The European arm of venture capital firm Accel Partners has led an $18 million financing round in Calastone, a UK-based fund management transaction network.
Octopus Investments, which originally backed Calastone in 2008, will remain an investor in the business, having also participated in this latest funding round.
UK-based Calastone provides electronic transaction processing services for the mutual fund management industry, which it claims can reduce transaction costs by 60 percent. Founded in 2007, Calastone has already accumulated more than 450 clients, and has processed transactions with a total value of $280 billion in the last 12 months.
Accel Europe partner Sonali De Rycker, who will take a seat on the Calastone board as part of the deal, said her firm was attracted by the scale of the opportunity, since this is one of the few areas of the financial sector where transactions have not yet been widely automated.
“This is a multi-billion industry – the asset management industry – which is completely manual,” De Rycker told Private Equity International. “And there are various break points along the way where human error can cause serious problems. For regulation to be properly enacted, and for the industry to be properly transparent, it needs [this sort of] technology to work.”
Other attractive aspects of the business include its network effects – the fact that every new client makes it more attractive to future clients, which tends to benefit the category leader – and the experience of the team, she added. “This is a veteran team that has already proved itself in the UK market, so they have that pattern recognition. They have great market share, they have happy customers and they have multiple ways to grow.”
Accel hopes to help expand the business into new products and geographies. “We've been financial technology investors for a long time. And that journey, of taking a company that is a leader in a single product and a single country to becoming a global, multi-product, multi-geography business – we've done that journey multiple times. And on top of that we have a global platform. There are not many funds that can offer that as well as the business-building.”
Julien Hammerson, Calastone chairman and CEO, said the investment would “enable Calastone to further deliver against its ambitions and truly compete in the global arena”.
Octopus first backed Calastone in 2007 via its listed venture capital trusts. This year, however, it created a new vehicle called Zenith that effectively bought Calastone from the Titan VCTs, along with their three other largest assets. This enabled Octopus to hold onto these businesses without exceeding the asset limit placed on VCTs in the UK, while also bringing in two other institutional LPs.
In March, Accel held a first and final close on Accel London IV, a $475 million fund focused on venture deals in Europe and Israel. However, the Calastone deal was completed using capital from its previous vehicle, Accel London III, which is now almost fully invested.