Three founders of starting alternative financing pipe who stepped down from his role as company executive in one of the most dramatic management shakeups seen in the fintech startup world in some time.
based in Miami pipe said now it is in the hunt for a “veteran” CEO as Harry Hurst, who has faced the company since the beginning of 2019, transitioning from the role of co-CEO to vice chairman.
Fellow founder and co-CEO Josh Mangel will temporarily assume the role of chief executive while Hurst leads the search and further transition in leadership with the help of a global executive recruitment firm. Once the new CEO has been named, Mangel will be the chief executive of Pipe, focusing on product and strategy. CTO and co-founder Zain Allarakhia will remain on the board and serve as a senior advisor to the company. Usman Masood, currently EVP of engineering, will take over as chief technology officer.
“We’re looking for people with significant operational experience at business scale, from product-market fit to market leadership to rapid growth on a global scale,” Hurst said.
The news – shared with TechCrunch exclusively – is quite shocking given that at its height just 18 months ago, Pipe was one of the busiest fintechs with Hurst as its public frontman. In May 2021, the company has raised $ 250 million at a $2 billion valuation in a round that Hurst described as “massively oversubscribed.”
Of course, it’s not the first time a company’s founder has stepped down to provide new leadership. But it was extraordinary for all three founders to act simultaneously. And at this stage in the business.
In an email interview, Hurst told TechCrunch that the trio “always knew that the next phase of Pipe’s growth would include a veteran operational leader.” He said they initially began searching for a COO in the second quarter and during that process, realized that the role they were defining was actually a CEO who could help the company reach its “true long-term potential.”
He added: “We are 0-1 backers, not scale operators.”
The co-founders remain the three largest shareholders in Pipe, according to Hurst. When asked what percentage of his shares were sold by the founders or how many employees took loans from the company to finance the purchase of their own shares, he replied, “As a private company, we do not share information about personal compensation or anyone’s holdings.”
Since its inception, the startup says that 22,000 companies have signed up to Pipe and $7 billion in ARR (annual recurring revenue) has been connected to platform. Hurst insisted that traction isn’t the issue here, telling TechCrunch that Pipe is “3xing” its revenue this year compared to last year.
“Nasdaq for income”
When Pipe first started three years ago, its goal was to provide SaaS companies with funding alternatives outside of equity or business debt. It promotes itself as the “Nasdaq for revenue,” suggesting that its mission is to give SaaS companies a way to collect future revenue in the future by pairing them with investors in the market who pay a discount for the annual value of the contract.
The purpose of the platform is to offer companies with recurring revenue streams to capital so that they do not dilute their ownership by obtaining external capital or being forced to take out loans.
provisions $50 million in strategic growth financing from the likes of HubSpot, Okta, Slack and Shopify, Pipe announced in March 2021 that it would begin expanding beyond strictly SaaS companies to “any company that has a recurring revenue stream. That could include, Hurst said, D2C subscription companies, ISPs, streaming services or telecommunication companies, even VC fund admins and management fees are being piped on their platforms, for example, according to Hurst.
In February, Pipe announced that expanding into media and entertainment financing with the acquisition of London-based Purely Capital. With that purchase – a first – Pipe created a new media and entertainment division called Pipe Entertainment with the aim of giving independent distributors the opportunity to trade their revenue streams in the same way SaaS companies can.
Expanding into so many new verticals felt like a bit of a gamble to some observers. Working with a SaaS company with boring and predictable recurring revenue feels very different than working with an independent film production company that, as Hurst himself points out, sometimes has to wait “three to five years to get the money back and move on to the next project .”
Hurst appears to have so much faith in Pipe’s “capital markets engine” that he believes it can support “an entire revenue-as-an-asset class” globally. At the time, he told TechCrunch, “Eventually, anyone should be able to come onto our platform.”
He remains optimistic. Currently, more than 50% of the trading volume – which buys and sells future revenues – on the platform comes from the non-SaaS vertical market. And surprisingly, Pipe Entertainment is one of the fastest growing verticals on the platform, according to Hurst.
“In general, diversifying across verticals has been positive, and we plan to continue driving additional vertical expansion,” he told TechCrunch.
Obviously, a lot has changed since February when the market took a dramatic turn. Since then the valuation has been challenged, over 100,000 tech workers have been laid off and inflation has surged. Currently, Pipe has 108 employees. It has not implemented layoffs, Hurst said.
The company’s latest move has nothing to do with the company’s current financial situation, according to Hurst, who said Pipe is “well positioned.”
He added: “Unlike many companies in this challenging environment, we have the resources and half a decade of groundwork to make long-term strategic decisions from a position of strength to ensure we continue to drive better value for our customers and investors.”
Pipe has raised over $300 million over its lifetime from investors such as Greenspring Associates, Craft Ventures, Morgan Stanley’s Counterpoint Global, CreditEase FinTech Investment Fund, Fin VC, 3L, and Japan’s SBI Investment. Existing backers include Next47, Marc Benioff, Alexis Ohanian’s Seven Seven Six, MaC Ventures and Republic.
More and more coconut trees
While revenue-based financing has been around for years, it has become an increasingly popular way to propel SaaS startups in recent years.
Y Combinator alum Arc out of stealth in January with $150 million in debt financing and $11 million in seed funding to build what it describes as a “premium software company community” that gives SaaS startups a way “to turn future revenue into upfront capital,” among others. In August, Arc – which now describes itself as a digital bank for SaaS companies – landed another $ 20 million in the Series A round led by Left Lane.
Spanish-American outfit Capchase – which claims to be “SaaS recurring revenue into flexible growth financing” – in July 2021 secured $280 million in new debt and equity funding and has since raised $80 million in equity and taken on another $400 million in debt.
Austin base Founderpath in August announced it has secured $145 million in debt and equity financing to help B2B SaaS founders grow their businesses without diluting ownership. Specifically, the company says it allows founders to take up to 50% of their annual recurring revenue (ARR) in cash up front.
Crowdz, the one secured $10 million in the capital co-led by Citi and the Dutch equity growth firm Global Cleantech Capital, said this year expanded from providing invoice-based financing to SaaS-focused SMEs to also provide them with recurring revenue access to the upfront capital they need without having to dilute them. justice
Unlike Pipe, this company still focuses on the SaaS portion of the business.
“After our public launch in 2020, we see many players entering the space, and we understand some of them may face challenges,” said Hurst. “Although the market has changed significantly since we started Pipe, we have never been in a stronger position for this next phase of growth.”