Fintech

SoftBank-backed TabaPay is buying the assets of a16z-backed Synapse, after it filed for bankruptcy

Comment

a blank check and a pen
Image Credits: ATU Images (opens in a new window) / Getty Images

After a tumultuous year, banking-as-a-service (BaaS) startup Synapse has filed for Chapter 11 bankruptcy and its assets will be acquired by TabaPay, according to the two companies.

The deal is pending bankruptcy court approval.

Founded in 2017, Mountain View-based TabaPay is an instant money movement platform that SoftBank backed in a 2022 round of an undisclosed sum. It is not clear how much venture capital it has raised.

San Francisco-based Synapse, which operated a platform enabling banks and fintech companies to develop financial services, was founded in 2014 by Bryan Keltner and India-born CEO Sankaet Pathak. 

In 2019, TechCrunch reported on the company’s $33 million Series B raise led by Andreessen Horowitz after rebranding from SynapseFi. That was the company’s last known fundraise. In total, it brought in just over $50 million in venture capital. Other backers include Trinity Ventures and Core Innovation Capital.

In announcing the acquisition, TabaPay pointed out that Synapse made Deloitte’s 2023 Fast 500, posting 650%+ growth over a five-year period. However, it had two large-scale layoffs in the past year, blaming slowing growth.

Last October, Synapse laid off 86 people, or about 40% of the company. This was after the startup had previously let go of 18% of its workforce last June. At the time, Synapse said “the current macroeconomic conditions” had begun to impact its clients and platforms, affecting its anticipated growth.

Besides having to lay off staff, Synapse also ran into difficulties last year after having served as an intermediary between banking partner Evolve Bank & Trust and business banking startup Mercury. When Evolve and Mercury decided to end their respective relationships with Synapse and work directly with each other, Evolve and Synapse were reportedly at odds with each other as the relationship was winding down. 

In particular, the entities were reportedly blaming each other “over who was responsible for a ‘deficit’ of over $13 million in ‘for benefit of’ accounts holding customer funds at Evolve, among myriad other issues” going back at least three years. Neither company ever addressed the allegations.

In a Medium post, Pathak said he was “excited” about the acquisition, writing: “Leveraging TabaPay, customers will join a thriving ecosystem of 15 bank partners, 16 network connections, 2,500+ existing clients, and domain expertise of the collective team.”

Rodney Robinson, the co-founder and CEO of TabaPay, said in a written statement that Synapse’s assets would be a “great and natural fit” to its existing services to grow its offerings “in tandem with providing continuity to Synapse clients and banks.” 

Banking-as-a-service woes

The banking-as-a-service space as a whole has faced turbulence in recent times. Several players in the industry have announced layoffs over the past year. Most recently, Synctera cut about 15% of its staff. Treasury Prime slashed half its 100-person staff in February, a year after it announced a $40 million Series C raise. Figure Technologies, which includes Figure Pay, laid off 90 people — or about 20% of its workforce — last July.

Meanwhile, Piermont Bank recently reportedly cut ties with startup Unit, Fintech Business Weekly reported.

BaaS refers to various types of business models such as offering bank-like services to other players in the industry; or providing the charter and bank services but not doing the underwriting; or offering banking components, which is more of a fintech that isn’t a bank but provides some bank-like services without a charter.

Players in BaaS have faced challenges, especially regulatory crackdowns in 2023. For instance, those providing BaaS to fintech partners accounted for more than 13% of severe enforcement actions from federal bank regulators last year, S&P Global Market Intelligence reports. 

Rohit Mittal, co-founder and CEO of Stilt, which offers financial products and resources for immigrants, knows a little something about this. His company was acquired by JG Wentworth in late 2022. 

Mittal noted in a post on X that despite banking-as-a-service being around for a decade, it is still an industry devoid of multiple billion-dollar businesses, writing, “Investors have burned $1B+ and created less value than that. The whole vertical is still very small in terms of value created through exits.”

He provided examples, including Synapse and Solid’s lawsuits with investor FTV Capital made public last October, in which FTV demanded its money be returned.

With regard to Solid, co-founder and CEO Arjun Thyagarajan told TechCrunch via email earlier this month that “the case has been settled, and as a result, FTV is no longer involved in the business.”

There has been other M&A activity, too. Last June, FIS, the fintech giant that runs a wide range of payment, banking and investment services, announced it had acquired Bond, a startup that specialized in embedded finance.

Want more fintech news in your inbox? Sign up for TechCrunch Fintech here.

Want to reach out with a tip? Email me at maryann@techcrunch.com or send me a message on Signal at 408.204.3036. You can also send a note to the whole TechCrunch crew at tips@techcrunch.com. For more secure communications, click here to contact us, which includes SecureDrop (instructions here) and links to encrypted messaging apps.

More TechCrunch

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

1 day ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

1 day ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo

Sony Music Group has sent letters to more than 700 tech companies and music streaming services to warn them not to use its music to train AI without explicit permission.…

Sony Music warns tech companies over ‘unauthorized’ use of its content to train AI