Silo, a Bay Area food supply chain startup, has hit a rough patch. TechCrunch has learned that the company on Tuesday laid off roughly 30% of its staff, or north of two dozen employees. Silo has confirmed the headcount reductions, clarifying the cuts were across the board and not focused on individual departments. Silo shared […]
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Dating apps and other social friend-finders are being put on notice: Dating app giant Bumble is looking to make more acquisitions.
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After a tumultuous year, banking-as-a-service (BaaS) startup Synapse has filed for Chapter 11 bankruptcy and its assets will be acquired by TabaPay, according to the two companies.
The deal is pending bankruptcy court approval.
Founded in 2017, Mountain View-based TabaPay is an instant money movement platform that Softbank backed in a 2022 round of an undisclosed sum. It is not clear how much venture capital it has raised.
San Francisco-based Synapse, which operated a platform enabling banks and fintech companies to develop financial services, was founded in 2014 by Bryan Keltner and India-born CEO Sankaet Pathak.
In 2019, TechCrunch reported on the company’s $33 million Series B raise led by Andreessen Horowitz after rebranding from SynapseFi. That was the company’s last known fundraise. In total, it brought in just over $50 million in venture capital. Other backers include Trinity Ventures and Core Innovation Capital.
In announcing the acquisition, TabaPay pointed out that Synapse made Deloitte’s 2023 Fast, posting 650%+ growth over a five-year period. However, it had two large-scale layoffs in the past year, blaming slowing growth.
Last October, Synapse laid off 86 people, or about 40% of the company. This was after the startup had previously let go of 18% of its workforce last June. At the time, Synapse said “the current macroeconomic conditions” had begun to impact its clients and platforms, affecting its anticipated growth.
Besides having to lay off staff, Synapse also ran into difficulties last year after having served as an intermediary between banking partner Evolve Bank & Trust and business banking startup Mercury. When Evolve and Mercury decided to end their respective relationships with Synapse and work directly with each other, Evolve and Synapse were reportedly at odds with each other as the relationship was winding down.
In particular, the entities were reportedly blaming each other “over who was responsible for a “deficit” of over $13 million in “for benefit of” accounts holding customer funds at Evolve, among myriad other issues” going back at least three years. Neither company ever addressed the allegations.
In a Medium post, Pathak said he was “excited” about the acquisition, writing: “Leveraging TabaPay, customers will join a thriving ecosystem of 15 bank partners, 16 network connections, 2,500+ existing clients, and domain expertise of the collective team.”
Rodney Robinson, the co-founder and CEO of TabaPay, said in a written statement that Synapse’s assets would be a “great and natural fit” to its existing services. to grow its offerings “in tandem with providing continuity to Synapse clients and banks.”
The banking-as-a-service space as a whole has faced turbulence in recent times. Several players in the industry have announced layoffs over the past year. Most recently, Synctera cut about 15% of its staff. Treasury Prime slashed half its 100-person staff in February, a year after it announced a $40 million Series C raise. Figure Technologies, which includes Figure Pay, laid off 90 people — or about 20% of its workforce — last July.
Meanwhile, Piermont Bank recently reportedly cut ties with startup Unit, Fintech Business Weekly reported.
BaaS refers to various types of business models such as offering bank-like services to other players in the industry; or providing the charter and bank services but not doing the underwriting; or offering banking components, which is more of a fintech that isn’t a bank but provides some bank-like services without a charter.
Players in BaaS have faced challenges, especially regulatory crackdowns in 2023. For instance, those providing BaaS to fintech partners accounted for more than 13% of severe enforcement actions from federal bank regulators last year, S&P Global Market Intelligence reports.
Rohit Mittal, co-founder and CEO of Stilt, which offers financial products and resources for immigrants, knows a little something about this. His company was acquired by JG Wentworth in late 2022.
Mittal noted in a post on X that despite banking-as-a-software being around for a decade, it is still an industry devoid of multiple billion-dollar businesses, writing, “Investors have burned $1B+ and created less value than that. The whole vertical is still very small in terms of value created through exits.”
He provided examples, including Synapse and Solid’s lawsuits with investor FTV Capital made public last October, in which FTV demanded its money be returned.
With regard to Solid, co-founder and CEO Arjun Thyagarajan told TechCrunch via email earlier this month that “the case has been settled, and as a result, FTV is no longer involved in the business.”
There has been other M&A activity, too. Last June, FIS, the fintech giant that runs a wide range of payment, banking and investment services, announced it had acquired Bond, a startup that specialized in embedded finance.
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Consolidation continues apace in the world of security. Sources tell us that Lacework — a cloud security startup that was valued at $8.3 billion post-money in its last funding round — is in talks to be acquired by another security player, Wiz, for a price of just $150–$200 million.
Sources close to the negotiations said that the two companies have already signed a letter of intent and described the state of negotiations as “somewhere in the middle.” That is to say, the acquisition is not yet completed and the deal could still fall through. Although both work in the wider area of cloud security, sources tell us that there is relatively little competitive overlap between the two companies so it would likely be a technology-plus-talent-plus-customer acquisition play. We are still trying to find out more terms of the deal, such as whether it would be in stock, cash, or a mix.
Wiz has said on a number of occasions that it’s looking to hit $1 billion in annual recurring revenue ahead of an IPO. We understand that its soft deadline is end of 2025, but considering it announced ARR of only $350 million in February 2024, the company has to get aggressive on bulking up to get there. Laceworks, we understand, has ARR of around $100 million.
The Information has reported some of the above details today too.
The deal underscores a story of two parts.
Part one: Security startups continue to attract a lot of funding attention, but some companies that have reached high valuations over recent years are struggling to justify those numbers and are considering their options as they come close to the end of their funding runway.
From what we understand, Laceworks’ investors — the longer list includes Snowflake Ventures, GV, General Catalyst, Tiger Global, and many more — were shopping the company around to potential buyers, which is how Wiz came into the frame.
Laceworks, we should note, is not the only security business getting a valuation haircut. Just last week, TechCrunch broke the news that Noname was in talks to be acquired by Akamai for $500 million, after last being valued at $1 billion.
Part two: Other players are emerging as consolidators in this process. Wiz — valued at around $10 billion — is one of them.
The company is positioning itself as a one-stop-shop for all things cloud security en route to its IPO. Earlier this month Wiz acquired Gem Security for $350 million, and it sounds like the M&A will not end with Laceworks.
“Wiz has experienced unprecedented organic growth since its inception, and we are dedicated to pushing this growth even further,” a spokesperson from Wiz said in a statement provided to TechCrunch. “Simultaneously, we recognize that consolidation is the future of the security industry and therefore are actively engaged in discussions with companies across the industry. We are always exploring compelling M&A opportunities that will enhance both our technological capabilities and business expansion, as we strive to build the world’s leading cloud security platform.”
Lacework, founded nearly nine years ago and based in San Jose, Ca., has raised over $1.8 billion from investors over the years. Most of that funding — $1.3 billion — ties to a late November 2021 round that, at the time, valued the company at $8.3 billion.
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