Startups in the fintech world have been facing an uphill battle, with many struggling to stay afloat in the current economic climate.
Recently, one of the most promising fintech startups in London which was touted to be near a unicorn valuation, Railsr, formerly known as Railsbank and once worth nearly $1 billion, announced that it has been acquired by a shareholder consortium, Embedded Finance Ltd. The acquisition comes with a bankruptcy state, allowing Railsr to continue as a going concern while it restructures.
Embedded Finance Ltd includes Railsr’s previous investors, D Squared Capital, Moneta VC, and Venture Capital, but the value of the deal has not been disclosed. Back in October 2022, when Railsr was still solvent, it was valued at around $250 million, so this provides a starting point for the acquisition deal.
Railsr’s Difficulties
The acquisition and bankruptcy state come after a difficult period of uncertainty at Railsr, with rumors of the company being in trouble and looking for a buyer for months. Sky News reported that the company raised a significant down round in October 2022, which valued the company at around $250 million.
Railsr was an early mover in the world of embedded finance, a type of fintech that builds and runs APIs for banking, payment cards, and credit products used by other fintechs, neobanks, brands, and businesses that want to offer financial services to their customers. The company has over 5 million users, and it has raised more than $185 million, with a previous valuation of close to $1 billion.
What Does This Mean for Embedded Finance?
The fall of a startup that once had very big ambitions raises questions about what Railsr’s fate might signify. Was its fall due to the startup’s own strategy, or execution?
Or, is it a signal of more woe to come for other embedded finance players? More generally, a wider swath of fintech startups that might not be profitable are coming to the end of their runway, and finding it hard to raise more cash may be coming to terms with their own next steps – and the outcome may not be pretty.
Despite these concerns, the investors are still bullish about the potential for embedded finance as a business, which is why they have acquired Railsr and given it another shot.
Embedded finance has the potential to spur innovation, shape business models, and shift consumer experiences. Dan Adler, managing director of D Squared Capital, said, “Railsr has the opportunity to maintain its position as the market leader in Europe and capture the ever-burgeoning embedded finance market opportunity.”
What’s Next for Railsr?
Railsr’s chair of the board, Rick Haythornthwaite, will stay on in the role. “We are absolutely delighted that Railsr is now able to rebuild momentum and return to growth,” he said in a statement. “We have secured a new chapter for Railsr and are excited about what the future holds.”
While Railsr is in administration, no services are being interrupted, and two other operations connected to Railsr, Payrnet Limited in the UK and UAB Payrnet in Lithuania will continue to trade as before.
