Strong, a fintech startup that after branded itself as “the AWS of fintech,” has formally filed for Chapter 11 chapter safety. The submitting was submitted on April 7 within the U.S. Chapter Courtroom for the District of Delaware.
Based in 2018 and previously often called Clever, Strong had raised roughly $81 million from outstanding traders, together with FTV Capital and Headline. On the peak of its momentum in August 2022, the Palo Alto-based startup introduced a $63 million Sequence B funding spherical led by FTV Capital, bringing its complete valuation to $330 million, in response to PitchBook.
Strong operated as a banking-as-a-service (BaaS) platform, enabling fintech and vertical SaaS corporations to embed monetary providers resembling banking, funds, playing cards, and even crypto merchandise by easy-to-integrate APIs. It attracted consideration for its bold positioning within the fintech area and claimed to have skilled a 10x income progress, doubled its buyer base to over 100 purchasers, and reached profitability by mid-2022.
Nevertheless, the corporate’s trajectory has shifted dramatically. In accordance with chapter paperwork, Strong is now exploring restructuring or a possible sale. Co-founder Arjun Thyagarajan expressed cautious optimism regardless of the submitting.
“After contemplating all choices, we’ve determined {that a} voluntary Chapter 11 restructuring is the perfect course,” he informed TechCrunch. “We’re optimistic that the court-supervised sale course of will entice the precise purchaser, resulting in a optimistic end result for the corporate, clients, and shareholders. Strong intends to proceed working its enterprise within the strange course by this course of.”
The chapter submitting reveals that Strong was unable to safe further capital following its final spherical and have become embroiled in pricey authorized disputes. In 2023, its main investor, FTV Capital, filed a lawsuit searching for to recuperate its $61 million funding. The agency accused co-founders Thyagarajan and Raghav Lal of misrepresenting key metrics like income and buyer churn and demanded their resignation.
In response, the founders countersued FTV and accomplice Robert Anderson, alleging aggressive and unethical conduct. They painted FTV as a personal fairness agency that turned hostile as soon as its funding underperformed, resorting to unfounded accusations and intimidation ways.
That authorized dispute has since been resolved. In accordance with the chapter submitting, the litigation with FTV was dismissed “with prejudice” in April 2024 following a settlement between each events.
As of the petition date, Strong disclosed having roughly $760,000 in unsecured commerce debt and round $7 million in money, although $2 million of that was locked in non-liquid reserves. The corporate now reportedly has simply three remaining staff.
A Restructuring or Fireplace Sale? What’s Subsequent for Strong
Strong filed underneath Subchapter V of Chapter 11, which is designed for small companies, providing quicker timelines for restructuring and extra flexibility in negotiating phrases with collectors.
Notably, Strong isn’t the one BaaS firm to face such a destiny. In April 2023, fellow BaaS startup Synapse additionally filed for Chapter 11 chapter, making an attempt to promote its belongings in a $9.7 million deal to TabaPay, which finally fell by. In each cases, Evolve Financial institution & Belief was the accomplice financial institution—a element drawing scrutiny. Not too long ago, fintech agency Mercury disclosed that it had ended its relationship with Evolve as properly.
The fallout from Strong’s chapter has reached a number of corners of the fintech ecosystem. In accordance with Fintech Enterprise Weekly, Strong’s 20 largest unsecured collectors embody main trade names like Amazon (AWS), Visa, Plaid, Trulioo, Spade, FS Vector, and several other authorized corporations. Updates on the case had been additionally shared by fintech commentator Jason Mikula and RK | Consultants on X (previously Twitter).
As of now, FTV Capital has not issued a public touch upon the matter.
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