On Nov. 22, alternative finance startup Pipe announced that its three co-founders were resign from their executive roles and that the search for a new “veteran” CEO had begun.
In an exclusive interview, co-founder and former co-CEO Harry Hurst told TechCrunch that the trio were “0-1 builders, not large-scale operators.” He said the company’s revenue was growing year on year and that the company had five years of runway.
However, finding the right successor could take some time. For starters, Pipe — which has raised more than $300 million from investors since it was founded in 2019 — has only one outside board member in Peter Ackerson, a general partner at Fin Capital who became a VC himself just three Years ago. Hurst and fellow founders Josh Mangel and Zain Allarakhia are the only other directors on the board.
Furthermore, detractors seem intent on raising questions about the way the company has been run. Since that article was published, several sources who wished to remain anonymous — including an investor who says he gave up investing in the startup in its early days — have said they’ve “heard” Pipe made loans worth about $80. million to one or several cryptocurrency mining companies. The suit or suits have since gone out of business and the $80 million is believed to have been completely written off, these people said.
When asked about the allegations, a company spokesperson told TechCrunch Pipe has not issued $80 million worth of loans to cryptocurrency mining companies, and Pipe has not had to completely “write off” any related claims. Instead, she confirmed that Pipe “provided funding access to cryptocurrency hosting companies” and said — when asked if Pipe lost whatever amount of money on loans to cryptocurrency mining entities – which as a private company, Pipe does not share its company’s financials.
The startup declined to name its cryptocurrency mining clients, but Pipe in particular did a public partnership with Compass Mininga cryptocurrency mining company now under siege, reportedly face their fair share of struggles.
There are other rumblings. A source said Hurst and the two other founders sold millions of dollars worth of shares of their own in a secondary sale, a practice that has become quite common during the pandemic at numerous young companies. (The founder of Hopin, also founded in 2019, has reportedly cashed in at least $195 million worth of shares.) When we asked Hurst last week how many investors had already let the co-founders off the table, he refused to answer.
A fintech investor also raised questions about the sophistication of Pipe’s technology. When asked if there were any related issues with Pipe’s underlying loans, the company spokesperson said: “While we have seen some insolvencies on the platform like many fintechs in this current macro environment, we do not expect buy-side investors to experience losses that have not already been disclosed to them or a part of the broader risk profile disclosed by the firm.”
Apparently Hurst has heard of the speculation about his company. In a Discussion on Twitter last night he railed against “VCs and others who hate our company based on rumors. Pretty obvious that there are bad actors with their own agendas who spread BS with no regard for the people they harm. He also wrote, “As a leader, I won’t let this noise distract us or undermine the incredible hard work our team puts into achieving our mission to enable businesses around the world to grow on their terms.”
Meanwhile, the search for the CEO continues. In fact, Pipe’s spokesperson reiterated today what the company said publicly last week, viz “Josh [Mangel] he is now interim chief executive officer and Harry is still at the company in his new capacity as vice president. Both want Pipe to reach its fullest potential and are committed to finding a new CEO as reported and announced…”
Once Pipe’s new CEO is named, he added, that individual will take over Hurst’s seat on the board.
As for who he’s helping with the research, he said the answer is that “Many of Pipe’s stakeholders are part of the CEO search process, including executives and investors.”
In addition to Fin Capital, other VCs spearheading investments in Pipe by their investment firms include Marlon Nichols, managing director of MaC Venture Capital, and Ashton Newhall, a longtime investor with Greenspring Associates and now a partner at StepStone Group, who acquired Greenspring in September of last year.
No one responded to requests for comment.
Another Pipe investor, Matthew Cowan of Next47 Capital, told TechCrunch that he was “not allowed to comment.”
Other backers of the company include Morgan Stanley’s Counterpoint Global, CreditEase FinTech Investment Fund, 3L, Japan’s SBI Investment, Marc Benioff, Seven Seven Six of Alexis Ohanian, Republic and Craft Ventures, who led the company $6 million seed funding in February 2020.
Meanwhile, a Form D signed by Pipe Senior Counsel Peter Chiaro with the U.S. Securities and Exchange Commission in late September reveals the company recently secured $7.12 million in debt financing, which could be interpreted as a It’s a positive alternative to the kind of highly structured internal around the fact that many startups are closing currently.
Pipe co-founder and chief business officer Michal Cieplinski, whose name was absent from the company’s announcement last week, was listed as Pipe’s “executive officer” in the filing, who declined to disclose his revenue range .
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