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.
About a third of the purchase price is paid over a two-year period subject to certain undisclosed conditions. And, if a particular undisclosed milestone 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 power finance announced last September that it had raised $16.1 million in 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 at the time had also announced a $300 million credit facility.
Oakland, California-based Marqeta, which went public in 2021 and is today valued at nearly $3.7 billion, touts that it “provides 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 provide cards, wallets, and other payment mechanisms. His clients include Block (formerly known as Square), Uber, Google, Affirm, DoorDash, JP Morgan, Citi, Goldman Sachs, Instacart, and Ramp, among others.
Power’s first product is a credit card issuance program, which is designed for businesses, brands, and banks to offer embeddable fintech experiences, such as personalized credit card programs, targeted promotions, and personalized rewards, into existing mobile and web applications. .
Marqeta’s main objective with the purchase is to expand and “significantly accelerate the capabilities” it offers in its credit product. Specifically, the acquisition will give Marqeta customers a way to launch “a broad range” of products and credit builds, the company said, by incorporating Power’s data science toolbox and its ability to embed experiences within existing mobile and web applications in your own offer. Historically, Marqeta has 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 general manager Randy Fernando will lead product management for Marqeta’s credit card platform.
In a written statement, Fernando said: “Companies like ours were possible thanks to the path that Marqeta paved in the issuance of modern cards, demonstrating the possibilities in payments with a flexible and modern payment infrastructure. At Power, we built a complete cloud-native credit card issuance platform, and by becoming part of Marqeta, we now have the ability to bring this innovation to a much larger market on a global scale.”
News of the purchase comes just three days after Marqeta revealed that it had contacted Simon Khalaf. to serve as its new CEO, as of 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 has been outspoken in his belief that Running a public company is “fundamentally different from running a private company.”, will transition into a role of CEO.
In an exclusive interview, Khalaf told TechCrunch that Marqeta “definitely felt that the Power team has built something unique and that it aligns with Marqeta’s mission and who we serve.”
“Until now, our approach to credit has been processor, but because customers have been asking us to do a lot of things in a very innovative way, we looked at it and said, ‘We need to own the full stack.’” Khalaf said.
Rather than spend resources trying to develop the technology it wanted to be able to offer its customers, Marqeta decided to explore acquisition targets. Some, Khalaf admits, were open to talks, while others were not. The company ended up deciding that Power was the best option both culturally and technologically.
Marqeta, he said, operates on the premise that consumers increasingly want personalization.
“If you look at a credit card, not a lot of innovation has happened to it,” Khalaf told TechCrunch. “But a lot of people want a credit card to come alive with a credit limit that dynamically changes based on the user’s current financial situation, with rewards that dynamically change, and most importantly, that they can integrate into their cash flows. retail or e-commerce work. …That’s what Power has built.”
“Most” of Power’s nearly 30 employees will join Marqeta, the company said. Currently, Marqeta has about 1,000 employees.
Overall, Khalaf said that Marqeta has witnessed hyper-growth, but is now moving towards a sustainable and profitable phase.
“We are very focused on sustainable, mature and predictable operating cadences for the company,” he said. “The integrated finance market is growing very fast and it is a market in which we are going to spend a lot of energy. The way that we deliver products and package them to be API first… the integrated finance space is made for us and we’re made for them. It’s a perfect combination.”
Through the acquisition, Khalaf said, Marqeta also hopes to meet growing demand from mobile retailers, creator marketplaces, and emerging job markets.
“We are going to see a lot of new demand around co-branding,” he said. “Businesses want a living brand card that is integrated with their properties. And we will be able to better serve that market instead of just issuing a piece of plastic with standard 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 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 by 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 a rising interest rate environment. Still, the company has continued to win new customers and grow relationships with existing ones, beating analyst estimates.
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 0 to 1.”
“That meant finding a leader with experience building and operating a global business at scale while simultaneously focusing on a path to profitability,” he added. “…Our board of directors concluded that Simon was the clear choice to be the next CEO of Marqeta. His prior experience as CEO and decades of experience scaling large technology organizations like Twilio, Verizon, Yahoo, and Novell, his product vision, 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 were not out of the question, but would also be highly deliberate.
“Acquisitions are not a strategy, more of a tactic,” he told TechCrunch. “You decide which customers we want to serve, which market you want to go to and then you evaluate whether to build, buy or partner. That’s what we’re focused on right now.”
The deal is just one of several M&A deals in the fintech space so far this year.