American Express quietly acquired UK fintech startup Cake for $13.3M

Cake Technologies, the U.K. fintech startup that wanted to make it more convenient to pay your restaurant or bar bill, has been acquired by American Express — as the credit card behemoth plans to beef up its payment options for Amex members.

According to sources the deal quietly completed in October last year for a final price of $13.3 million (approx. £10.1m). However, due to an eleventh-hour preferential debt round and after fees, only some shareholders made a profit. I also understand from one source that Cake had raised a total of £4.5 million in equity and £1.4 million in debt. Part of the equity funding was a £1 million crowdfunding round on Crowdcube in 2015.

Confirming the acquisition, American Express gave TechCrunch the following statement:

Last year American Express acquired Cake Technologies. This year, we will be on-boarding Cake and their technologies to collaborate on ways to provide our Card Members with enhanced service and value in the dining space, which is an area many of our Card Members are passionate about.

A spokesperson for American Express declined to comment on the exact financial terms of the deal, but said that it was a “good outcome for Cake employees, previous investors and American Express”. They did confirm, however, that Cake employees are now employees of American Express.

This includes Cake founders Charlotte Kohlmann and Michelle Songy, who hold the positions of Vice President Global Dining Platform Solutions at American Express, and Director Global Platform Dining Solutions at American Express, respectively.

“We are excited to have Cake on board with us and look forward to collaborating on bringing our Card Members exciting new capabilities in the dining space soon,” adds the American Express spokesperson.

The back story to Cake’s eventual exit makes for interesting reading. According to a source with knowledge of the startup’s path to a sale, who spoke to TechCrunch on the condition of anonymity, it was very close to raising a £5 million Series A in the fall of 2016 before the company’s founders walked away for “ethical reasons,” although the source declined to diverge what these were. This then left Cake in a precarious situation financially as the company could not find another VC to step in quickly enough before running out of cash.

In the holidays/early 2017, the board of Cake put together a rescue round that was structured in the form of debt and designed to give the startup more runway to try to achieve a trade sale. All existing shareholders were given the chance to participate on a pro rata basis, although some declined due to the substantial risk of doubling down.

The loan was also structured so that, should the company get acquired, these eleventh hour investors would get a multiple preferential return. This, I’m told, explains why some investors made money from the exit, while others, including some Crowdcube backers, lost money, even possibly after factoring in EIS tax breaks.

In May 2017, American Express first made an offer to acquire Cake. The startup passed due diligence in late June, but American Express pulled the deal in mid-July for unknown reasons. Determined to get the sale back on track, Cake co-founder Kohlmann flew to New York unannounced and the deal eventually closed in October.

“Despite the complications and lengthy process, Amex did a really good deal here,” says my source. “It is clear that Cake is now a very important part of their digital strategy and the purchase price looks like good value in that context. Cake’s user experience will be a benefit to users of the Amex app once fully integrated and Cake’s basket level POS integrations will give Amex better insight into exactly what products their customers are buying rather than just where they go and how much they spend”.