New funding round for Nivaura as momentum builds for digitisation

The digital workflow specialist is seeking to raise up to $10 million as interest builds in automating fixed income origination workflows.

Nivaura is currently in the middle of a new funding round, seeking to raise $6-10 million by the end of February, The TRADE can reveal.

The tech start-up, which focuses on digitising the workflow for debt origination, has done three previous funding rounds, with the latest in February 2019 raising $20 million from investors including The London Stock Exchange Group (LSEG), law firm Linklaters, Transamerica Ventures (part of asset management giant Aegon) and Spencer Lake, the former head of global markets at HSBC. 

The firm is now looking to expand fast, with several recent engineering hires and plans for some notable sales additions later in the year.

“We’re talking to venture capital firms, existing shareholders, a broad range. We’ll look at anyone’s money,” new CEO Scott Eaton told The TRADE. “Fundraising meetings are always beneficial, even if the answer is no, because any time you have to explain yourself and tell your story, you refine it and understand it better yourself.”

Founded in 2016, Nivaura originally wanted to solve the problem of debt capital markets origination through distributed ledger technology (DLT). It executed the first ever fully automated cryptocurrency-denominated bond issuance in 2017, and in 2019 helped Santander launch the world’s first end-to-end blockchain bond. The original goal was to leverage public blockchains to achieve a fully-automated “self-service” system for the issuance of financial instruments. But since then the firm has broadened its focus, pivoting away from the blockchain concept.

“In order for DLT to take off in DCM, and in the broader financial system, you need the buy-side to come along to the party,” explained Eaton, who took over as CEO in August last year. “At the moment, we see people dabbling in blockchain, but so far it’s mainly just innovation theatre. So in 2019 we moved towards building out a digitisation solution for DCM instead.”

This solution, called Aurora, has won some enthusiastic fans – including LSEG, which in 2021 partnered with the firm to develop its own new digital primary DCM Flow platform, designed to automate the debt capital markets issuance process using structured data and General Purpose Legal Mark-Up Language (GLML) – essentially an origination platform, allowing issuers and dealers to interact.

Flow was tested via a $7 billion syndicated issuance in April, with the bonds listed on the main market of the LSE and settled in DTC, Euroclear and Clearstream. The deal marked a notable milestone in capital markets automation and digitisation, highlighting the advantages of end-to-end automation.

“Our partnership with Nivaura to develop Flow, built to simplify bond transaction execution, is revolutionising capital flow by helping market participants do business in an open-access, resilient, secure and scalable manner,” said Shrey Kohli, Head of Debt Capital Markets and Funds, Capital Markets at London Stock Exchange.

Nivaura also recently deployed its Aurora software to DBS, the largest bank in Singapore, which now uses it both as an in-house workflow tool and as a shopfront window, provisioning services to both issuers and investors. “It’s almost a menu approach,” added Eaton. “An investor can come in and ask for a specific issuer, or yield, or tenor, and – once agreed – the transaction can take place seamlessly, with all the documentation pulled together automatically.”

It’s an interesting step for the debt capital market, which has long suffered from the pain of highly manual and fragmented processes, requiring complex data management solutions. Automation allows these transactions to flow unfettered, thereby reducing both the time and cost of capital markets transactions and, in theory, dramatically boosting capital flow. Given the times in which we live (with inflation running high and significant rate rises expected) it could be a challenging year for fixed income – especially as a lot of issuers crammed into the market last year to get deals done while rates remained low – meaning that there are some worries about a dearth of supply for 2022.

So what’s next for Nivaura, once its latest round of funding is secured?

“We’re working on finishing, improving and further developing the Aurora software, and we’re also in conversations with some potential new clients,” revealed Eaton. “We’re working on some interesting projects, moving further down the value chain from origination, and also talking to dealers about deploying this on their side, as well as working on some new innovations on the DLT frame.”

From a relatively uncrowded space a few years ago, the digitisation of workflows has become a hot button topic, which has brought a cluster of new competitors into the space. “Competition is not always welcome,” admitted Eaton. “But it does mean that the dealer and issuer community are finally becoming more aware of what we are trying to do. DCM workflow processes haven’t really changed since the 1980s, and at the start we were a little like Sisyphus, trying to push the stone uphill by ourselves. Now that we have more firms active in this space, we should start to see a much speedier adoption.”

Although it’s primarily being explored within the fixed income space for now, Eaton points out that the automation process can easily be perfected and then applied to other asset classes with the same documentation/origination/settlement process, such as syndicated loans, which could facilitate downstream trading for the loan market.

“It’s a really great time to be in the markets, and in technology in particular,” said Eaton. “We’re seeing innovations occurring at speed, but also the cost of deployment is coming down and regulated firms are getting more comfortable with cloud deployment, so it is becoming a virtuous cycle. It’s incredibly exciting to see change coming so fast.”