Citi Bank Invests in Capstack Technologies – A Game-Changing Fin-Tech Startup

Exciting news for the promising Israeli fintech startup Capstack Technologies — CitiBank, one of the largest banks in the world, has made a strategic investment in the company through Citi Ventures. They join existing investors, including Fin Capital, Alloy Labs, Selah Ventures, Cowboy Ventures, Cambrian Ventures, Gaingels, Future Perfect Ventures, Uncorrelated Ventures, and Valor Equity Partners, who together have invested $6M in seed funding.

Although Capstack Technologies is still in its early stages, it recently acquired Edge Tradeworks, a platform offering institutional-grade loan trading and bank analytics. Together, these companies form a unique solution, providing financial institutions with a comprehensive platform to trade both whole loans and loan participations in a single, efficient ecosystem.

"As we grew, we realized that nothing existed that brought both sides of the bank-to-bank market together, so we saw a huge opportunity to change that and enhance liquidity for our customers," said Capstack Technologies' co-Founder and CEO, Michal Cieplinski. "By bringing participation and whole loan trading under one roof, we can provide significantly more liquidity and trading volume for both sides of the market."

"The company we acquired provides advanced analytics tools that enable our customers to price loans, evaluate risk, and run scenario analysis. These capabilities are integrated into our AI-driven marketplace, which intelligently matches banks based on their portfolios and risk profiles," explains Tzvika Perelmuter, Capstack Technologies' CTO and Co-founder. "I don't know many companies at our stage that have made acquisitions so early in their journey, which speaks to the strength and ambition of what we're building."

Perelmuter, an alumnus of Israel's prestigious Unit 8200, previously led an R&D team at Fundbox. He holds an MSc in Computer Science and Biology from The Open University and an MBA with a focus on entrepreneurship and innovation from Tel Aviv University.

It was at Fundbox where he met Michal Cieplinski, now the CEO of Capstack Technologies. With a deep understanding of the challenges facing small to mid-sized banks in the U.S., the two co-founded Capstack Technologies in 2023. As CTO, Perelmuter leads the R&D team based in Tel Aviv, while Cieplinski heads operations in the U.S. The company currently has 15 employees and is growing quickly.

"We were a bit ahead of our time. We launched just one month before the Silicon Valley Bank crisis in March 2023. The collapse served as a powerful reminder of the consequences banks face if they fail to diversify their assets adequately", says Perelmuter.

"A major problem facing U.S. small and mid-sized banks is that each of them operates independently with different languages, technologies, and core systems. These banks make up the vast majority of all banks in the U.S., and unlike larger banks, they tend to focus on a single sector or geographic area," continued Perelmuter. "For a bank in Texas, for example, it's likely that most of their customers and loans will also come from within the state of Texas, putting them at a higher risk if, let's say, a natural disaster were to happen. After the SVB crisis, interest in diversifying loan portfolios and deposit exposure increased dramatically."

How can banks mitigate their concentration risks?
"They can do it by trading both whole loans and loan participations. With participation, banks can sell interests in loans they originate to other banks and/or purchase interests in loans other banks originate. This can improve net interest margins and fund balance sheets and promote financial stability for originating and participating banks. By trading whole loans and participations, banks gain exposure to loans from different geographic areas and sectors, diversifying their risk profiles".

Did the banks cooperate between them before that?
"Yes, but they did it through a manual, relationship-driven process that made bank-to-bank loan participation very long, complex, and nearly impossible to implement at scale. So the scope of cooperation between them was negligible compared to the potential, although the regulations were in place," says Perelmuter.

"Our team has created the first-ever bank-to-bank loan marketplace — a groundbreaking platform designed to improve risk management and facilitate seamless collaboration among financial institutions. We aim to enable banks to connect, share assets, and diversify capital confidently, all in one place with robust security," he adds.

"We believe that the time is ripe for a revolutionary solution that leverages digitization and cloud technology to streamline loan participation for the small and mid-sized bank sector. That's why we're excited to invest in Capstack Technologies," said Citi Ventures in its investment announcement.

What is your vision for the future to come?

Perelmuter believes that Capstack Technologies is the next unicorn coming out of Israel. "We see ourselves as a network that connects all U.S. banks, creating a system that benefits the entire economy. I believe that the U.S. banking system will become significantly stronger as banks can now easily collaborate and trade with one another", he says.

In collaboration with Capstack Technologies