Pipe’s founding team stepping down as hunt for ‘veteran’ CEO begins • TechCrunch

The three co-founders of alternative financing startup Pipe to leave their role as executive of the company in one of the most dramatic management seen in the fintech startup world in some time.

Miami-based Pipe said today it is on the hunt for a “veteran” CEO as Harry Hurst, who has been the face of the company since its 2019 creation, transitions from his role as co-CEO to vice president.

Fellow founder and co-CEO Josh Mangel will temporarily assume the role of chief executive while Hurst leads the search and subsequent leadership transition with the help of a global executive recruiting firm. Once a new CEO is named, Mangel will become executive chairman 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 are looking for someone with significant operational experience to scale their business, from product market fit to market leadership to rapid growth on a global scale,” said Hurst.

The news – shared with TechCrunch exclusively – is a bit startling considering that at its height just 18 months ago, Pipe was among the biggest fintechs with Hurst serving as its public leader. In May 2021, the company raised $250 million at a $2 billion valuation in a round that Hurst described as “massively oversubscribed.”

Certainly, it is not the first time the founder of a company has resigned to allow new leadership. But it is very unusual for all three co-founders to do so at once. And at this stage of a business.

In an email interview, Hurst told TechCrunch that the trio had “always known that the next phase of Pipe’s growth would include a veteran operational leader.” He said that they initially began a search for a COO in the second quarter and during that process, they realized that the role they were defining was actually a CEO who could help the company reach its “true long-term potential .”

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He added: “We are 0-1 builders, not operators of scale.”

The co-founders remain the three largest shareholders in Pipe, according to Hurst. When asked what percentage of the shares the founders sold or how many employees took out loans from the company to finance the purchase of their own shares, he replied, “As a private company, we do not share information about anyone’s personal compensation or the holdings.”

Since its founding, the startup claims that 22,000 companies have signed up for Pipe and $7 billion in ARR (annual recurring revenue) has been linked to the platform. Hurst insists that traction is not the issue here, telling TechCrunch that Pipe is on track to “3x” its revenue this year compared to last year.

“Nasdaq for Income”

When Pipe started three years ago, its goal was to provide SaaS companies with a financing alternative outside of equity or corporate debt. It promoted itself as the “Nasdaq for revenue,” stating that its mission was to provide SaaS companies with a way to collect future revenue in advance by pairing them with investors on a marketplace that pays a discounted rate for the annual value of those contracts.

The purpose of the platform was to offer companies with recurring income access to capital so that they do not dilute their ownership by accepting external capital or having to take out loans.

Armed with $50 million in strategic growth funding 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, Hurst said, D2C subscription companies, ISPs, streaming services or telecommunications companies. Even administrative fees and VC fund management have been piped into its platform, for example, according to Hurst.

In February, Pipe announced it was expanding into media and entertainment financing with the acquisition of London-based Purely Capital. With this purchase – its first – Pipe created a new media and entertainment division called Pipe Entertainment with the goal of giving independent distributors the opportunity to trade their income in the same way a SaaS company could.

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Expanding into so many new verticals felt like a bit of a gamble to some observers. Working with SaaS companies with boring recurring revenue felt very different than working with independent film production companies who, as Hurst himself pointed out, sometimes had to wait “three to five years to get their money back and move on to the next project they..”

Hurst appeared so confident in Pipe’s “capital markets engine” that he believed it could support “all income classes as an asset” globally. At the time, he told TechCrunch, “Eventually, anyone should be able to originate on our platform.”

He remains optimistic. Currently, more than 50% of trading volume – buying and selling future income – on the platform comes from non-SaaS vertical markets. And surprisingly, Pipe Entertainment is one of the fastest growing verticals on its platform, according to Hurst.

“Overall, diversifying across verticals has been positive, and we plan to continue driving further vertical expansion,” he told TechCrunch.

Clearly, a lot has changed since February as the markets took a dramatic turn. Since then, valuations have challenged, more than 100,000 tech workers have been laid off and inflation has soared. Currently, Pipe has 108 employees. He did not make any layoffs, Hurst said.

The company’s latest move has nothing to do with the company’s current financial situation, according to Hurst, who says that Pipe “is well positioned.”

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 in a position of strength to ensure we continue to deliver more value to our customers and investors. “

Pipe has raised over $300 million over its lifetime from investors including Greenspring Associates, Craft Ventures, Morgan Stanley’s Counterpoint Global, CreditEase FinTech Investment Fund, Fin VC, 3L, and SBI Investment Japan. Existing signatories include Next47, Marc Benioff, Seven Seven Six Alexis Ohanian, MaC Ventures and Republic.

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Increasingly competitive landscape

While revenue-based funding has been around for decades, it has become more of a ubiquitous way to fuel SaaS startups in recent years.

Y Combinator alum Arc came out of hiding in January with $150 million in debt funding and $11 million in seed funding to build what it describes as “a community of premium software companies” that provide SaaS startups with a way to “convert revenue into the future capital advance. ,” among other things. 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.

The Spanish-American Capchase team – which says it turns “SaaS recurring revenue into flexible growth financing” – in July 2021 secured $280 million in new debt and equity financing and has since raised $80 million in equity and taken another $400 million in debt.

Austin-based Founderpath in August announced it had secured $145 million in its own debt and equity financing to help B2B SaaS founders grow their businesses without diluting ownership. Specifically, the company claims that it allows founders to take up to 50% of their annual recurring revenue (ARR) in cash upfront.

Crowdz, which secured $10 million in capital from Citi and was co-led by Dutch firm Global Cleantech Capital, said this year it expanded from providing invoice-based financing to SaaS-focused SMEs to also give them access to revenue renewable in their initial capital. needs without having to dilute their equity.

Unlike Pipe, these companies remain focused on serving SaaS businesses.

“After our public launch in 2020, we’ve seen a lot of follow-up players enter the space, and we understand some of them may face challenges,” Hurst said. “While the market has changed significantly since we started Pipe, we have never been in a stronger position for this next phase of growth.”

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