Fintech startup Clear Street raises $270 million at a $2 billion valuation

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Clear Streetwho says it is building “modern infrastructure” for capital markets, has raised $270 million in the second tranche of a Series B funding round at a valuation of $2 billion.

Growth limited company Prysm Capital led the funding, which brings the round to $435 million. New York-based Clear Street raised first tranche of the round in May 2022 at a value of $1.7 billion. Prysm also led the first tranche, which was the company’s first round of funding raised from external investors. Until last year, Prysm had operated with only capital provided by the co-founders.

The company was founded in 2018 with a mission “to replace the outdated infrastructure used across the capital markets,” starts with a premium brokerage platform for institutional investors, said Chris Pento, co-founder and CEO.

“The US public securities industry, which moves trillions of dollars a day, still relies on mainframe technology from the 1980s. These legacy systems are rooted in manual processes and siled data, resulting in costly errors and expensive technical debt,” he said. “For many firms, replacing these outdated systems will be like removing the engine from an airplane in midair. It is time-consuming and difficult to carry out with fragmented technology.”

Clear Street built its cloud-based prime brokerage and clearing system from the ground up – including integrations with central clearinghouses and development of APIs – with the goal of “maximizing returns while minimizing risk and costs” for its clients by providing them “everything they need to clear, deposit and fund US stocks and options,” according to Sachin Kumar, co-founder and CTO.

Those clients include roughly 200 institutional-sized investors and hundreds of less active trading entities, according to COO Andy Volz, who declined to be named and said those clients “prefer anonymity.” In the long term, the company’s aim is to serve a range of investor types across multiple asset classes on a global scale.

Image credit: Clear Street

Clear Street executives declined to provide hard revenue figures, but noted that over the past year, the company has seen the number of institutional clients on its platform increase by 500%. Meanwhile, daily transaction volume increased by more than 300% and funding balances increased by nearly 150%, they said. The company claims its primary clearing platform processes 2.5% of gross notional U.S. equity volume, which executives say amounts to about $10 billion in daily notional trading value of U.S. stocks.

The company makes money by charging fees for transactions and financing of public market securities.

“We feel this structure is a better fit than other options in the current markets,” Volz said.

Currently, The company has around 400 employees today, up from around 325 in April 2022.

In the past year, Clear Street launched capital injection and repo businesses. It also made what it describes as “key hires in Europe and in the derivatives space.” The company plans to use its new capital to expand into new markets and asset classes, as well as expand its product offering to support the clearing needs of market makers, which it sees “as a major growth area.”

Matt Roberts, co-founder and partner at Prysm Capital, believes Clear Street is unique in terms of its “differentiated user experience, real-time risk analytics and tools, and scalability” of the platform.

Other backers of the company include NextGen Venture Partners, IMC Investments, Walleye Capital, Belvedere, NEAR Foundation, McLaren Strategic Ventures and Validus Growth Investors. In February, Clear Street announced that it had received one undisclosed strategic investment from IMC Investments, the venture capital arm of IMC, a proprietary trading firm and global market maker.

In total, Clear Street says it has $700 million “in capital,” including the external raise. Before taking in equity investments, Clear Street says it raised debt from insurance companies and regional banks. Prysm has a minority stake in the company.

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