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Fintech startup Solid co-founders Arjun Thiagarajan and Raghav Lal are putting pressure on Series B investor FTV Capital, which filed a lawsuit against the company, to get back its $61 million investment.
Solid provides a way for companies to provide their own financial products, for example, banking, payments and cards. At the time private equity firm FTV invested in 2022, Solid was also offering cryptocurrency products.
FTV Capital’s lawsuit, filed in the Delaware Court of Chancery and made public on October 2, claimed, among other things, that Thiagarajan and Lall had “distorted FTV with respect to company revenues, customer churn and business generally.” Lied to FTV and further defrauded FTV.”
The private equity firm also claimed that the two co-founders not only attempted to hide what they were doing, but also sent a cease-and-desist letter to their finance head, which FTV said was the firm’s Were sharing information with. The company also asked Thiagarajan and Lal to resign.
FTV Capital did not respond to repeated attempts for comment.
Thiagarajan and Lall refused to resign and instead filed a counter-suit against FTV and its partner Robert Anderson on 9 October. In it, he described FTV as “an aggressive private equity firm” and claimed that “the moment its investments were no longer profitable, [the firm was] They are resorting to fabricated claims of fraud, threats and strong-armed tactics to try to get their money back.”
In an interview with TechCrunch, Thiagarajan and Lall said they opened Solid’s books for FTV to conduct due diligence, which the private equity firm did for about two months. They acknowledge that FTV came back saying that Solid’s revenue and churn were higher than it had originally thought. However, the company used this to renegotiate the terms of the investment, which the co-founders agreed to.
According to Thiagarajan and Lal, the relationship began to break down in November 2022 when “Crypto Winter” was in full effect. Solid was affected, Thiagarajan said, with “a significant portion” of early-stage fintechs as customers.
“From November 2022 to about April or May 2023, it was not just a downturn in the market, but also a big decline in our revenues,” he said. “We knew it was a downturn, but we came back stronger. Will come and focus on medium-sized companies and enterprise companies where we have seen a clear need for fintech infrastructure.”
When TechCrunch reported on the solid Series B in August 2022, Thiagarajan said the company’s revenue had grown 10x year over year. Furthermore, its customer base doubled to 100 and it became profitable. And year after year it has done transactions of more than $2 billion. That’s all changed.
Now more than a year later, the volume of transactions processed has increased – up to $5.79 billion to date in 2023 – however, its revenue is down 70% from the same period last year, mainly due to customer churn, Thiagarajan said. confirmed.
As for the finance chief, whom FTV claimed was providing the information, Thiagarajan and Lall told TechCrunch that they let the person go for “incompetence.”
Thiagarajan and Lall say that FTV’s claims are baseless because FTV’s own due diligence report “shows that their allegations are completely baseless and false.” They also insist that “there has been no wrongdoing” on their part.
Still, there’s a lot going on here, and a lot of uncertainty ahead, so we’ll have to see how it turns out.
