Marketa 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 is payable over a period of two years, subject to certain undisclosed conditions. And if one secret milestone in particular is met within the next 12 months, Marqeta said it will pay an additional $52 million for the startup, bringing the total acquisition price to $275 million.
Founded in early 2021 by Randy Fernando and Andrew Dust, based in New York Wealth financing announced last September that it had raised $16.1 million in a seed funding round led by Anthemis and Fin Capital. Other lenders include CRV, Restive Ventures (formerly Financial Venture Studio), Dash Fund, Plug & Play and a group of investors. The company had also announced a $300 million credit facility at the time.
Oakland, California-based Marqeta, which went public in 2021 and is today valued at nearly $3.7 billion, touts that it offers “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 otherwise – to offer 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 integrate fintech experiences such as tailored credit card programs, targeted promotions and personalized rewards into existing mobile and web applications.
Marqeta’s main goal with the purchase is to expand and “significantly accelerate” the capabilities of its credit product. Specifically, the acquisition will give Marqeta customers a way to launch “a broad range” of credit products and constructs, the company said, by incorporating Power’s data science toolbox and its ability to embed experiences into existing mobile and web applications. in its own offer. Historically, Marqeta has been 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 the product management of Marqeta’s credit card platform.
In a written statement, Fernando said: “Companies like ours were made possible by Marqeta’s journey into modern card issuance, demonstrating the possibilities of payments with a flexible and modern payment infrastructure. At Power, we built a full-stack, cloud-native credit card issuance platform, and by becoming part of Marqeta we now have the opportunity to bring this innovation to a much larger market on a global scale.”
News of the purchase comes just three days after Marqeta revealed it tapped Simon Khalaf to serve as the new CEO, effective January 31. Khalaf joined Marqeta in June 2022 as Chief Product Officer and began leading the company’s go-to-market organization last August. Founder Jason Gardner, who has spoken out about his belief that running a public company is “fundamentally different from running a private company”, will transition to the role of executive chairman.
In an exclusive interview, Khalaf told londonbusinessblog.com that Marqeta “definitely felt like the Power team built something unique and something that aligns with Marqeta’s mission and who we’re focused on.”
“Our approach to credit so far has been the processor, but because customers have asked us to do a lot of things in a very innovative way, we’ve looked at it and said, ‘We’ve got to own the full stack.'” said Khalaf.
Instead of spending the resources building out the technology it wanted to offer its customers, Marqeta decided to explore acquisition targets. Some, Khalaf admits, were open to conversation, others were not. The company ultimately decided that Power was the best fit for him both culturally and technologically.
Marqeta, he said, assumes that consumers increasingly want personalization.
“If you look at a credit card, not a lot of innovation has happened to it,” Khalaf told londonbusinessblog.com. “But many people want a credit card to come to life with a credit limit that changes dynamically based on a user’s current financial situation, with rewards that change dynamically, and more importantly, that they can integrate into their e-commerce or retail workflows …That’s what Power built.”
“Most” of Power’s nearly 30 employees will join Marqeta, the company said. Currently, Marqeta has nearly 1,000 employees.
Overall, Khalaf said Marqeta has witnessed hypergrowth but is now entering a sustainable and profitable phase.
“We are strongly focused on sustainable, mature and predictable operational cadence for the business,” he said. “The market for embedded finance is growing very fast and it is a market that we will spend a lot of energy on. The way we deliver products and package them to be API first… the built-in financial space is made for us, and we are made for them. It’s a perfect match.”
Through the acquisition, Marqeta also hopes to meet increasing 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. “Companies want a brand map that is alive and integrated with their properties. And we will be able to serve that market better instead of just issuing a piece of plastic with standard rewards.”
In November, Marqeta reported a net loss of $53.2 million in the third quarter, adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of $13.6 million and revenue of $191.6 million — compared to $ 131.5 million in the same quarter of the previous year. Meanwhile, it reported that total processing volume increased 54% to $42 billion. Once valued at $18 billion, Marqeta – like many other fintechs – has seen its share price and valuation fall thanks to high inflation and rising interest rates. Still, the company has continued to win new customers and expand relationships with existing ones, while beating analyst estimates.
In appointing Khalaf as Marqeta’s new CEO, Gardner told investors his goal was to find a leader “who would take Marqeta to the next level” after taking the company “from zero to one.”
“That meant finding a leader with experience building and operating a global business at scale, while also focusing on a path to profitability,” he added. “…Our board of directors concluded that Simon was the clear choice to become Marqeta’s next CEO. His prior CEO experience and decades of experience scaling large technology organizations such as Twilio, Verizon, Yahoo and Novell, his product insight and relentless focus on customer experience will serve us well as we move into the next phase of our grow. .”
For his part, Khalaf said further acquisitions were not out of the question, but would also be very well considered.
“Acquisitions are not a strategy, more of a tactic,” he told londonbusinessblog.com. “You determine which customers we want to serve, which market you want to enter and then you evaluate whether you build, buy or partner. That is what we are focusing on now.”
The acquisition of Marqeta is just one of many M&A deals in the fintech space so far this year.
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