Marketa buys fintech powerhouse Finance in $275M all-cash deal, its first acquisition • TechCrunch

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Marketa It has agreed to buy a two-year-old fintech infrastructure startup Power Finance For $223 million in cash, it marks the first acquisition in the publicly traded company’s 13-year history.

One-third of the purchase price will be paid over a period of two years subject to certain undisclosed conditions. And if an undisclosed milestone is reached within the next 12 months, Marketa said it will pay the startup an additional $52 million, bringing the total acquisition price to $275 million.

Founded in early 2021 by New York-based Randy Fernando and Andrew Dust Power Finance It announced last September Raised $16.1 million A seed funding round co-led by Anthemis and Fin Capital. Other backers 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 credit facility at the time.

Marqeta, based in Oakland, California, is Goes public in 2021 Today valued at nearly $3.7 billion, it claims to “provide a single, global, cloud-based, open API platform for modern card issuance and transaction processing.” In other words, it provides the tools for companies – fintechs and others – to issue cards, wallets and other payment methods. Its clients 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 offering program designed to provide companies, brands and banks with embeddable fintech experiences such as personalized credit card programs, targeted promotions and personalized rewards within existing mobile and web applications.

Marketa’s main goal is to expand and “significantly accelerate” its loan product offering capabilities. Specifically, the company said the acquisition will give Marqeta clients a “wider range” of loan products and structures to launch, with the ability to embed Power’s data science toolbox and experiences in existing mobile and web applications into its own offering. Historically, Marketa focused on debit and prepaid cards, but in February 2021, it formally Expanded into the consumer credit card space To help other brands launch credit card programs.

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

In a written statement, Fernando said: “Marketa’s path to modern card issuance has made companies like ours possible because of its exposure to payments with a flexible and modern payment infrastructure. At Power, we built a full-stack, cloud-native credit card issuance platform, and becoming part of Marketa By doing so, we now have the ability to bring this innovation to a much larger market globally.

News of the buyout comes three days after Marketa revealed it had tapped Simon Khalaf to serve as its new CEO, with effect from January 31. He joined Marketa in June 2022 as its Chief Product Officer. Founder Jason Gardner has been vocal about his hopes Running a public company is “fundamentally different from running a private company,” will move to the position of acting chairman.

In an exclusive interview, Khalaf told TechCrunch, Marqeta “felt strongly that the Power team had created something unique and aligned with Marqeta’s mission and who we cater to.”

“Our debt approach has been functional so far, but as customers asked us to do a lot of things in a more innovative way, we looked at it and said, ‘We want to own the whole stack,'” Khalaf said.

Instead of spending resources on developing the technology it wanted to offer to its customers, Marketa decided to explore acquisition targets. Some, Khalaf admits, others were open to negotiation. The company decided that Power was a good fit both culturally and technologically.

Marketa, he said, operates under the premise that consumers increasingly want customization.

“If you look at a credit card, there’s not a lot of innovation going on,” Tech told Crunch. “But a lot of people want the credit card to be alive with a credit limit that changes dynamically based on a user’s current financial situation, rewards change, and more importantly, they can integrate into their e-commerce or retail business. …That’s what Power built.

“The majority” of Power’s nearly 30 employees will join Marqeta, the company said. Currently, Marqeta has nearly 1,000 employees.

In general, Marketa has seen high growth, but is now moving into a stable and profitable phase, said Khalaf.

“We are very focused on stable, mature and predictable operational capabilities for the company,” he said. “The embedded finance market is growing at a very fast pace, and it’s a niche market. The way we offer products, and we’ve packaged them as an API first….The embedded finance space was built for us, and we’re built for them. It’s a perfect match.

With the acquisition, Marketa hopes to meet growing demand from emerging, mobile-first retailers, creator markets and labor markets, Khalaf said.

“We’re going to see a lot of new demand around co-brands,” he said. “Businesses want a living branded card that is integrated with their assets. And we can better serve that market as opposed to offering pieces of plastic with fixed rewards.

In November, Marqeta reported a third-quarter net loss of $53.2 million, adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of $13.6 million and earnings of $191.6 million — up from $131.5 million in the same quarter a year earlier. Meanwhile, total processing volume rose 54% to $42 billion, it said. Once valued at $18 billion, Marqeta – like many fintechs – has seen its share price and valuation fall thanks to a high inflation and rising interest rate environment. However, the company continues to win new customers and grow its relationships with existing ones while beating analysts’ estimates.

In appointing Khalaf as Marketa’s new CEO, Gartner told investors his goal was to find a leader who would “take Marketa to the next level” after taking the company “from zero to 1.”

“That means finding a leader with experience in building and running a global business, while staying focused on the path to profitability,” he added. “…our board of directors decided that Simon was the clear choice to be Marketa’s next CEO. His previous CEO experience and decades of experience scaling large technology companies such as Twilio, Verizon, Yahoo and Novell, along with his product insights and relentless focus on customer experience will serve us well as we look to enter the next phase of our growth. .”

For his part, Khalaf said further acquisitions are not out of the question, but very deliberate.

“Acquisition is not a strategy, more a tactic,” he told TechCrunch. “You decide which customers we want to serve, which market you want to go after, and evaluate whether you’re building, buying or partnering. That’s what we’re focused on right now.

The acquisition of Marketa is one Many M&A deals Where fintech is so far this year.

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