Fintech Startup Cushion Bows Out After 8 Years and $20 Million in Funding: What Went Wrong?
Cushion, a fintech startup often referred to as the “Plaid for buy now, pay later (BNPL),” has officially announced its closure. This significant development in the fintech sector highlights the challenges faced by startups in achieving sustainable growth.
Cushion’s Journey and Closure
On Thursday, founder and CEO Paul Kesserwani shared the news of Cushion’s decision to wind down operations by the end of 2024 via a LinkedIn post. He emphasized that despite launching several innovative fintech products, the company struggled to achieve the necessary scale to remain viable.
Background and Funding
Founded in late 2016 in San Francisco, Cushion successfully raised a total of $21.6 million from notable investors, including:
- Afore Capital
- Flourish Ventures
- Vestigo Ventures
- Better Tomorrow Ventures
- 500 Global
The last funding round was a $12 million Series A completed in May 2022, which valued the company at $82.4 million post-money, according to PitchBook.
Business Model and Consumer Impact
Cushion developed a consumer app that analyzed users’ bank transaction histories to identify excessive fees. The platform negotiated refunds on behalf of users, aligning its interests with consumers by only charging a commission on recovered funds. Kesserwani initially conceived the idea after assisting his parents with banking issues while they traveled abroad, revealing a significant gap in the market for automated fee negotiation.
Achievements and Challenges
During its operation, Cushion achieved remarkable milestones:
- Reached $3 million in annual recurring revenue (ARR) within just 10 months.
- Processed over $300 million in BNPL loans.
- Onboarded over 1 million consumers, with more than 200,000 paying customers.
In his LinkedIn post, Kesserwani reflected on his eight-year journey with Cushion, expressing pride in the company’s contributions to the fintech industry despite the disappointing outcome. He stated, “I gave Cushion everything I had for 8+ years. While the outcome wasn’t what we hoped for, we built something that moved the industry forward — and I’m proud of that. As for me, I’m excited for what’s next.”
Industry Context and Future Outlook
The fintech landscape is facing increasing challenges, with predictions indicating that 2025 may see a rise in startup closures. For example, in late December, another fintech company, Bench, shut down only to be acquired shortly after. This trend underscores the volatility and competitive nature of the fintech sector.
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