This Is Only the Beginning

At our last all-hands meeting we gathered the Clear Street team together and made it official: Thanks to everyone’s hard work, we raised $165 million in our Series B funding round. This is the first time since Clear Street’s inception that we have raised external equity and now puts our valuation at $1.7 billion.

That’s an unbelievable accomplishment in just over three years since Clear Street’s founding. We’ve grown to more than 300 team members and process more than $3 billion in trades on an average day. Not to mention, our balance sheet is really strong. We found ourselves in the unique position of investors approaching us, rather than the other way around.

As we’ve built a new way of doing business for prime brokerage, we’ve realized there is a massive opportunity to help a wider range of investors, from retail to hedge funds, and everything in between. And to get there, we had to make the right decision, and our decision was to answer the calls of the investors who’d been reaching out. The investors who have now put their weight behind us have recognized that we solve one of the most important problems in the financial world, which is providing access to capital markets.

Engineering talent was critical to us landing the investment, but even more so was having the balance of technical excellence and deep financial expertise, a combination that is extremely rare.

Founded in Mutual Pain

When Sachin Kumar, our CTO, and I joined together as co-founders of Clear Street, we knew each other from across the proverbial aisle. We both came from finance, but in very different realms. I had spent the majority of my career as an operator, at companies like Knight Capital, today known as Virtu Financial. Sachin is an amazing engineer and came from founding a series of start-ups focused on trading. We knew the difficulties of getting and granting access to the markets firsthand.

All of which tells us that there is a uniform cause for all this pain. The legacy systems that currently allow professional traders, retail investors, investment advisors, hedge funds, brokers, fintech apps, and everyone else participate in financial markets — they are still running on archaic COBOL mainframes. That system is outdated. The purpose they were built for is no longer daily reality. This is where Clear Street comes in.

Prioritization Is Essential for Growth

Whenever you see COBOL mainframes, whether it’s nuclear reactors, the IRS or financial infrastructure, that usually means there’s a giant problem — and one that is complex and difficult to solve. The current systems can’t be improved; they can only be maintained. These are inherently fragile systems that aren’t up to the tasks required by modern investors. The costs of maintenance are passed on to customers.

A big question we faced from the start was prioritization. We elected to focus on clearing, perhaps one of the most challenging areas of capital market operations. Clearing is critical to the function of our financial markets, ensuring that buy and sell transactions are matched and processed. Despite its importance, clearing systems run on legacy technology. Clearing is a function that, for decades, has suffered from a lack of innovation and investment to improve slow, outdated systems. We knew that we could solve the challenges that the team has seen with clearing. We had a choice to make: should we focus on making great gains in one area, or first lay the groundwork and build for all client groups, from institutions, to fintechs, to active traders?

We elected to start focused, and then span out more broadly. Sachin and I spent the bulk of our time in the institutional prime brokerage world, so we started there. That segment became our first step toward the goal. This puts us on the path to serve every type of investor, in every market, trading any product — that’s the goal. We want sustainable market access for everyone.

From a business growth perspective, we find it helpful to delineate the different segments we’re serving. We have three main segments driving our work right now:

Institutions: Hedge funds, family offices, market-makers, and other high-volume participants that need a full prime brokerage offering, including execution, clearing, risk, financing, and reporting.

Active Traders: Individuals and small trading companies that need professional trading services. A subset of our prime offering.

Fintech Apps: Developers creating apps that need clearing, risk, execution, PaaS via APIs.

Access, Speed, Service

Our first product supporting institutional investors is redefining what it means to work with a prime broker. Clients can onboard in days instead of months, access accurate and consistent data through our real-time data tool, and have everything they need to trade U.S. equities and options.

The tools we have built for prime brokerage can be easily translated to serve the other market participants we outlined above. Right now, we’re working on building out our platform to include new geographies and asset classes, as well as making sure every type of investor has fast, reliable, and secure access to the capital markets.

Strong Sales Outlook

As of this writing, we have hundreds of institutional prospects, several fintech apps in the pipeline and we’re bringing on many active traders each month. They’re all witnessing the sort of change that Clear Street brings to the prime brokerage space. We regularly hear positive feedback from our clients who cite the benefits of a faster and more nimble platform.

Looking Forward to Gateway Status

Unicorn status isn’t enough. We aspire to what we think of as “gateway” status. Clear Street now has the opportunity to be the gateway to the capital markets. The recent investment gives us the tools to build toward that vision.