Marqeta buys fintech Power Finance in $275m all-cash deal, its first acquisition

Marqeta has agreed to acquire Power Finance, a two-year-old fintech infrastructure startup, for $223 million in cash, marking the first acquisition in the publicly traded company’s 13-year history.

Approximately one-third of the purchase price is payable over a two-year period subject to certain undisclosed conditions. And, if a particular undisclosed milestone is reached within the next 12 months, Marqeta said it would 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 Finance announced last September that it raised $16.1 million in a 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 also announced a $300 million credit facility at the time.

Oakland, Calif.-based Marqeta, which went public in 2021 and is now valued at nearly $3.7 billion, claims that it “provides a single, global, open API platform based on the cloud, for modern card issuance and transaction processing”. In other words, it provides the tools for companies – fintechs and otherwise – to provide cards, wallets and other payment mechanisms. Its clients include Block (formerly known as Square), Uber, Google, Affirm, DoorDash, JP Morgan, Citi, Goldman Sachs, Instacart, and Ramp, among others.

Power’s first product is a credit card issuance program, designed for businesses, brands and banks to deliver embeddable fintech experiences, such as personalized credit card programs, targeted promotions and personalized rewards, in existing mobile and web applications.

Marqeta’s primary 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 broad range” of products and credit constructs, the company said, by incorporating Power’s data science toolkit and ability to integrate experiences in existing mobile and web applications in its own offering. Historically, Marqeta focused on debit and prepaid cards, but in February 2021, it officially 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: “Businesses like ours have been made possible by Marqeta’s path in modern card issuance, demonstrating the possibilities of payment with flexible and modern payment infrastructure. At Power, we’ve built a cloud-native credit card issuance platform, and by becoming a member of Marqeta, we now have the ability to bring this innovation to a much larger market globally. .

News of the purchase comes just three days after Marqeta revealed it had tapped Simon Khalaf as its new CEO, effective January 31. Khalaf joined Marqeta in June 2022 as Chief Product Officer and began leading the marketing of the business. organization last August. Founder Jason Gardner, who has expressed his belief that running a public company is “fundamentally different from running a private company,” will step up to executive chairman.

In an exclusive interview, Khalaf told TechCrunch that Marqeta “definitely feels like the Power team has built something unique and something that aligns with Marqeta’s mission and who we speak to.”

“So far, our approach to credit has been the processor, but because customers have asked us to do a lot of things in very innovative ways, we looked at it and said, ‘We need to own the full stack.’ Khalaf said.

Rather than expend resources trying to develop the technology it wanted to be able to offer its customers, Marqeta decided to explore acquisition targets. Some, admits Khalaf, were open to discussions while others were not. The company eventually decided that Power was the best fit, both culturally and technologically.

Marqeta, he said, assumes that consumers increasingly want personalization.

“If you look at a credit card, there hasn’t been a lot of innovation,” Khalaf told TechCrunch. “But a lot of people want a credit card to come to life with a credit limit that changes dynamically based on the user’s current financial situation, with rewards that change dynamically, and most 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 join Marqeta, the company said. Currently, Marqueta has nearly 1,000 employees.

Overall, Khalaf said Marqeta has experienced hypergrowth but is now entering a sustainable and profitable phase.

“We are very focused on sustainable, mature and predictable operating rates for the business,” he said. “The market for integrated finance is developing very rapidly and it is a market on which we will spend a lot of energy. The way we deliver the products and packaged them to be API first…the integrated financial space is for us, and we are for them. It’s a perfect match.

Through the acquisition, Khalaf said Marqeta also hopes to meet growing demand from emerging, mobile-first retailers, designer markets and labor markets.

“We’re going to see a lot of new demand around co-brands,” he said. “Businesses want a living brand map that integrates with their properties. And we’re going to be able to better serve that market instead of just issuing a piece of plastic with standard rewards.

In November, Marqeta posted a third quarter net loss of $53.2 million, adjusted earnings before interest, tax, depreciation and amortization (Ebitda) of $13.6 million and revenue of $191.6 million. dollars, compared to 131.5 million dollars in the same quarter of the previous year. Meanwhile, he reported that total processing volume increased by 54% to $42 billion. Once valued at $18 billion, Marqeta has – like many other fintechs – seen its share price and valuation plummet thanks to high inflation and a rising interest rate environment. Still, the company continued to win new customers and grow relationships with existing customers while beating analyst estimates.

In appointing Khalaf as Marqeta’s new CEO, Gardner told investors his goal was to find a leader “who would take Marqeta to the next level” after taking the company “from zero to 1”.

“That meant finding a leader with experience in building and operating a large-scale global business while focusing on the path to profitability,” he added. “…Our Board of Directors concluded that Simon was the clear choice to be the next CEO of Marqeta. His previous CEO experience and decades of experience scaling large technology organizations such as Twilio, Verizon, Yahoo and Novell, his product vision and relentless focus on customer experience will serve us well. as we seek to enter the next phase of our growth. .”

For his part, Khalaf said further acquisitions were not out of the question but would also be very deliberate.

“Acquisitions are not a strategy, but rather a tactic,” he told TechCrunch. “You decide which customers we want to serve, which market you want to target, and then you assess whether to build, buy or partner. That’s what we’re focusing on right now. »

The Marqeta acquisition is just one of many fintech M&A deals so far this year.

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