Marqeta buys fintech Power Finance in a $275 million all-cash transaction, its first acquisition

Marqeta buys fintech Power Finance in a 5 million all-cash transaction, its first acquisition

Marqueta has agreed to acquire two-year-old fintech infrastructure startup Power Finance for $223 million in cash, marking the first acquisition in the publicly traded company’s 13-year history.

Approximately one-third of the purchase price will be paid over a period of two years, subject to certain undisclosed terms. And if a certain undisclosed milestone is reached within the next 12 months, Marqeta will pay an additional $52 million for the startup, bringing the total purchase price to $275 million.

Founded in early 2021 by Randy Fernando and Andrew Dust, New York-based Power Finance announced last September that it had raised $16.1 million in a seed funding round led by Anthemis and Fin Capital. Other sponsors include CRV, Restive Ventures (formerly Financial Venture Studio), Dash Fund, Plug & Play and a group of angel investors. The company also announced a $300 million line of credit at the time.

Oakland, Calif.-based Marqeta, which went public in 2021 and is now valued at nearly $3.7 billion, announces it will provide “a single, global, cloud-based open API platform for the … of modern card and transaction processing”. In other words, it gives businesses (fintechs and others) the tools to deploy cards, wallets and other payment mechanisms. Customers include Block (formerly known as Square), Uber, Google, Affirm, DoorDash, JP Morgan, Citi, Goldman Sachs, Instacart, and Ramp.

Power’s first product is a credit card issuance program designed for businesses, brands and banks to deliver embeddable fintech experiences such as personalized credit card programs, targeted promotions and personalized rewards in existing mobile and web apps.

Marqeta’s main goal with the purchase is to expand and “significantly accelerate” the features it offers in its lending product. Specifically, the acquisition will give Marqeta customers the ability to launch “a wide variety” of products and credit configurations, the company said, leveraging Power’s data science toolbox and its ability to integrate experience into existing mobile devices and incorporate web applications. in your own devices. to offer. . In the past, Marqeta focused on debit and prepaid cards, but in February 2021 it officially expanded into consumer credit cards to help other brands launch credit card programs.

Once the transaction closes, Randy Fernando, CEO of Power Finance, will lead product management for Marqeta’s credit card platform.

In a written statement, Fernando said: “Companies like ours have been possible thanks to the path Marqeta has paved by issuing modern cards and demonstrating the capabilities of payments with a flexible and modern payment infrastructure. At Power, we built a fully cloud-native credit card issuance platform and by becoming part of Marqeta we now have the opportunity to take this innovation to a much larger market globally.”

The news of the purchase comes just three days after Marqeta revealed he had been in contact with Simon Khalaf. act as the new CEO effective January 31. Khalaf joined Marqeta in June 2022 as Chief Product Officer and began leading the company’s merchandising organization last August. Founder Jason Gardner, who openly believes that running a public company is “fundamentally different than running a private company,” will transition to the role of CEO.

In an exclusive interview, Khalaf told TechCrunch that Marqeta “definitely felt like the Power team built something unique and aligned with Marqeta’s mission and who we serve.”

“Before, our approach to credit was processor-based, but because customers asked us to do a lot of things in very innovative ways, we looked at that and said, ‘We have to own the whole stack,’” Khalaf said.

Rather than dedicate resources to developing the technology it wanted to offer its customers, Marqeta decided to explore acquisition targets. Some, Khalaf admits, are open to negotiation, others are not. The company ultimately decided that Power was the better match, both culturally and technologically.

Marqeta assumes that consumers want more and more personalization.

“If you look at a credit card, there hasn’t been much innovation,” Khalaf told TechCrunch. “But many people want a live credit card with a credit limit that dynamically adjusts to the user’s current financial situation, dynamically changing rewards, and most importantly, that can be integrated into their cash flows.” Retail or e-commerce work. … That’s what Power built.

“Most” of Power’s nearly 30 employees will join Marqeta, the company said. Marqeta currently has approximately 1,000 employees.

Overall, Khalaf said Marqeta has experienced strong growth but is now moving towards a sustainable and profitable phase.

“We are very focused on sustainable, mature and predictable operating rhythms for the business,” he said. “The integrated financial market is growing very fast and it is a market in which we will invest a lot of energy. The way we deliver and package products to be API first… the integrated financial space is made for us and we are made for them. It’s a perfect match.”

Through the acquisition, Khalaf said, Marqeta also hopes to meet growing demand from wireless retailers, creative markets and emerging job markets.

“We’re going to see a lot of new demand around co-branding,” he said. “Companies want a living brand card integrated into their premises. And we can better serve that market instead of just handing out a piece of plastic with standard premiums.”

In November, Marqeta posted a third quarter net loss of $53.2 million, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $13.6 million and revenues of $191.6 million, compared to $131.5 million in the same quarter last year. Meanwhile, total processing volume would have increased by 54% to $42 billion. Once valued at $18 billion, Marqeta, like many other fintechs, has seen its share price and valuation fall due to high inflation and an environment of rising interest rates. Still, the company continued to win new customers and deepen relationships with existing customers, beating analyst estimates.

Gardner named Khalaf as Marqeta’s new CEO, telling investors his goal is to find a leader “who will take Marqeta to the next level” after leading the company “from 0 to 1.”

“That meant finding an executive with experience building and running a global business at scale, while also focusing on the path to profitability,” he added. “…Our board concluded that Simon was the right choice to become Marqeta’s next CEO. His previous CEO experience and decades of experience scaling large technology companies such as Twilio, Verizon, Yahoo and Novell, his product vision and relentless focus on the customer experience will serve us well as we enter the next phase of our growth. .”

For his part, Khalaf said further acquisitions are not out of the question, but will also be considered very carefully.

“Acquisitions are not a strategy, they are more of a tactic,” he told TechCrunch. “You decide which customers you want to serve, which market you want to enter, and then you decide whether to build, buy or collaborate. That is what we are focusing on now.”

The acquisition of Marqeta is just one of many mergers and acquisitions in the fintech space this year.

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Source: La Neta Neta