of Silicon Valley Financial institution — not solely pre-revenue, however pre-product.

“One thing I noticed is that banks are islands,” Cieplinski advised TechCrunch in an interview. “Every financial institution operates by itself and there’s no connectivity…They usually’re all looking for a capability to diversify capital sources.”

Small and mid-sized banks specifically, mentioned Cieplinski, are restricted by geographical footprint with most of their clients residing close to a financial institution department.

“We don’t essentially notice how severe that’s,” he mentioned. “Particularly as a result of small and mid-sized banks are usually not funding banks — they don’t get cash aside from deposits.”

What Cieplinski envisions constructing would give not solely these banks, however bigger monetary establishments as properly, a approach to make investments deposits and loans and “de-riskify their portfolios.”

“Over 60 banks agreed to affix the platform even earlier than the primary line of code was written and a single worker was employed,” Cieplinski mentioned. “And with that I went to VCs.”

Fin Capital, which additionally was a lead investor in Pipe, led CapStack’s spherical, which additionally included participation from Alloy Labs, Cambrian Ventures, Cowboy Ventures, Future Excellent Ventures, Gaingels, Selah Ventures, Uncorrelated Ventures and Valor Fairness Companions.

Cieplinski transitioned from his function as chief enterprise officer to a senior advisor at Pipe at the finish of February, a couple of months after the choice financing startup made headlines for the remainder of its co-founders stepping down on the identical time amid a hunt for a brand new, “veteran” CEO. Pipe, which had raised greater than $300 million in funding and was as soon as valued at $2 billion, was the goal of quite a few allegations surrounding its use of capital — all of which the corporate vehemently denied.

With CapStack, the manager — who additionally co-founded Fundbox and is a former SVP of LendingClub — says he desires to present monetary establishments the flexibility to host on CapStack’s platform the loans that they originate and the flexibility for different banks to take part in these loans, borrow/transfer one another’s deposits and to see what different property one other financial institution might need that they will put money into to allow them to “diversify threat and publicity into different non-correlated property.”

Within the banking sector, defined Cieplinski, there are establishments which originate nice property, reminiscent of loans, however might not have sufficient capital to fund them — reminiscent of small and mid-size banks. Then there are bigger banks, which sit on huge deposit bases however have “no manner of originating loans” as a result of they don’t have relationships on the bottom.

“My TAM is successfully all of the banking methods in America, sub the High 30. However even a few of the prime 30 banks need to be patrons of those property too,” Cieplinski mentioned. 

Fin Capital founder and managing accomplice Logan Allin, who has joined CapStack’s board, mentioned in a written assertion that he believes CapStack has the chance “to dramatically enhance options for financial institution threat administration at a crucial time for the soundness of our nation’s banking infrastructure.

“Banks nonetheless depend on legacy know-how for managing dangers round their steadiness sheets, and to revive confidence for shoppers, industrial clients, regulators, and different stakeholders, they completely want an improve,” Allin added.

Cieplinski is focusing on the fourth quarter or first quarter of 2024 to carry out the primary beta testing with design companions.

“Everyone knew what was taking place with SVB — it had an over-concentration of property,” he mentioned. “Each single one of many banks that need to be part of the platform are additionally over-concentrated in some property — a few of them have an excessive amount of deposits, they usually don’t know the way to deploy it, however they should present the return to their depositors to the shoppers.”

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