Marqeta buys fintech Power Finance in $275M all-cash deal, its first acquisition
Marqeta 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 one-third of the purchase price is payable over a two-year period, subject to certain undisclosed conditions. And, if one undisclosed 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, New York-based Power Financeannounced 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.https://jac.yahoosandbox.com/1.6.0/safeframe.html
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 issuing and transaction processing.” In other words, it provides the tools for companies — fintechs and otherwise — to provide cards, wallets and other payment mechanisms. Its customers include Block (formerly known as Square), Uber, Google, Affirm, DoorDash, JPMorgan, Citi, Goldman Sachs, Instacart and Ramp, among others.
Power’s first product is a credit card issuance program, which is designed for companies, brands and banks to offer embeddable fintech experiences, such as customized 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” offered in its credit product. Specifically, the acquisition will give Marqeta customers a way to launch “a wide range” of credit products and constructs, the company said, by incorporating Power’s data science toolbox and its ability to embed experiences inside existing mobile and web applications into its own offering. Historically, Marqeta was 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 because of the path Marqeta blazed in modern card issuing, demonstrating the possibilities in payments with flexible and modern payment infrastructure. At Power, we built a full-stack, cloud-native credit card issuance platform, and by becoming a part of Marqeta we have the ability now to bring this innovation to a much larger market at global scale.”https://jac.yahoosandbox.com/1.6.0/safeframe.html
News of the buy comes just three days after Marqeta revealed that it had tapped Simon Khalaf to serve as its new CEO, effective January 31. Khalaf joined Marqeta in June of 2022 as its chief product officer and began leading the company’s go-to-market organization last August. Founder Jason Gardner, who has been vocal about his belief that running a public company is “foundationally different from running a private company,” will transition into an executive chairman role.
In an exclusive interview, Khalaf told TechCrunch that Marqeta “definitely felt that the Power team has built something unique and something that aligns with Marqeta’s mission and who we cater to.”
“Our approach to credit so far has been the processor, but as customers have been asking us to do a lot of things in a highly innovative way, we looked at it and said, ‘We do need to own the full stack,’” Khalaf said.
Rather than spend the resources to attempt to build out 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 fit both culturally and technologically.https://jac.yahoosandbox.com/1.6.0/safeframe.html
Marqeta, he said, is operating under the premise that consumers increasingly want personalization.
“If you look at a credit card, not much innovation has happened to it,” Khalaf told TechCrunch. “But a lot of folks want a credit card to become alive 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 has built.”
“Most” of Power’s nearly 30 employees will be joining Marqeta, the company said. Presently, Marqeta has nearly 1,000 employees.
Generally, Khalaf said that Marqeta has been witnessing hypergrowth but is now moving into a sustainable and profitability phase.https://jac.yahoosandbox.com/1.6.0/safeframe.html
“We’re highly focused on sustainable, mature and predictable operating cadences for the company,” he said. “The embedded finance market is growing very fast and it’s a market we’re going to spend a lot of energy on. The way we deliver products, and have packaged them to be API first….the embedded finance space is made for us, and we’re made for them. It’s a perfect match.”
Through the acquisition, Khalaf said Marqeta hopes also to meet increasing demand from emerging, mobile-first retailers, creator marketplaces and labor marketplaces.
“We’re going to see a lot of new demand around co-brands,” he said. “Businesses want a branded card that is alive that is integrated with their properties. And we’re going to be able to serve that market better versus 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 — which compared to $131.5 million in the same quarter of the prior year. Meanwhile, it reported that total processing volume rose by 54% to $42 billion. Once valued at $18 billion, Marqeta has — like many other fintechs — seen its stock price and valuation drop thanks to high inflation and a rising interest rate environment. Still, the company has continued to win new customers and grow its relationships with existing ones while beating analysts’ estimates.https://jac.yahoosandbox.com/1.6.0/safeframe.html
In appointing Khalaf as Marqeta’s new CEO, Gardner told investors that his goal was to find a leader “who would take Marqeta to the next level” after he had taken the company “from Zero to 1.”
“That meant finding a leader with experience in 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 be Marqeta’s next CEO. His previous CEO experience and decades of experience scaling large technology organizations such as Twilio, Verizon, Yahoo, and Novell, his product insight, and his 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 that further acquisitions were not out of the question but also would be very deliberate.
“Acquisitions is not a strategy, more of a tactic,” he told TechCrunch. “You decide which customers we want to serve, which market you want to go after and then you evaluate whether you build, buy or partner. That’s what we’re focused on right now.”https://jac.yahoosandbox.com/1.6.0/safeframe.html
Marqeta’s acquisition is just one of several M&A deals in the fintech space so far this year.