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In this episode, I sit down with Chris Pento, CEO/Co-Founder of Clear Street, a $2 billion modern financial infrastructure business focused on providing capital markets services including clearing, custody, execution, and prime brokerage services.
Launched just five years ago in 2018, Clear Street was recently valued at $2 billion and has raised close to $600 million in equity and debt from Prysm Capital, NextGen Venture Partners, IMC Investments, and many more.
In this episode, we discuss:
A brief history of the US Securities and Capital Markets infrastructure and how Clear Street is modernizing 50-year-old technology
“I like to use the analogy, you're flying a plane over the United States, and oh, by the way, take the engine and change it while you're flying. It's like, okay, we're processing millions of transactions, how do we change it? It's very hard to do that.”
The prime brokerage industry is largely reliant on outdated technology from the 70s and 80s, with systems often built in COBOL and running on mainframes. This legacy technology has accumulated a significant amount of technical debt, impeding innovation and adaptability to modern global trading environments. While these systems are ingrained in every facet of prime broker operations, updating them is challenging, likened to changing an engine mid-flight. Disparate systems for various asset classes create complexities in data consolidation, emphasizing the need for a unified platform and data model – enter Clear Street.
How Chris thinks about strategic-decision making and why they’ve been able to execute and launch so many products in just a few years
“It really boils down to three things we always think about: we want to expand our asset classes and geographies, our footprint. Expanding the products we want to give our clients. And the customer personas we want to support.”
Clear Street is built on microservices infrastructure, allowing for rapid iteration without system-wide impacts. This approach to systems architecture, uncommon in the clearing infrastructure, enables fast-paced advancements like launching a new asset class in just six months. This might seem a bit long for the startup world, but for capital markets infrastructure, it’s lightning fast!
Why Chris believes in the concept of a value-add investor, especially in niche and regulated space like theirs
“We actually have a couple of small strategic investors today that that actually invested alongside of Prysm, because they see the value of what we're creating, and they understand the need in the marketplace. And they want to be part of this. So we do have strategic investors. And we will always be looking for people that not only understand the problem, but can end up being really good users of the platform.”
Transitioning from a Wall Street corner office to scrappy startup founder, competitive ping pong matches at Clear Street… and a lot more!
“I'm not sure if we would have started [Clear Street] early in my career, if I would have been able to deliver. I think all the experiences I've had over the years have helped me think about how to build a company, and organize how we think about growing and scaling. So not sure the level of success we've had in such a short time would have been there.”
Chris Pento suggests that the timing of starting Clear Street was pivotal to its success. His accumulated experiences were crucial in navigating the complexities of company growth and scaling. Additionally, the advent of contemporary technologies, such as open-source tools and cloud-native infrastructure, weren't as accessible a decade ago. Pento believes that the convergence of his experience with the availability of these modern tools made the present moment optimal for addressing the longstanding challenges in the industry.
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Miguel Armaza is Co-Founder & Managing General Partner of Gilgamesh Ventures, a seed-stage investment fund focused on fintech in the Americas. He also hosts and writes the Fintech Leaders podcast and newsletter.
Chris Pento, Clear Street CEO/Co-Founder – Building a $2B Giant in 5 Years, Upgrading Wall Street's Technology, Strategy & Rapid Product Launches