Capstack Technologies’ founder and CEO Michal Cieplinski believes he has the antidote to the Silicon Valley Bank meltdown, and Citi Ventures agrees. Citi Ventures has invested an undisclosed sum in Capstack, a marketplace designed to help banks avoid the perils of overconcentration. The platform’s primary focus is on commercial real estate loans.
“Citi Ventures is committed to investing in companies that have the potential to drive our industry forward,” said Jeff Flynn, director of Citi Ventures. “Capstack Technologies’ innovative approach could fundamentally change the way smaller banks manage risk and grow their businesses, and ultimately could create opportunities for Citi to engage differently with this sizable segment of the financial services ecosystem.”
“Securing this strategic investment from Citi Ventures, forming a distinguished advisory board, and welcoming experienced executives from community and regional banks collectively mark a pivotal moment for Capstack Technologies,” Cieplinski said. “These milestones validate our vision and accelerate our mission to revolutionize banking technology for the community.”
The news continues a good run for Capstack, which celebrated a $6 million raise last summer. Its investor list includes Fin Capital, Alloy Labs, Cambrian Ventures, Cowboy Ventures, Future Perfect Ventures, Gaingels, Selah Ventures, Uncorrelated Ventures and Valor Equity Partners.
Capstack adds advisors, key staff
Alongside the Citi Ventures funding, Capstack announced an advisory board consisting of Trey Maust, chairman of Lewis & Clark Bancorp; Patrick Kennedy, executive chairman of TransPecos Banks; and Dub Sutherland of Kennedy Sutherland LLP.
“As a member of the advisory board for Capstack Technologies, I am deeply impressed by the calibre of talent and expertise we have assembled to guide this groundbreaking technology,” Kennedy said. “Having the right people involved is crucial in steering such innovative solutions. The experiences and insights our team brings are essential in shaping a technology that has the potential to redefine the banking sector.”
Capstack Technologies recently added David McArdle as head of banking relationships and Randy Riffle as head of customer and platform operations. McArdle is charged with streamlining processes for C-suite executives in community banks. Riffle will coordinate transforming operational efficiencies and focusing on positive customer experiences.
Capstack tackled the problem from personal experience
Cieplinski is a comparative old hand in the fintech space. A lawyer by training, he is a member of the bar in New York, California and Brussels. Once the managing director and lead counsel at BNY Mellon, Cieplinski was the COO, CCO and general counsel at Fundbox, serving as the first United States employee and leading the company through several funding rounds. After two years as an SVP at Lending Club, Cieplinski co-founded Pipe, seeing it grow into a billion-dollar-plus company.
Along the way, he’s seen some issues financial institutions have had with accessing diversified capital sources. Those experiences led him to found Pipe, which offers frictionless embedded financing for business owners on partner platforms while providing entrepreneurs with other capital sources.
That’s where the Capstack story starts. Cieplinski said as much as 70% of Pipe’s buy-side were small- and medium-sized banks. Many of those institutions are community-oriented, with an urban radius of five miles or a rural one of at most 15. It’s a more homogenous customer set than national banks, which don’t solely rely on walk-in traffic.
“What it brings is a complete lack of diversification or a concentration of assets,” Cieplinski said.
How Capstack solves the problem
Capstack is the cure. The integrated bank-to-bank loan marketplace allows banks and fiservs to increase profitability and mitigate risk through asset diversification. It offers a secure and automated operating system that sits on top of a bank’s core system and allows them, for the first time, to trade loans via integrations.
Cieplinski said banks were hindered in their diversification efforts by incomplete information. Perhaps they received maybe 10 data points via email or incomplete information in a non-digitized format. Capstack allows for a seamless lift of all data needed to underwrite a loan.
“(Previously), you were investing without any knowledge of the loans,” Cieplinski said. “Capstack provides a full overview of the originating bank’s performance of this asset and overall.”
Investors clearly saw the need for what Cieplinski envisioned. Capstack’s original funding was secured within hours. Then came the hard work of fully integrating data links to core banking and loan origination systems.
With Capstack, bank officials get an immediate view of all the loans in their system. Loans can be immediately posted on a marketplace where hundreds of institutions can scrutinize them with the same level of access to data as the originator.
“For the first time, we are creating that massive data exchange in the format required by banks,” Cieplinski said. “Everyone knew there was a diversity problem. No one thought of creating an exchange.”
Build a solution WITH your clients, not just for them
Cieplinski learned some crucial lessons while designing Capstack. Better to build a solution with banks than simply for them. Meet with as many as you can and get as much feedback as they’re willing to give.
He jokes that he’s an anomaly in the space, given that he’s been around for two decades. That’s one of his most important traits.
“There are few founders with knowledge of the entire system,” Cieplinski said. “Typically, you have to know the pain point yourself.”
What’s another critical attribute?
“People underestimate the skill of persistence,” Cieplinski said. “You know what my skill is? I don’t give up.”
