Three co-founders of $2 billion Fintech Pipe resign abruptly, citing inexperience

Three co-founders of fintech lending startup Pipe, valued at $2 billion in a funding round last year, are stepping down from the Miami company. The departing executives include co-CEO Harry Hurst, 33; co-CEO Josh Mangel, 29; and CTO Zain Allarakhia, 34. The news comes as a big surprise since the fast-growing business is only three years old, and it is highly unusual for multiple co-founders to all announce their retirement at once.

“While all three of us will remain involved in Pipe, we of course recognize that the company needs a veteran and experienced operational CEO to drive the business to even greater heights,” former co-CEO Harry Hurst said in a press release yesterday. Pipe is currently searching for a new CEO. Hurst has already resigned, but still sits on the board as deputy chairman. Mangel will be Pipe’s acting CEO until a replacement is found, at which time he will become CEO. Allarakhia “will also remain deeply involved, both at the board level and in his role as a senior advisor,” the press release said.

Pipe’s investors and Hurst, Mangel and Allarakhia decided that despite running the company since 2019, the three executives did not have enough operational fintech experience to continue in their leadership roles. Before Pipe, Hurst and Mangel founded a car delivery rental company which was later acquired. Allarakhia previously worked as a software engineer at the fintech companies Braintree and Plaid. Michal Cieplinski, a former executive at LendingClubLC
who joined Pipe a month after it was founded, will remain with Pipe as business manager.

Pipe looks and smells like a lender, but technically isn’t one. It allows other businesses such as software companies to sell their future recurring revenue to large institutional investors for cash that the borrowers can use immediately. Pipe charges roughly 1% to 2% transaction fees for the service, and institutional investors earn interest on the software companies’ loans. Pipe has helped more than 22,000 companies get financing and facilitates hundreds of millions of dollars in loans every quarter.

Even if Pipe has no loans on its books, the business suffers if the deals it facilitates go bad – that’s because investors will stop buying loans through Pipe if borrowers can’t pay them back. In March, Pipe announced that it would help facilitate funding for bitcoin mining companies, which have been decimated by the decline in bitcoin’s price. Some of those loans have gone badly, says an insider in the company.

Pipe is also investigating questions about Hurst and Mangel’s holdings in cryptomining companies that became Pipe customers, says a person with knowledge of the matter. (A Pipe spokesperson says Hurst and Mangel do not own equity stakes in any crypto mining companies that became clients and would not comment further.) Beyond software companies and crypto, Pipe has expanded into many different business categories, including entertainment, consumer brands and real estate, a diversification strategy that makes it more difficult to assess risk, experts say.

Over the past year, as interest rates have risen and venture capital funding has slowed to a crawl, fintech companies have been hit hard. Many have had layoffs, including the largest private fintech in the US, Stripe. Pipe is the latest fintech to feel the pressure of the downturn. The Miami startup claims it has more than five years of cash in the bank to continue operating the business.

Although Pipe is only a few years old, CEO Harry Hurst has already cashed out some of his shares. He sold some shares in a financing round in 2021, according to The Information. A Pipe spokesperson says Hurst, Mangel and Allarakhia remain the largest shareholders in the company and declined to comment on their holdings.

A venture capitalist who passed on Pipe says Hurst is part of a group of “larger than life” entrepreneurs. “They were good storytellers,” says the investor. “They had big egos, big personalities. And they dictated terms to investors … The founder of [failed startup] Fast, the founder of Bolt – they were the kind of founders in this mix.”