Solid, the ‘AWS of Fintech,’ Files for Bankruptcy After Securing $81M in Funding

Banking-as-a-service (BaaS) startup Solid, previously known as Wise, has recently filed for Chapter 11 bankruptcy protection. This significant development was recorded in documents submitted to the United States Bankruptcy Court for the District of Delaware on April 7, 2023.

Overview of Solid’s Business Journey

Founded in 2018, Solid quickly emerged in the fintech space, raising nearly $81 million in funding from notable investors such as FTV Capital and Headline. At its peak, the company was valued at $330 million as of August 2022, following a successful $63 million Series B funding round led by FTV.

Services Offered by Solid

Headquartered in Palo Alto, Solid specialized in providing a range of financial products, including:

• Banking services
• Payment solutions
• Card services
• Cryptocurrency products

Using easy-to-integrate APIs, Solid positioned itself as “the AWS of fintech.” It claimed to have achieved a remarkable tenfold growth in revenue, doubled its customer base to 100, and reached profitability by August 2022.

Current Bankruptcy Filing Details

In light of its ongoing struggles, Solid is now in the process of restructuring or considering a sale. Co-founder Arjun Thyagarajan stated, “After considering all options, we’ve decided that a voluntary Chapter 11 restructuring is the best course.” He expressed optimism about the court-supervised sale process attracting the right buyer and resulting in a positive outcome for stakeholders.

Challenges Faced by Solid

The company faced numerous challenges leading to its bankruptcy filing, including:

• Inability to secure additional capital since its last funding round
• Significant and costly litigation, including a lawsuit from FTV Capital

The lawsuit alleged that Solid’s co-founders misrepresented company revenues and customer churn. In response, the co-founders filed a countersuit against FTV, labeling it as an aggressive private equity firm resorting to fabricated claims of fraud.

Financial Status and Employee Count

According to bankruptcy documents, Solid reported:

• Unsecured trade debt totaling approximately $760,000
• About $7 million in cash, with $2 million held in non-liquid reserve accounts
• Only three remaining employees

Legal Framework of the Bankruptcy

Solid filed for bankruptcy under subchapter V, which allows for shorter deadlines for reorganization plans and greater flexibility in negotiations with creditors.

The Broader Context of BaaS Bankruptcies

Solid is not alone in its struggles; other BaaS startups have also filed for bankruptcy. Notably, Synapse filed for Chapter 11 in April 2022, seeking to sell its assets in a $9.7 million fire sale. However, TabaPay, the interested buyer, ultimately withdrew from the deal.

Interestingly, both Solid and Synapse shared a partnership with Evolve Bank & Trust, which has recently faced scrutiny, leading another fintech, Mercury, to end its relationship with them.

Creditor Landscape

According to reports from Fintech Business Weekly and industry expert Jason Mikula, Solid’s largest unsecured creditors include major companies such as:

• Amazon (AWS)
• Visa
• Plaid
• Trulioo
• Various law firms

As of now, TechCrunch has reached out to FTV Capital for comments but has yet to receive a response.

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