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Three co-founders of $2 billion Fintech Pipe quit abruptly, citing inexperience

Three co-founders of fintech lending startup Pipe, valued at $2 billion in a funding round last year, are pulling out of the Miami company. Outgoing leaders 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 company is only three years old, and it’s highly unusual for multiple co-founders to all announce their resignations at the same time.

“While all three of us are still involved with Pipe, of course we recognize that the company needs a seasoned and experienced operational CEO to take the company to even greater heights,” said the former co-CEO Harry Hurst in a statement. Press release yesterday. Pipe is currently looking for a new CEO. Hurst has already resigned but remains on the board as vice chairman. Mangel will serve as interim CEO of Pipe until a replacement is found, in which case he will become executive chairman. Allarakhia will also “remain deeply involved, both at board level and in his role as senior advisor,” the press release said. States.

Investors in Pipe and Hurst, Mangel and Allarakhia decided that, although they have run the company since 2019, the three executives do not 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, former LendingClub executive
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who joined Pipe a month after its creation, will remain at Pipe as commercial director.

Pipe looks and smells like a moneylender but technically isn’t one. It allows other companies such as software companies to sell their future recurring revenue to large institutional investors for cash that borrowers can spend immediately. Pipe charges transaction fees of around 1% to 2% for the service, and institutional investors earn interest on loans from software companies. Pipe has helped over 22,000 businesses obtain financing and facilitates hundreds of millions of dollars in quarterly loans.

Although Pipe does not hold loans on its books, if the transactions it facilitates go wrong, its business suffers, as investors will stop buying loans through Pipe if borrowers cannot repay them. In March, Pipe announcement that it would help facilitate funding for bitcoin mining companies, which have been decimated by the drop in the price of bitcoin. Some of those loans have gone bad, says a person familiar with the business.

Pipe is also investigating whether Hurst and Mangel had stakes in crypto mining companies that became clients of Pipe, a person familiar with the matter said. (A Pipe spokesperson said Hurst and Mangel do not hold any stakes in the crypto mining companies that have become clients and would not comment further.) Beyond the software and crypto companies, Pipe has expanded into many business categories, including entertainment, consumer brands and real estate, a dispersed strategy that makes it harder to assess risk, experts say.

Over the past year, as interest rates have risen and venture capital funding has slowed, fintech companies have been hit hard. Many have had layoffsincluding the largest private fintech in the United States, Bandaged. Pipe is the latest fintech to feel the pressure of the recession. The Miami start-up complaints he has more than five years of cash in the bank to continue running the business.

Although Pipe is only a few years old, CEO Harry Hurst has already cashed in on some of his shares. It sold shares in a funding round in 2021, according to information. A Pipe spokesperson said Hurst, Mangel and Allarakhia remain the company’s largest shareholders and declined to comment on their holdings.

A venture capitalist who passed on Pipe says Hurst is part of a group of “larger than life” founders. “They were good storytellers,” says the investor. “They had big egos, big personalities. And they dictated conditions to investors… The founder of [failed startup] Fast, the founder of Bolt – he was the kind of founders in this mix.

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