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Pipe commits to embedded Capital as a Service

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Apr 16, 2024
Illustration of a pipe opened up with cash spewing out

Illustration: Annelise Capossela/Axios

Financing startup Pipe has fully pivoted its business to offer embedded Capital as a Service to B2B companies looking to lend to their end customers.

Why it matters: The new product will make it easier for vertical SaaS platforms and payment processors to offer revenue-based financing solutions.

Context: In the frothy days of 2021, Pipe raised more than $300 million and secured a $2 billion valuation to provide small businesses with revenue-based financing.

  • But as the market turned in 2022, Pipe's founding team stepped down, and former Square and Intuit exec Luke Voiles took over as CEO soon after.
  • Voiles hired a whole new C-suite with the intent of pivoting Pipe from a direct B2B lender to a B2B2B capital provider.

The latest: Now, about a year after Voiles took the helm, Pipe is officially launching its embedded solution and naming its first partners.

  • The partners include Priority, an integrated payments and banking platform; Infinicept, an embedded payments processor; and Boulevard, a vertical SaaS platform for salons and self-care businesses.
  • The company has also secured enough capital to deploy more than $1 billion over the next year.

How it works: Partners can embed Pipe's capital platform into their own product offerings through a series of APIs.

  • Pipe handles all the risk, compliance and underwriting work and shares about 25% of profits with partners.
  • "If you think about it, [our partners] can get 100% margin ... just straight to the bottom line. They end up with a profitable business out of the gate, that adds average revenue per customer pretty dramatically," Voiles says.

Between the lines: Voiles says the Capital as a Service offering will enable platforms that previously didn't have the necessary scale to offer financing.

  • "Based on my experience ... you need an 85- to 100-person team to do lending the right way," he says.

What's next: Pipe is working with two capital partners to fund its loans, but the company eventually wants to move to a balance sheet-light model where it's more of a market maker.

  • "Fundamentally, we want to get to a place where we ... deploy capital to the underlying small businesses, and then we can turn around and sell that risk to the capital markets," Voiles says.
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