Solid Fintech Files for Bankruptcy After $81M Funding

Solid, Formerly Wise, Files for Chapter 11 Bankruptcy

Banking-as-a-service provider Solid, previously known as Wise, has initiated Chapter 11 bankruptcy proceedings. Relevant documentation was submitted to the United States Bankruptcy Court for the District of Delaware on April 7th.

Company Background and Funding

Established in 2018, the fintech company successfully secured approximately $81 million in funding from various investors, including FTV Capital and Headline. As of August 2022, PitchBook assessed Solid’s valuation at $330 million, coinciding with the announcement of a $63 million Series B funding round spearheaded by FTV Capital.

Services and Growth Claims

Headquartered in Palo Alto, Solid collaborated with fintech and vertical SaaS businesses. It offered a suite of banking, payment, card, and cryptocurrency solutions through easily integrated APIs. The company positioned itself as “the AWS of fintech” and reported a tenfold increase in revenue, a doubling of its customer base to 100, and profitability by August 2022.

Currently, the company is actively pursuing restructuring or a potential sale, as detailed in the filed documents.

Statement from Co-founder

“Having evaluated all available options, we’ve determined that a voluntary Chapter 11 restructuring represents the most viable path forward,” stated co-founder Arjun Thyagarajan to TechCrunch. “We are confident that a court-supervised sale process will attract a suitable buyer, resulting in a favorable outcome for the company, its customers, and shareholders. Solid plans to maintain its regular business operations throughout this process.”

Reasons for Filing

The bankruptcy filings indicate that Solid was unable to secure additional funding following its last investment round and encountered “substantial and expensive legal challenges.”

Legal Disputes with FTV Capital

In 2023, Solid faced a lawsuit initiated by Series B investor FTV Capital, seeking the return of its $61 million investment. The suit alleged that Solid’s co-founders, Thyagarajan and Raghav Lal, “provided false information to FTV regarding the company’s revenues, customer attrition, and overall business performance, and further misled FTV.” FTV also requested the resignation of both Thyagarajan and Lal.

The co-founders responded with a countersuit against FTV and partner Robert Anderson. They characterized FTV as “an aggressive private equity firm” and asserted that the firm, “upon realizing its investment was no longer profitable, resorted to fabricated claims of fraud, intimidation, and coercive tactics in an attempt to recover its funds.”

The bankruptcy filing reveals that the FTV litigation was dismissed in April 2024 “with prejudice, as per a settlement agreement reached by all parties.”

Current Financial Status

As of the bankruptcy petition, Solid reported approximately $760,000 in unsecured trade debt, “limited current revenue,” and roughly $7 million in cash reserves, with $2 million held in non-liquid accounts. The company currently employs only three individuals.

Restructuring Process

Solid has filed for bankruptcy under subchapter V, which accelerates the timeline for submitting reorganization plans and provides increased flexibility in negotiating with creditors.

Precedent and Partner Bank Concerns

Solid is not the first BaaS startup to seek bankruptcy protection. Synapse filed for Chapter 11 last April, intending to sell its assets for $9.7 million to TabaPay, but the deal ultimately fell through.

Both Solid and Synapse shared a common banking partner: Evolve Bank & Trust. Interestingly, Mercury, another fintech company, recently announced the termination of its relationship with Evolve.

Creditor Information

According to reports from Jason Mikula of Fintech Business Weekly and RK | Consultants on X, Solid’s 20 largest unsecured creditors include Amazon (AWS), regulatory consulting firm FS Vector, Visa, Plaid, Trulioo, Spade, and several legal practices.

TechCrunch contacted FTV Capital for a statement but had not received a response at the time of publication.