Bankruptcy Filing of Fintech Startup Solid

Introduction

Banking-as-a-service startup Solid, formerly known as Wise, has filed for Chapter 11 bankruptcy protection, according to documents filed in the United States Bankruptcy Court for the District of Delaware on April 7.

Background

Founded in 2018, Solid had raised nearly $81 million in funding from investors such as FTV Capital and Headline. The company was valued at $330 million as of August 2022, according to PitchBook, when it announced a $63 million Series B round of funding led by FTV.

Business Operations

Palo Alto-based Solid worked with fintech and vertical SaaS companies, offering banking, payments, cards, and cryptocurrency products via easy-to-integrate APIs. The company claimed to have grown 10x in revenue, doubled its customers to 100, and became profitable as of August 2022. However, it is now in the process of trying to restructure or sell itself, according to the documents.

Statement from Co-Founder

"After considering all options, we’ve decided that a voluntary Chapter 11 restructuring is the best course," co-founder Arjun Thyagarajan told TechCrunch. "We’re optimistic that the court-supervised sale process will attract the right buyer, leading to a positive outcome for the company, customers, and shareholders. Solid intends to continue operating its business in the ordinary course through this process."

Financial Challenges

Solid had not been able to raise more capital since its last funding round and "faced significant and costly litigation," according to the bankruptcy filings. In 2023, the company was the target of a lawsuit filed by Series B investor FTV Capital, which was attempting to get its $61 million investment back.

Lawsuit and Countersuit

FTV Capital’s suit claimed that Solid co-founders Thyagarajan and Raghav Lal "lied to FTV concerning the company’s revenues, customer churn, and business generally and further deceived FTV." The firm also asked for Thyagarajan and Lal to resign. The startup’s co-founders pushed back, filing a countersuit against FTV and its partner Robert Anderson, describing FTV as "an aggressive private equity firm" that resorted to "made-up claims of fraud, threats, and strong-armed tactics" to try to get its money back.

Bankruptcy Filing

According to the bankruptcy filing, the FTV litigation was dismissed in April 2024 "with prejudice under a settlement reached by the parties." As of the petition date, Solid said its capital structure consisted of unsecured trade debt totaling approximately $760,000, with "a limited amount of current revenue" and approximately $7 million in cash on hand, with approximately $2 million of that held in non-liquid reserve accounts. The company claims to now only have three employees.

Subchapter V Bankruptcy

The company has filed for bankruptcy under subchapter V, which imposes shorter deadlines for filing reorganization plans and allows for greater flexibility in negotiating restructuring plans with creditors.

Comparison to Other BaaS Startups

Solid is not the first BaaS startup to file for bankruptcy. Last April, Synapse famously filed for Chapter 11, hoping to sell its assets in a $9.7 million fire sale to another fintech, TabaPay. However, TabaPay walked away from the deal.

Common Partner Bank

One thing both startups had in common was Evolve Bank & Trust as a partner bank. Notably, another fintech, Mercury, recently declared that it ended its relationship with Evolve.

Reaction from Fintech Community

Fintech Business Weekly’s Jason Mikula and RK | Consultants posted about the bankruptcy on X. According to Mikula, Solid’s 20 largest unsecured creditors include Amazon (AWS), regulatory consulting shop FS Vector, Visa, Plaid, Trulioo, Spade, and a number of law firms.

Request for Comment

TechCrunch reached out to FTV for comment but had not heard back at the time of writing.