Marqeta buys fintech Power Finance for $275 million in cash, its first acquisition • TechCrunch

Marqeta has agreed to buy two-year-old fintech infrastructure startup Power Finance 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 to be paid over a two-year period on certain undisclosed terms. And if an undisclosed milestone is reached within the next 12 months, Marqeta said it will 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 had raised $16.1 million in a seed funding round 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 at the time had also announced a $300 million credit facility.

Oakland, California-based Marqeta — which went public in 2021 and is currently valued at nearly $3.7 billion — states that it “offers a single, global, cloud-based, open API platform for modern card issuance and transaction processing.” In other words, it provides the tools for companies – fintechs and others – to offer cards, wallets and other payment mechanisms. Their 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 issuing program, which is designed for companies, brands and banks to offer integrated fintech experiences, such as customized credit card programs, targeted promotions and personalized rewards, in existing mobile and web applications.

Marqeta’s main objective with the purchase is to expand and “significantly accelerate the opportunities” offered in the credit product. Specifically, the acquisition will give Marqeta customers a way to launch “a broad range” of credit products and constructs, the company said, by incorporating Power’s data science toolbox and its ability to embed experiences into existing mobile and web applications into its own offering. Historically, Marqeta was focused on debit and prepaid cards, but in February 2021 it formally expanded into the consumer credit card space to help other brands launch credit card programs.

When the deal closes, Power Finance CEO Randy Fernando will lead product management of Marqeta’s credit card platform.

In a written statement, Fernando said: “Companies like ours were made possible because of the path Marqeta blazed in modern card issuing, demonstrating the possibilities in payments with flexible and modern payment infrastructure. At Power, we built a full-stack, cloud-based credit card issuing platform, and by becoming a part of Marqeta, we have the opportunity to bring this innovation to a much larger market on a global scale.”

News of the purchase comes just three days after Marqeta revealed it had tapped Simon Khalaf to act as its new CEO, effective January 31. Khalaf joined Marqeta in June 2022 as product manager and began leading the company’s go-to-market organization in August last year. Founder Jason Gardner, who has been vocal about his belief that running a public company is “fundamentally different from running a private company,” will transition to an executive chairman role.

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

“Our approach to credit so far has been the processor, but as customers have asked us to do a lot of things in a very innovative way, we looked at it and said, ‘We need to own the whole stack,'” Khalaf said.

Instead of spending resources trying to build out the technology they wanted to be able to offer their customers, Marqeta decided to explore acquisition targets. Some, Khalaf admits, were open to talks while others were not. The company ended up deciding that Power was the best fit both culturally and technologically.

Marqeta, he said, operates under the premise that consumers increasingly want personalization.

“If you look at a credit card, not a lot of innovation has happened with it,” Khalaf told TechCrunch. “But many people want a credit card to come to life with a credit limit that changes dynamically based on a user’s current financial situation, with rewards that change dynamically, and more importantly, that they can be integrated into the e-commerce or retail business. …It is Power has built.”

“Most” of Power’s nearly 30 employees will join Marqeta, the company said. Currently, Marqeta has almost 1,000 employees.

In general, Khalaf said Marqeta has witnessed hyper-growth but is now entering a sustainable and profitability phase.

“We are strongly focused on sustainable, mature and predictable operating cadences for the company,” he said. “The embedded finance market is growing very quickly, and it is a market we will spend a lot of energy on. The way we deliver products, and have packaged them to be API first…the built-in finance space is built for us, and we’re built for them. It’s a perfect match.”

Through the acquisition, Khalaf said Marqeta also hopes to meet growing demand from new, mobile-first retailers, creator marketplaces and labor marketplaces.

“We’re going to see a lot of new demand around co-brands,” he said. “Companies want a brand card that’s alive that’s integrated with their properties. And we’re going to be able to serve that market better than just giving out a piece of plastic with standard rewards.”

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

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

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

For his part, Khalaf said that further acquisitions were not ruled out, but that it would also be very deliberate.

“Acquisitions are not a strategy, more of a tactic,” he told TechCrunch. “We decide which customers we want to serve, which market you want to go after, and then you decide whether you build, buy or collaborate. That’s what we’re focusing on right now.”