Power Finance, a fintech infrastructure startup that has only been around for two years, will be purchased by Marqeta for $223 million in cash. This is the first acquisition that the publicly traded company has made in its 13-year history.
Under certain conditions that have not been disclosed, approximately one third of the purchase price must be paid over the course of two years. Additionally, Marqeta stated that it would pay an additional $52 million for the startup if a specific undisclosed milestone is reached within the following year, bringing the total acquisition cost to $275 million.
Power Finance, based in New York, announced in September that it had received $16.1 million from a seed funding round co-led by Anthemis and Fin Capital, which was launched at the beginning of 2021 by Randy Fernando and Andrew Dust. Plug & Play, CRV, Restive Ventures (formerly Financial Venture Studio), Dash Fund, and a group of angel investors are additional backers. A $300 million credit facility had also been announced at the time by the company.
Marqeta, headquartered in Oakland, California, claims to “provides a single, global, cloud-based, open API Platform for modern card issuing and transaction processing.” The company went public in 2021 and is currently valued at nearly $3.7 billion. To put it another way, it gives companies, whether they are fintechs or not, the tools they need to offer cards, wallets, and other payment methods. Block (formerly Square), Uber, Google, Affirm, DoorDash, JPMorgan, Citi, Goldman Sachs, Instacart, and Ramp are just a few of its clients.
Power’s first product is a credit card issuance program for businesses, brands, and banks to embed custom credit card programs, targeted promotions, and personalized rewards into existing mobile and web applications.
The primary objective of Marqeta’s acquisition is to expand and “significantly accelerate the capabilities” of its credit product. By incorporating Power’s data science toolbox and its capacity to embed experiences within existing mobile and web applications into its own offering, Marqeta customers will be able to launch “a wide range” of credit products and constructs, the company stated. Marqeta has traditionally concentrated on debit and prepaid cards; however, in February 2021, it officially entered the consumer credit card market to assist other brands in launching credit card programs.
Randy Fernando, CEO of Power Finance, will be in charge of product management for Marqeta’s credit card platform after the deal closes.
Fernando stated in a written statement, ” Marqeta paved the way for modern card issuing, demonstrating the possibilities of payments with flexible and modern payment infrastructure, which made it possible for businesses like ours to exist. We built a full-stack, cloud-native credit card issuance platform at Power, and now that we are a part of Marqeta, we can bring this innovation to a much larger global market.
The acquisition was announced just three days after Marqeta announced that Simon Khalaf would take over as CEO on January 31. In June of 2022, Khalaf became Marqeta’s chief product officer, and in August of that same year, he began leading the organization responsible for going to market. Jason Gardner, the company’s founder, will assume the role of executive chairman. Gardner has made it clear that he thinks running a public company is “fundamentally different” from running a private one.
Khalaf told that in an exclusive interview 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.”
Marqeta decided to look into acquisition targets rather than putting money into developing the technology it wanted to offer to customers. Khalaf acknowledges that some were willing to talk, while others were not. In the end, the company decided that Power was the best cultural and technological fit.
According to him, Marqeta is based on the idea that customers are increasingly seeking personalization.
Khalaf stated that, “If you look at a credit card, not much innovation has occurred to it.” But a lot of people want a credit card that is alive, with a credit limit that changes based on a user’s current financial situation, rewards that change based on the situation, and most importantly, that they can integrate into their e-commerce or retail workflows. Power has built that.”
The company stated that “most” of Power’s nearly 30 employees will join Marqeta. Marqeta currently employs nearly 1,000 people.
In general, Khalaf stated that Marqeta has experienced rapid expansion but is currently transitioning into a sustainable and profitable phase.
He stated, “We’re highly focused on the company’s sustainable, mature, and predictable operating cadences.” We will focus a lot of effort on the embedded finance market, which is expanding at a rapid pace. The embedded finance industry is made for us, and we’re made for them, thanks to the way we deliver products and have packaged them to be API first. It fits perfectly.”
According to Khalaf, Marqeta hopes to meet rising demand from emerging mobile-first retailers, creator marketplaces, and labor marketplaces through the acquisition.
He stated, “We’re going to see a lot of new demand around co-brands.” A branded card that is alive and integrated with their properties is what businesses want. In addition, rather than merely issuing a piece of plastic with standard rewards, we will be able to better serve that market.
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 in November. This was down from $131.5 million in the same quarter last year. In the meantime, it reported that the total volume of processing grew by 54% to $42 billion. Like many other fintechs, Marqeta’s stock price and valuation have decreased as a result of high inflation and a rising interest rate environment. The company was once valued at $18 billion. Nonetheless, the company has outperformed analyst estimates in both acquiring new customers and expanding its existing clientele.
Gardner told investors that he wanted to find a leader “who would take Marqeta to the next level” after he had taken the company “from Zero to 1” when he appointed Khalaf as Marqeta’s new CEO.
Our board of directors came to the conclusion that Simon should be Marqeta’s next CEO. His prior experience as CEO, his decades of scaling large technology companies like Twilio, Verizon, Yahoo, and Novell, his product insight, and his unwavering focus on the customer experience will benefit us as we move into the next phase of our growth.
Khalaf, on the other hand, stated that additional acquisitions were not out of the question but would also be very carefully planned.
He stated that, “Acquisitions is more of a tactic than a strategy.” After determining which customers we want to serve and which markets you want to target, you decide whether to build, buy, or partner.
The acquisition of Marqeta is just one of several M&A transactions in the fintech sector thus far this year.