On November 22, alternative finance startup Pipe announced its three co-founders step down from their executive positions and that a search for a new, “experienced” CEO had begun.
In an exclusive interview, co-founder and former co-CEO Harry Hurst told businesskinda.com that the trio were “0-1 builders, not large-scale operators.” He said the company’s sales grew year-over-year and the company had five years of catwalk.
However, finding the right successor can take some time. For starters, Pipe – which has been raised more than 300 million dollars of investors since inception in 2019 – has only one outside board member in Peter Ackerson, a general partner at Fin Capital who himself became a VC just three years ago. Hurst and fellow founders Josh Mangel and Zain Allarakhia are the only other directors on the board.
In fact, detractors seem determined to question the way the company is run. Since the publication of that article, several sources who wished to remain anonymous — including an investor who says he stopped investing in the startup in its early years — have said they have “heard” that Pipe has made about $80 million in loans. to one or several crypto mining companies. The outfit or outfits have since gone bankrupt and the $80 million is believed to have been fully written off, these individuals said.
When asked about the allegations, A spokesperson for the company told businesskinda.com Pipe has not made $80 million worth of loans to crypto mining companies and Pipe has not had to fully write off related receivables. Instead, she confirmed that Pipe has “given access to funding to crypto mining hosting companies” and said – when asked if Pipe lost each amount of money on loans to crypto mining entities – that as a private company, Pipe does not share the company’s financial data.
The startup declined to name its crypto mining-related clients, but Pipe specifically had one a public partnership with Compass Mininga now beleaguered crypto mining company it is reported to be facing his own share of the battle.
There are other grumbles. One source claimed that Hurst and the other two founders sold millions of dollars worth of their own stock in a secondary sale, a practice that became quite common among numerous young companies during the pandemic. (The founder of Hopin, also founded in 2019, reportedly owns shares worth at least $195 million.) When we asked Hurst last week how many investors had already let the co-founders off the table, he declined to answer.
A fintech investor also questioned the sophistication of Pipe’s technology. When asked if there was a related issue with Pipe’s underlying loans, the company’s spokesperson said: “While we’ve seen some delinquencies on the platform like many fintechs in this current macro environment, we don’t expect buy-side investors to suffer losses that haven’t been communicated to them yet or part of the greater risk profile presented by the company.”
Hurst apparently heard about the suspicion surrounding his company. In a Twitter thread last night he went on a rampage against ‘VCs and others who hate our company based on rumors. It’s pretty obvious that there are bad actors with their own agendas spreading BS with no regard for the people it harms. He also wrote, “As a leader, I will not let this noise distract us or undermine our team’s incredible hard work to achieve our mission of empowering businesses around the world to grow on their terms.”
Meanwhile, the search for the CEO continues. Indeed, Pipe’s spokesperson today echoed what the company said publicly last week, that “Jos [Mangel] is now interim CEO and Harry is still with the company in his new capacity as Vice Chairman. They both want Pipe to reach its ultimate potential and are committed to finding a new CEO, as reported and announced…”
Once Pipe’s new CEO is named, she added, that person will take Hurst’s place on the board.
As for who is helping with the search, she said the answer is that “many of Pipe’s stakeholders are part of the CEO search process, including senior management and investors.”
In addition to Fin Capital, other VCs leading investments in Pipe on the part of their investment firms include Marlon Nichols, a general manager at MaC Venture Capital, and Ashton Newhall, a longtime investor at Greenspring Associates and now a partner at StepStone Group, who acquired Greenspring in September last year.
No one responded to requests for comment.
Another investor in Pipe, Matthew Cowan of Next47 Capital, told businesskinda.com he was “not allowed to comment.”
Other lenders in the company include Morgan Stanley’s Counterpoint Global, CreditEase FinTech Investment Fund, 3L, Japan’s SBI Investment, Marc Benioff, Alexis Ohanian’s Seven Seven Six, Republic and Craft Ventures, who ran the company $6 million seed funding in February 2020.
Meanwhile, one Shape-D signed by Pipe Senior Counsel Peter Chiaro to the US Securities and Exchange Commission in late September reveals that the company recently secured $7.12 million in debt funding, which could be seen as a positive alternative to the kind of highly structured internal round that many startups currently closing.
Pipe co-founder and chief business officer Michal Cieplinski, whose name was not present in the company’s announcement last week, was listed as Pipe’s “executive officer” in the filing, which declined to disclose its revenue range.
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