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Pipe cofounder and CEO Harry Hurst made the surprise decision to resign less than four years after starting the company.
Pipe
Three cofounders of fintech lending startup Pipe, valued at $2 billion in a funding round last year, are stepping down from the Miami company. The departing executives include co-CEO Harry Hurst, 33; co-CEO Josh Mangel, 29; and CTO Zain Allarakhia, 34. The news comes as a big surprise since the fast-growing business is just three years old, and itâs highly unusual for multiple cofounders to all announce their resignations at once.
âWhile the three of us will still all be involved in Pipe, of course, we acknowledge the company needs a veteran and experienced operational CEO to drive the business forward to even greater heights,â former co-CEO Harry Hurst said in a press release yesterday. Pipe is currently searching for a new CEO. Hurst has already stepped down but remains on the board as vice chair. Mangel will be Pipeâs acting CEO until a replacement is found, at which point heâll become executive chair. Allarakhia âwill also remain deeply involved, both at the board level and in his role as Senior Advisor,â the press release states.
Pipeâs investors and Hurst, Mangel and Allarakhia decided that, despite having run the company since 2019, the three executives didnât have enough fintech operational experience to continue in their leadership roles. Prior to Pipe, Hurst and Mangel founded a rental car delivery company that was later acquired. Allarakhia previously worked as a software engineer at fintech companies Braintree and Plaid. Michal Cieplinski, a former executive at LendingClub
Pipe looks and smells like a lender but isnât technically one. It lets other businesses such as software companies sell their future recurring revenue to large institutional investors for cash the borrowers can spend immediately. Pipe charges transaction fees of roughly 1% to 2% for the service, and institutional investors earn interest on the software companiesâ loans. Pipe has helped more than 22,000 companies get financing and facilitates hundreds of millions of dollars in loans quarterly.
Although Pipe doesnât hold loans on its books, if the deals it facilitates go sour, its business suffersâthatâs because investors will stop buying loans through Pipe if borrowers canât pay them back. In March, Pipe announced that it would help facilitate financing for bitcoin mining companies, which have been decimated by the decline in bitcoinâs price. Some of those loans have gone bad, says a person familiar with the company.
Pipe is also investigating questions about whether Hurst and Mangel owned equity stakes in crypto mining companies that became Pipe customers, says a person familiar with the matter. (A Pipe spokesperson says Hurst and Mangel donât own equity stakes in any crypto mining companies that became customers and wouldnât comment further.) Beyond software companies and crypto, Pipe has expanded into many different business categories including entertainment, consumer brands and real estate, a scattershot strategy that makes it more difficult to assess risk, experts say.
Over the past year, as interest rates have risen and venture capital funding has slowed to a crawl, fintech companies have been hit hard. Many have had layoffs, including the largest private fintech in the U.S., Stripe. Pipe is the latest fintech to feel the squeeze of the downturn. The Miami startup claims it has more than five years of cash in the bank to keep running the business.
Although Pipe is only a few years old, CEO Harry Hurst has already cashed out some of his shares. He sold some stock in a 2021 funding round, according to The Information. A Pipe spokesperson says Hurst, Mangel and Allarakhia remain the largest shareholders in the company and declined to comment on their ownership stakes.
One venture capitalist who passed on Pipe says Hurst is a part of a batch of âlarger than lifeâ founders. âThey were good storytellers,â the investor says. âThey had big egos, big personalities. And they were dictating terms to investors ⊠The founder of [failed startup] Fast, the founder of Boltâthose were the type of founders in this mix.â