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In a surprising turn of events, Railsr, the UK embedded fintech startup formerly known as Railsbank, has gone into bankruptcy protection after being acquired by a shareholder consortium. The consortium, named Embedded Finance Ltd, includes previous investors such as D Squared Capital, Moneta VC, and Venture Capital.
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The financial details of the acquisition have not been disclosed. Railsr was once valued at nearly $1 billion, but due to recent challenges, the deal was made as the company went into administration to restructure its operations.
londonbased railsr 1blundentechcrunch
Railsr had been a prominent player in the world of fintech, particularly in the niche of embedded finance. The company offered APIs for banking, payment cards, and credit products, serving as a backbone for other fintechs, neobanks, and businesses looking to offer financial services to their customers.
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The acquisition comes after a series of difficulties for Railsr, with rumors circulating for months about its financial troubles and search for a buyer. In October 2022, the company raised a Series C funding round of $26 million, along with $22 million in debt, valuing the firm at around $250 million. This down round marked a significant decline in its valuation compared to previous funding rounds when it was valued at close to $1 billion.
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The initial acquisition discussions had been with Flutterwave, a pan-African financial services company looking to expand into Europe. However, those negotiations did not materialize, leading to the shareholder consortium stepping in to acquire the company.
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While Railsr’s challenges raise questions about its own strategy and execution, it also reflects the broader difficulties faced by startups in the current economic climate. Fintech startups, especially those struggling to achieve profitability, are finding it increasingly challenging to secure additional funding and ensure sustainable growth.
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Despite its current predicament, Railsr’s new consortium owners remain optimistic about the potential of embedded finance as a business model. They believe that the company’s best-in-class technology platform and customer base can provide a competitive advantage in the ever-burgeoning embedded finance market.
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Railsr’s chair of the board, Rick Haythornthwaite, expressed excitement about the future prospects, highlighting the potential for rebuilding momentum and returning to growth. The investors share this sentiment and are committed to supporting the company through the changing regulatory landscape and maintaining its position as a market leader in Europe.
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While Railsr navigates its restructuring under administration, the company assures its customers that no services will be interrupted. Other operations connected to Railsr, such as Payrnet Limited in the UK and UAB Payrnet in Lithuania, remain unaffected and will continue trading as before.
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The fate of Railsr raises important questions about the challenges faced by fintech startups and serves as a cautionary tale for other players in the embedded finance space. As the economic landscape evolves, it remains to be seen how startups in the fintech industry will adapt and find sustainable paths to success.