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

Three co-founders Alternative financing startup Pipe is stepping down from its leadership positions in one of the most dramatic management changes seen in the fintech startup world in some time.

Miami-based Pipe said today it is seeking a “veteran” CEO as Harry Hurst, the company’s face since 2019, moves from the role of joint CEO to vice chairman.

Co-founder and co-chairman Josh Mangel will assume the role of CEO on an interim basis while Hurst leads the search and subsequent transition in leadership with the help of a global executive recruiting firm. After the new CEO is named, Mangel will become Pipe’s executive chairman, focusing on product and strategy. CTO and co-founder Zain Allarakhia will remain on the board and serve as a general advisor to the company. Usman Masood, currently EVP of engineering, will take over as chief technology officer.

“We’re looking for someone with significant operational experience in scaling businesses from product-market fit to rapid global growth to market leadership,” Hurst said.

The news, shared exclusively with TechCrunch, is a little surprising given that just 18 months ago Pipe was one of fintech’s most vocal and very public frontmen with Hurst at the top. In May 2021, the company raised $250 million at a $2 billion valuation in a round that Hurst described as “massively oversubscribed.”

This certainly isn’t the first time a company’s founder has stepped down to make way for new leadership. But it is very unusual for all three co-founders to do so at the same time. And in a case at this stage.

In an email interview, Hurst told TechCrunch that the trio “always knew that the next phase of Pipe’s growth would be a veteran operations leader.” He said they initially began searching for a COO in the second quarter and realized during that process that the role they identified 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 scale operators.”

According to Hurst, the co-founders remain Pipe’s three largest shareholders. Asked how many percent of their shares the founders sold or how many employees took out loans from the company to finance their stock purchases, he said: “As a private company, we don’t share information about anyone’s personal compensation or holdings. “

Since its inception, the startup says 22,000 companies have signed up for Pipe and $7 billion in ARR (annual recurring revenue) has been connected to the platform. Hurst insists that traction isn’t the problem here, telling TechCrunch that Pipe is on track to “3x” 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 a financing alternative outside of equity or venture debt. It has billed itself as the “Nasdaq for revenue” and emphasized that its mission is to give SaaS companies a way to collect their future revenue upfront by pairing them with investors in a market that pays a discounted price for the annual value of those contracts.

The purpose of the platform was to offer companies with recurring revenue streams access to capital without having to accept external capital or 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. This includes, Hurst said, D2C subscription companies, ISPs, streaming services or telecommunications companies. According to Hurst, for example, even VC fund admin and management fees were handled on its platform.

In February, Pipe announced it was expanding into media and entertainment financing with the acquisition of London-based Purely Capital. With this acquisition—a first—Pipe created a new media and entertainment division, Pipe Entertainment, with the goal of enabling independent distributors to trade revenue streams the way a SaaS company can.

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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, predictable recurring revenue sometimes felt very different from working with independent film production companies who, as Hurst himself notes, “have to wait three to five years to get their money back and move on to their next project. .”

Hurst is so confident in Pipe’s “capital markets engine” that it believes it can support “an entire asset class of income” globally. At the time, he told TechCrunch, “Ultimately, everyone should be able to access our platform.”

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

“Overall, diversification across verticals has been positive, and we plan to pursue further vertical expansion,” TechCrunch said.

Obviously, a lot has changed since February as the markets have changed dramatically. Since then, valuations have been challenged, more than 100,000 tech workers have been laid off and inflation has soared. Currently, Pipe has 108 employees. Hurst said he did not make any cuts.

The company’s latest move has nothing to do with the company’s current financial situation, according to Hurst, who said Pipe is “in a good position.”

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 deliver greater value to our customers and investors.”

During its lifetime, Pipe has raised more than $300 million 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.

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An increasingly competitive landscape

While revenue-driven funding has been around for decades, it has become a more common way to power SaaS startups in recent years.

Y Combinator alum Arc went undercover in January with $150 million in debt funding and $11 million in seed funding to build what it describes as a “premium software company community” that “gives SaaS startups a path to turn future revenue into seed capital.” ,” among other things. In August, Arc, which now describes itself as a digital bank for SaaS companies, raised another $20 million in a Series A round led by Left Lane.

Spanish-American outfit Capchase – which it says turns “SaaS recurring revenues into funding for agile growth” – secured $280 million in new debt and equity funding in July 2021 and has since raised $80 million in equity and another $400 million in debt took it.

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

Crowdz, which secured $10 million in capital in partnership with Citi and Dutch firm Global Cleantech Capital, said this year it expanded invoice-based financing to SaaS-based SMEs, as well as providing them with a recurring return on seed capital. necessary without diluting its own capital.

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

“After going public in 2020, we’ve seen a lot of players get into the space, and we understand that some of them may run into issues,” Hurst said. “While the market has changed significantly since we started the pipeline, we’ve never been more strongly positioned for this next phase of growth.”

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