After a turbulent year, banking-as-a-service (BaaS) startup Synapse has filed for Chapter 11 bankruptcy and its assets will be acquired by TabaPay, the companies said.
The transaction is pending bankruptcy court approval.
Founded in 2017, Mountain View-based TabaPay is an instant money transfer platform backed by SoftBank in a private funding round in 2022. It's not clear how much venture capital has been raised.
San Francisco-based Synapse operates a platform that enables banks and fintech companies to develop financial services, and was founded in 2014 by Brian Keltner and Indian-born CEO Sankaet Pathak. Established in .
In 2019, TechCrunch reported on the Andreessen Horowitz-led company's $33 million Series B funding after rebranding from SynapseFi. This was the company's last known financing. In total, he received an influx of just over $50 million in venture capital. Other backers include Trinity Ventures and Core Innovation Capital.
In announcing the acquisition, TabaPay noted that Synapse has recorded over 650% growth in five years and was named to Deloitte's 2023 Fast 500. However, the company has made two large-scale layoffs in the past year due to slowing growth.
Last October, Synapse laid off 86 people, about 40% of the company. This came after the company laid off 18% of its workforce in June last year. At the time, Synapse said “current macroeconomic conditions” were beginning to impact its customers and platform, impacting expected growth.
Synapse had to lay off staff and faced challenges last year after acting as an intermediary between banking partner Evolve Bank & Trust and business banking startup Mercury. Evolve and Synapse were reportedly at odds with each other as their relationship was dissolving when Evolve and Mercury decided to end their respective relationships with his Synapse and work directly with him.
In particular, the two companies reportedly accused each other going back at least three years “over who was responsible for more than $13 million in 'deficits' in 'for profit' accounts holding Evolve customer funds.” There is. Neither company made any mention of the allegations.
In a Medium post, Pathak said he was “excited” about the acquisition, writing: “By leveraging TabaPay, customers will join a thriving ecosystem of 15 banking partners, 16 network connections, over 2,500 existing customers, and the expertise of our collective team.”
Rodney Robinson, co-founder and CEO of TabaPay, said in a written statement that Synapse's assets will continue to grow its services “in parallel with providing continuity for Synapse customers and banks.” It said it would be a “great natural fit” with existing services to expand.
The issue of banking as a service
The entire banking-as-a-service industry has recently faced disruption. Multiple companies in the industry have announced layoffs over the past year. Most recently, Synctera cut approximately 15% of its workforce. Finance Prime cut its 100-person staff by half in February, a year after announcing a $40 million Series C raise. Figure Technologies, which includes Figure Pay, laid off 90 of his employees, about 20% of its workforce, last July.
Meanwhile, Piermont Bank recently terminated its relationship with its startup unit, FinTech Business Weekly reported.
BaaS refers to different types of business models, such as providing bank-like services to other players in the industry. or provide charter and banking services but not underwriting. Alternatively, you can also provide a banking component. This is not a bank, but more like a fintech that provides bank-like services without a charter.
BaaS players face challenges, particularly a regulatory crackdown in 2023. For example, companies offering BaaS to fintech partners accounted for more than 13% of severe enforcement actions by federal banking regulators last year, according to S&P Global Market Intelligence.
Rohit Mittal, co-founder and CEO of Stilt, a company that provides financial products and resources for immigrants, knows a thing or two about this. His company was acquired by JG Wentworth at the end of 2022.
mittal It was pointed out in the post of X Although banking-as-a-service has been around for 10 years, it remains an industry with no multibillion-dollar business, he said. We created less value than that. The industry as a whole is still very small in terms of value created through exit.”
He cited examples including Synapse and Solid's lawsuit with investor FTV Capital, made public last October, in which FTV demanded the return of its funds.
As for Solid, co-founder and CEO Arjun Thyagarajan told TechCrunch in an email earlier this month that “the lawsuit has been resolved. As a result, FTV is no longer involved in this business.”
There were other M&A activities as well. Last June, fintech giant FIS, which operates a wide range of payments, banking and investment services, announced it had acquired Bond, a startup specializing in embedded finance.
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