Pipe co-founder raises $6M for CapStack, a bank-to-bank marketplace aimed at ‘de-riskifying portfolios’

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CapStack, a startup formed by Pipe co-founder Michal Cieplinski, has raised $6 million toward its effort to build an integrated operating system for banks.

In simpler terms, Cieplinski described CapStack as the “first bank-to-bank marketplace,” giving the institutions the ability to share and have visibility into one another’s portfolios.

Cieplinski started CapStack in March with Tzvika Perelmuter and, interestingly, says they managed to raise the capital almost immediately after launching the company and right before the meltdown of Silicon Valley Bank — not only pre-revenue, but pre-product.

“Something I saw is that banks are islands,” Cieplinski told TechCrunch in an interview. “Each bank operates on its own and there is no connectivity…And they’re all searching for an ability to diversify capital sources.”

Small and mid-sized banks in particular, said Cieplinski, are limited by geographical footprint with most of their customers residing near a bank branch.

“We don’t necessarily realize how serious that is,” he said. “Especially because small and mid-sized banks are not investment banks — they don’t get money other than deposits.”

What Cieplinski envisions building would give not only these banks, but larger financial institutions as well, a way to invest deposits and loans and “de-riskify their portfolios.”

“Over 60 banks agreed to join the platform even before the first line of code was written and a single employee was hired,” Cieplinski said. “And with that I went to VCs.”

Fin Capital, which also was a lead investor in Pipe, led CapStack’s round, which also included participation from Alloy Labs, Cambrian Ventures, Cowboy Ventures, Future Perfect Ventures, Gaingels, Selah Ventures, Uncorrelated Ventures and Valor Equity Partners.

Cieplinski transitioned from his role as chief business officer to a senior advisor at Pipe at the end of February, a few months after the alternative financing startup made headlines for the rest of its co-founders stepping down at the same time amid a hunt for a new, “veteran” CEO. Pipe, which had raised more than $300 million in funding and was once valued at $2 billion, was the target of a number of allegations surrounding its use of capital — all of which the company vehemently denied.

With CapStack, the executive — who also co-founded Fundbox and is a former SVP of LendingClub — says he wants to give financial institutions the ability to host on CapStack’s platform the loans that they originate and the ability for other banks to participate in those loans, borrow/move each other’s deposits and to see what other assets another bank might have that they can invest in so they can “diversify risk and exposure into other non-correlated assets.”

In the banking sector, explained Cieplinski, there are institutions which originate great assets, such as loans, but may not have enough capital to fund them — such as small and mid-size banks. Then there are larger banks, which sit on massive deposit bases but have “no way of originating loans” because they don’t have relationships on the ground.

“My TAM is effectively all the banking systems in America, sub the Top 30. But even some of the top 30 banks want to be buyers of these assets too,” Cieplinski said. 

Fin Capital founder and managing partner Logan Allin, who has joined CapStack’s board, said in a written statement that he believes CapStack has the opportunity “to dramatically improve solutions for bank risk management at a critical time for the stability of our country’s banking infrastructure.

“Banks still rely on legacy technology for managing risks around their balance sheets, and to restore confidence for consumers, commercial customers, regulators, and other stakeholders, they absolutely need an upgrade,” Allin added.

Cieplinski is targeting the fourth quarter or first quarter of 2024 to perform the first beta testing with design partners.

“Everybody knew what was happening with SVB — it had an over-concentration of assets,” he said. “Every single one of the banks that want to join the platform are also over-concentrated in some assets — some of them have too much deposits, and they don’t know how to deploy it, but they need to provide the return to their depositors to the customers.”

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