Solid, a fintech company that once billed itself as the “AWS of fintech,” filed for Chapter 11 bankruptcy protection on April 7, 2024. The filing took place in the United States Bankruptcy Court for the District of Delaware. That was a steep decline for a company worth $330 million just 18 months before.
The company’s imminent bankruptcy comes in sharp contrast to a very positive trajectory. August 2022 – Solid Solid announced a $63 million Series B funding round led by FTV Capital. At the time, Solid had some amazing accomplishments. They’ve seen a ten times growth in revenues, as they’ve more than doubled their customers to 100 and gone profitable. These accomplishments proved to be no match for the present day fiscal disaster.
As of April 2024, Solid’s capital structure showed approximately $760,000 in unsecured trade debt and about $7 million in cash on hand. Importantly, almost $2 million of this available cash was sitting in non-liquid reserve accounts, barring instant access to those funds. The company’s financial woes have drawn attention to its largest unsecured creditors, which include significant industry players like Amazon (AWS), Visa, Plaid, Trulioo, and Spade.
Serious moves made this year by one of the largest Series B investors FTV Capital Risky by filing a lawsuit against Solid. They wanted to get their $61 million investment back. The lawsuit had its origin in a broader clash. Solid’s co-founders, Arjun Thyagarajan and Raghav Lal, alleged in a public Medium post that FTV Capital used fraudulent claims, intimidation tactics, and other strong-arm tactics to force them to return their money.
In light of the ongoing challenges, Thyagarajan stated, “After considering all options, we’ve decided that a voluntary Chapter 11 restructuring is the best course.” This announcement highlights Solid’s attempts to work through its financial challenges while pivoting its business model.
On top of the bankruptcy filing and investor lawsuits, Solid has experienced a tumultuous executive exodus. The firm, in a bid to restructure, has called for the resignation of its co-founders. As treehugger points out, this decision is a strong indication that the company is heading in a different direction. The goal is to stabilize the business and regain investor trust.
Though it underwent tremendous boom and success in the fintech world so early on, Solid’s path has been paved with challenges. The company’s cheery proclamations of ever-rising growth have been replaced by chapter 11 lawsuits and uncertainty.
The lawsuit against FTV Capital was dismissed in April 2024 “with prejudice under a settlement reached by the parties,” suggesting that some resolution has been found within the contentious relationship between the two entities. Solid’s bankruptcy filing should rattle the fintech community, if not wake it up entirely. Investors are going to have to retool and reprioritize going into a much more competitive environment.
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