Cloudwall Capital raises $6.3m from LocalGlobe and Illuminate Financial
by Kyle Downey, CEO & Co-founder - 01 Jun 2022
Cloudwall Capital raises $6.3m from LocalGlobe and Illuminate Financial to provide tools for institutional investors seeking to manage risk in the crypto market
- Launched in 2021, Cloudwall Capital is building the digital asset risk management platform for institutional investors
- Through its product, Serenity, Cloudwall Capital is building the critical insights layer for institutional investors as interest and investment grow in cryptocurrencies and decentralized finance from traditional financial institutions
- With stablecoins such as TerraUST collapsing recently and catching investors off guard, demand is growing for a product that can provide strategic risk insights
- Founders are uniquely placed to bridge the worlds of crypto and asset management with over 50 years experience across a range of financial services including automated risk, quantitative research and enterprise-grade software
New York and Singapore, May: Cloudwall Capital, a new digital asset risk management startup, has raised $6.3m in seed funding led by LocalGlobe and Illuminate Financial to help it build the tool to bridge the traditional finance world with digital assets and decentralized finance. They were joined by a syndicate of investors including IA Capital Partners, Eberg Capital and NEMO Ventures, along with founder and operator angel investors from across decentralized and traditional finance.
Founded in 2021, Cloudwall Capital is building a new product, Serenity, which will provide institutional investors with the risk management insights to effectively build portfolios and manage risks inherent in digital assets so they can invest confidently. As the recent volatility in the digital assets market has shown, there is a clear need for a platform that can help investors assess risk and correlation more accurately, make better decisions when it comes to investing and demonstrate to their investors that they have institutional-grade stacks to assist their work.
Despite volatility and the collapse of stablecoins such as UST, institutional engagement with crypto continues to grow significantly. Many traditional asset managers are now launching new specialist crypto funds as well as investing in platforms and assets. New tokens are continually being created and new investment mechanisms such as derivatives, staking and liquidity pools add both opportunity and complex risks to understand and quantify. As blockchain technology encroaches further into our economy, including tokenization of more traditional assets, Cloudwall Capital can become the critical arbiter of risk and insight for institutional investors.
Understanding risk in the new world of digital assets
For traditional finance, having an understanding of risk is essential, with different platforms and services such as Moody’s Analytics and Aladdin by BlackRock built to serve investors across the world. Such platforms help asset managers run stress tests and models to determine the impact on their portfolios. Currently though, there is no similar service for investors in the digital asset space - an issue that has become ever more pressing given that it is much more volatile than traditional markets. Nor is it easy to quantify risks in digital assets since there are few valuation metrics available.
Cloudwall Capital is building Serenity, its digital asset portfolio management platform, to solve these challenges. The cloud-based platform combines risk management with research to give investors an overview of their assets and potential. It allows investors to pull in their portfolios and access historical data from a range of sources including centralized exchanges and blockchain data to analyse and demystify the digital asset market, including the ability to break down the entire market. The platform’s proprietary statistical and machine learning algorithms will also enable investors to run simulations and stress tests on their portfolios to see how they will behave. Serenity doesn’t offer advice to managers on what to do - instead, it provides clients with the data and insights to understand the context of what is going on and likely outcomes to support better decisions.
Cloudwall can achieve this because of the strength of the founding team, which has a combined 50+ years of experience working across different areas of financial services. CEO Kyle Downey was the MD and global head of Automated Risk Trading and Quantitative Investment Strategies IT at Morgan Stanley. COO Jia Yng Wee spent 20+ years in global markets and private banking at Morgan Stanley, DB, Coutts and Nomura, covering senior operations and business management roles, while Head of Research Ilya Kulyatin is a former fintech founder and has more than a decade of quant research experience in hedge funds, asset management, and market-making. The founders intrinsically understand quantitative asset management, combined with a passion and belief in digital assets and a drive to build a powerful platform for investors to satisfy their investment and risk objectives.
Powering the Blockchain Economy
Though much of the current interest in this space revolves around NFTs or cryptocurrencies, in the future anything could be tokenized in what Cloudwall calls the Blockchain Economy. This will include everything from stocks and bonds to real estate, art, antique cars, intellectual property rights, commodities, account receivables and more.
Institutional investors need tools to access this new economy so they can invest with confidence - a survey last year found that seven out of 10 institutional investors expect to invest or buy digital assets in the future. Serenity is targeted at this growing category of digital asset hedge funds, family offices and asset managers who are looking to enter this space.
Cloudwall will use its seed funding to grow its team to 15 people by the end of the year and further develop the platform with an aim to launch an early access program this summer.
Kyle Downey, co-founder and CEO at Cloudwall Capital, said: “Digital assets underwent explosive growth between 2020 and 2021, with almost five years of growth taking place overnight. Recent market gyrations have only increased the case for a digital asset platform to manage risk so that institutional investors have the tools and platforms to help manage their portfolios and risks. We’re building Serenity to do just that and we’re excited about the potential for this platform to enable more people to invest in digital assets and unlock trillions of dollars of assets on the blockchain.”
Jia Yng Wee, co-founder and COO at Cloudwall Capital, said: “It’s becoming clearer to institutional investors that they should invest in digital assets if they aren’t already but they don’t have the tools to help them embrace this new market in a way they are used to. We’re building Serenity to provide this solution and supporting the careful growth of this industry. It’s incredibly rewarding to be working at the convergence of traditional finance with digital assets and there is so much potential for us to have an impact.”
Ilya Kulyatin, co-founder and Head of Research at Cloudwall Capital, said: “In the course of our market research, we identified the lack of institutional-grade risk and analytics products for investors in cryptocurrencies as a serious issue - with traditional finance models insufficient at best and misleading most of the time for this growing market. There is a need for a new risk modelling and valuation paradigm. The platform we are building, Serenity, will be the first and most advanced solution for this new world of digital assets.”
Julian Rowe, general partner at LocalGlobe, said: “Digital assets demand a different understanding of risk and correlation to traditional finance. Institutional investors, from crypto funds to traditional asset managers, want to invest in digital assets and decentralized finance as they capture a growing share of our economy. Unfortunately, few have access to institutional-grade models and tools at their disposal to understand risk, volatility and opportunity. Cloudwall Capital is building this insights layer and I’m looking forward to working with Kyle, Jia Yng, Ilya and the Cloudwall team as they take on this challenge and launch Serenity later this year.”
Alexander Ross, general partner at Illuminate Financial, said: “Over the course of 2021 a large number of TradFi institutions, some of which are LPs in our funds, started to invest in crypto assets. As a result, we are seeing significant demand for an institutional-grade risk management solution. Recent market conditions further exacerbate the need for risk management solutions and we believe strongly that Kyle, Ilya and Jia are the perfect team to build this.”
About Cloudwall Capital:
Cloudwall Capital is transforming access to the digital assets market for institutional investors. Its tool Serenity is a digital asset portfolio management tool that enables investors to manage their portfolios effectively to satisfy both their investment and risk objectives. https://cloudwall.capital
LocalGlobe is a UK-based venture capital firm that focuses on seed investments. Seeding ambitious founders since 1999 including TransferWise, Zoopla, Melio, Rapyd, Algolia and Robinhood. Visit https://localglobe.vc/