Banking-as-a-service startup Solid (previously referred to as Sensible) has filed for Chapter 11 chapter safety, in accordance with documents filed in america Chapter Court docket for the District of Delaware on April 7.
Based in 2018, the fintech firm had raised a complete of practically $81 million in funding from traders reminiscent of FTV Capital and Headline. Solid was valued at $330 million as of August 2022, in accordance with PitchBook, when it introduced a $63 million Series B round of funding led by FTV.
Palo Alto-based Strong labored with fintech and vertical SaaS corporations and provided banking, funds, playing cards and cryptocurrency merchandise by way of easy-to-integrate APIs. The corporate touted itself as “the AWS of fintech” and claimed in August 2022 that it had grown 10x in income, doubled its clients to 100 and have become worthwhile. It’s now within the technique of attempting to restructure or promote itself, in accordance with the paperwork.
“After contemplating all choices, we’ve determined {that a} voluntary Chapter 11 restructuring is the very best course,” co-founder Arjun Thyagarajan informed TechCrunch. “We’re optimistic that the court-supervised sale course of will appeal to the best purchaser, resulting in a constructive end result for the corporate, clients, and shareholders. Strong intends to proceed working its enterprise within the odd course by this course of.”
Strong had not been capable of increase extra capital since its final funding spherical and “confronted important and expensive litigation,” in accordance with the chapter filings.
In 2023, Strong was the goal of a lawsuit filed by Series B investor FTV Capital, which was making an attempt to get its $61 million funding again.
FTV Capital’s go well with claimed, amongst different issues, that Strong co-founders Thyagarajan and Raghav Lal “lied to FTV regarding the firm’s revenues, buyer churn, and enterprise usually and additional deceived FTV.” The agency additionally requested for Thyagarajan and Lal to resign.
The startup’s co-founders pushed again, submitting a countersuit towards FTV and its associate Robert Anderson. In it, they described FTV as “an aggressive personal fairness agency,” and claimed that “the second its funding was now not worthwhile, [the firm was] resorting to made-up claims of fraud, threats and strong-armed ways to attempt to get its a refund.”
In response to the chapter submitting, the FTV litigation was dismissed in April of 2024 “with prejudice underneath a settlement reached by the events.”
As of the petition date, Strong stated its capital construction consisted of unsecured commerce debt totaling roughly $760,000 with “a restricted quantity of present income” and roughly $7 million in money readily available with roughly $2 million of that held in non-liquid reserve accounts. It claims to now solely have three staff.
The corporate has filed for chapter underneath subchapter V, which imposes shorter deadlines for submitting reorganization plans and permits for better flexibility in negotiating restructuring plans with collectors.
Strong shouldn’t be the primary BaaS startup to file for chapter. Final April, Synapse famously filed for Chapter 11, hoping to promote its property in a $9.7 million hearth sale to a different fintech, TabaPay. However TabaPay walked.
One factor each startups had in widespread? Evolve Financial institution & Belief was a associate financial institution. Notably, one other fintech — Mercury — just lately declared that it ended its relationship with Evolve.
Fintech Enterprise Weekly’s Jason Mikula and RK | Consultants posted in regards to the chapter on X. In response to Mikula, Strong’s 20 largest unsecured collectors embrace Amazon (AWS), regulatory consulting store FS Vector, Visa, Plaid, Trulioo, Spade, and quite a few legislation companies.
TechCrunch reached out to FTV for remark however had not heard again on the time of writing.
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