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

The three co-founders start-up alternative financing Tube are stepping down from their roles as company executives in one of the most dramatic management changes the world of fintech startups has seen in a long time.

based in miami Tube said today that it is looking for a “veteran” CEO as Harry Hurst, who has been the face of the company since its inception in 2019, moves from his role of co-CEO to vice president.

Co-Founder and Co-CEO Josh Mangel will temporarily assume the role of CEO, while Hurst leads the search and subsequent leadership transition with the help of a global executive recruiting firm. Once a new CEO has been named, Mangel will become Pipe’s CEO, 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 executive vice president of engineering, will assume the role of chief technology officer.

“We are looking for someone who has significant operating experience scaling businesses from product-to-market to market leadership to rapidly growing on a global scale,” Hurst said.

The news, shared exclusively with TechCrunch, is a bit surprising considering that in its heyday just 18 months ago, Pipe was among the loudest fintechs with Hurst as its public leader. In May 2021, the company had raised $250 million with a valuation of $2 billion in a round that Hurst had described as “massively underwritten”.

It’s certainly not the first time a company founder has resigned to allow for new leadership. But it’s very unusual for all three co-founders to do it at the same time. And at this stage in a business.

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

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

The co-founders remain Pipe’s three largest shareholders, according to Hurst. When asked what percentage of their shares the founders sold or how many employees took company loans 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 holdings. ”

Since its founding, the startup says 22,000 businesses have signed up for Pipe and $7 billion of ARR (annual recurring revenue) has been connected to the Pipe. platform. Hurst insists that traction isn’t the issue here, telling TechCrunch that Pipe is on track to “triple” its revenue this year compared to last year.

“Nasdaq by revenue”

When Pipe started three years ago, its goal was to provide SaaS companies with a financing alternative outside of venture capital or debt. It billed itself as the “Nasdaq of Revenue,” touting its mission as providing a way for SaaS companies to cash in on their future revenue up front by matching them with investors in a marketplace that paid a discount rate for value. annual of those contracts.

The goal of the platform was to offer companies with recurring income streams access to capital so they wouldn’t dilute their ownership by accepting outside capital or being forced to borrow.

Armed with $50 million in strategic growth financing From companies like HubSpot, Okta, Slack, and Shopify, Pipe announced in March 2021 that it would start expanding beyond serving strictly 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 VC fund administration and management fees were being funneled into its platform, for example, according to Hurst.

In February, Pipe announced that it was expand into media and entertainment financing with the acquisition of London-based Purely Capital. With that first-ever purchase, Pipe created a new media and entertainment division called Pipe Entertainment with the goal of giving independent distributors the opportunity to market their revenue streams in the same way that a SaaS company would.

Expanding into so many new verticals felt like a gamble to some observers. Working with SaaS companies with their boring, predictable recurring revenue felt very different from working with independent film production companies which, as Hurst himself noted, sometimes had to wait “three to five years to get their money back and continue with his next projects. .”

Hurst seemed so confident in Pipe’s “capital markets engine” that he believed it could support “the entire income asset class” 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 (the buying and selling of future revenue) on the platform comes from non-SaaS verticals. And surprisingly, Pipe Entertainment is one of the fastest growing verticals on its platform, according to Hurst.

“Overall, vertical diversification has been positive and we plan to continue to drive additional vertical expansion,” he told TechCrunch.

Clearly, a lot has changed since February when the markets took a dramatic turn. Since then, valuations have been questioned, more than 100,000 tech workers have been laid off and inflation has risen. Pipe currently has 108 employees. He has not made 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 Pipe “is well positioned.”

He added: “Unlike many companies in this challenging environment, we have the resources and half a decade of experience to make long-term strategic decisions from a position of strength to ensure we continue to deliver more value for our customers and investors. ”

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

Increasingly competitive landscape

While revenue-based financing has been around for decades, it has become a more mainstream way of boosting SaaS startups in recent years.

Alum Bow Y Combinator came out of stealth in January with $150 million in debt financing 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 seed capital “, among other things. In August, Arc, which now describes itself as a digital bank for SaaS companies, landed another $20 million in a Serie A round led by Left Lane.

The Spanish-American team Capchase, which says it turns “recurring revenue from SaaS 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 on another $400 million in debt.

based in Austin Founder in August it announced that 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 earn up to 50% of their annual recurring revenue (ARR) in cash up front.

crowd, which secured $10 million in capital co-led by Citi and Dutch growth equity firm Global Cleantech Capital, said it expanded this year from providing invoice-based financing to SaaS-focused SMEs to also give them recurring income access to the seed capital they need without having to dilute your equity.

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

“After our public launch in 2020, we saw a lot of follow-up players enter the space, and we understand that 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.”