The three founders to start alternative financing pump They are stepping down from their roles as company CEOs in one of the most dramatic management changes seen in the fintech startup world in quite some time.
Miami based pump Today it said it was looking for a “veteran” CEO like Harry Hearst, who has been the face of the company since its inception in 2019, transitioning from his role as co-CEO to vice chairman.
Founder and Co-CEO Josh Mangel will assume the interim CEO role while Hearst leads the search and subsequent leadership transition with the help of a global executive recruiter. Once a new CEO is hired, Mangel will become CEO of Pipe, focusing on product and strategy. Chief Technology Officer and Co-Founder Zain Al-Larakhiya will remain on the board and serve as a senior advisor to the company. Usman Masoud, currently Executive Vice President of Engineering, will take over as Chief Technology Officer.
“We’re looking for someone with significant operational experience scaling the business, from market fit to market leadership all the way to rapid growth on a global scale,” Hearst said.
The news — shared with TechCrunch exclusively — was a bit startling considering that in its heyday just 18 months ago, Pipe was among the busiest fintech companies with Hurst as a very public face. In May 2021, the company had Raised $250 million $2 billion in a round that Hearst described as “vastly oversubscribed”.
Certainly, this isn’t the first time a company founder has stepped down to allow for new leadership. But it is highly unusual for all three founders to do so at once. And at this point in business.
In an email interview, Hearst told TechCrunch that the trio “always knew the next phase of pipeline growth would involve a veteran operational leader.” He said they first began looking for a COO in the second quarter and, in the process, realized that the role they were identifying was actually a CEO role that could help the company reach its “true long-term potential.”
He added, “We are 0-1 builders, not large-scale operators.”
According to Hearst, the co-founders remain Pipe’s three largest shareholders. When asked what percentage of their shares the founders sold or how many employees took out loans from the company to finance their stock purchases, he replied, “As a private company, we don’t share information about anyone’s personal compensation or holdings.”
Since its founding, the startup says 22,000 companies have signed up for Pipe and $7 billion in ARR (Annual Recurring Revenue) has been linked to a program. Traction isn’t the issue here, Hearst insists, telling TechCrunch that Pipe is on track to “triple” its revenue this year compared to last year.
When Pipe first started three years ago, its goal was to provide software-as-a-service (SaaS) companies a financing alternative outside of equity or project debt. It promoted itself as “the Nasdaq of revenue,” stating that its mission was to give SaaS companies a way to collect their future revenues upfront by pairing them with investors in a market that paid a discounted rate for the annual value of those contracts.
The aim of the platform was to provide companies with recurring revenue streams to access capital so that they would not dilute their ownership by accepting outside capital or be forced to take out loans.
armed b $50 million to fund strategic growth From the likes of HubSpot, Okta, Slack, and Shopify, Pipe announced in March 2021 that it would begin expanding beyond strictly serving SaaS companies to “any company with a recurring revenue stream.” That could include, Hirst said, D2C subscription companies or a provider Internet service, streaming services, or telecom companies.According to Hearst, even venture capital fund management and management fees were being poured onto his platform, for example.
In February, Pipe announced that he was Expansion of media and entertainment Financing through the acquisition of London-based Purely Capital. With this purchase—the first—Pipe created a new media and entertainment division called Pipe Entertainment with the goal of giving independent distributors the opportunity to trade their revenue streams the same way a SaaS company can.
Expanding into so many new sectors seemed like a bit of a gamble to some observers. Working with SaaS companies with their boring, predictable recurring revenue seemed very different than working with independent film production companies, which, as Hearst himself noted, sometimes had to wait “three to five years to get their money back and move on with their next projects.”
Hearst appears to have so much confidence in Pipe’s “capital markets engine” that he believes it can support “the entire revenue class as an asset” globally. At the time, he told TechCrunch, “Ultimately, anyone should be able to build our platform.”
Still optimistic. Currently, more than 50% of trading volume – the buying and selling of future revenue – on the platform comes from non-SaaS vertical markets. Surprisingly, Pipe Entertainment is one of the fastest growing segments on their platform, according to Hearst.
“Overall, diversification across segments has been a positive thing, and we plan to continue to drive additional vertical expansion,” he told TechCrunch.
It is clear that a lot has changed since February as the markets took a drastic turnaround. Since then, valuations have been challenged, more than 100,000 tech workers have been laid off and inflation has soared. At present, PIPE employs 108 employees. Hearst said she has not made any layoffs.
The company’s latest move has nothing to do with the company’s current financial situation, according to Hurst, who said Pipe is “in good shape.”
He added, “Unlike many companies in this challenging environment, we have the resources and half a decade of runway to make long-term strategic decisions from a position of strength to ensure we continue to drive value for our clients and investors.”
Pipe has raised more than $300 million in its lifetime from investors like 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.
An increasingly competitive landscape
While revenue-based financing has been around for decades, it has become a more mainstream way to fuel SaaS startups in recent years.
Y Combinator alum Arc He came out of hiding In January, it funded $150 million in debt and $11 million in seed funding to build what it describes as a “community of premium software companies” that gives SaaS startups a way to “turn future revenue into equity,” among other things. other. In August, Arc — which now describes itself as a digital bank for SaaS companies — landed Another $20 million In a Series A round led by Left Lane.
Spanish-American company Capchase – which says it turns “recurring revenue from SaaS into flexible growth funding” – in July of 2021 $280 million insurance in new debt and equity financing, and has since raised $80 million in equity and taken out another $400 million in debt.
Based in Austin founderpath In August, it announced that it had raised $145 million in its own debt and equity financing to help B2B SaaS founders grow their businesses without diluting ownership. Specifically, the company claims to allow founders to take up to 50% of their annual recurring revenue (ARR) in cash upfront.
Crowdz, which $10 million insurance In capital jointly led by Citi and Dutch growth company Global Cleantech Capital, it said this year it expanded from providing invoice-based financing to SaaS-focused SMBs to also provide them with frequent access to the upfront capital they need without dilution. the financial value.
Unlike Pipes, these companies remain focused on serving the SaaS business.
“After our public launch in 2020, we’ve seen a lot of gamers following enter the space, and we understand some of them may face challenges,” Hearst said. “While the market has changed dramatically since we started the pipeline, we were not in a stronger position for this next phase of growth.”