Affirm exits returns business through strategic partnership

Affirm (Nasdaq: AFRM) has struck a strategic partnership with startup Loop Returns and will shut down Returnly, a company it acquired for $300 million just two years ago.

Why it matters: As it focuses on its core business and profitability, the Loop partnership enables Affirm to back away from the returns business while maintaining a stake in the sector.

What’s happening: Affirm plans to sunset Returnly by October and will work to transition its merchant clients to Loop Returns.

• Affirm will take an equity stake in Loop, which has raised more than $100 million in funding.

How it works: Loop Returns founder Jonathan Poma says his team has been working with Affirm to make it seamless for its clients to switch over.

• "A merchant, if they opt in, can essentially send all of their Returnly software settings ... to Loop," Poma says.
• To ease the process, Loop's R&D team built a tool to map those settings to the returns language it uses.

Flashback: Affirm acquired Returnly in early 2021 for $300 million in a mix of cash and equity.

• Not long after, PayPal bought competitor Happy Returns.

The other side: Loop Returns stayed private, raising a $65 million Series B round led by CRV, with participation from strategic investor Shopify.

• In describing that decision, Poma said, "I think leaving a business with our product-market fit, our customer base and the partners we [had] ... would have been selling the company short."
• "There's a whole lot of TAM that someone's going to go capture, and I believed that we could be the winner," he added.

The big picture: Affirm, on the other hand, decided a returns business was a nice-to-have and not a must-have for its purposes, particularly in a rough environment for publicly traded fintech companies.