Railsr

Railsr was a London-based embedded finance startup founded in 2016 that provided banking, payments, and card APIs to other companies.²⁴¹⁰ The company raised over $185 million and was once valued at nearly $1 billion, but its valuation dropped to around $250 million in October 2022.²³¹¹ In March 2023, Railsr was acquired by a consortium of investors through a pre-packaged administration after becoming insolvent.²¹⁰

Timeline

Money raised

Railsr raised a $1 million seed round in August 2017.⁸ Railsr raised a $10 million Series A round in September 2019.⁸ Railsr raised a $37 million Series A round in November 2020.⁸ Railsr raised a $70 million Series B round in March 2021 led by Anthos Capital.⁸¹¹ In October 2022, Railsr raised a $46 million Series C round consisting of $26 million in equity and $20 million in debt.⁹¹¹ The equity portion of the Series C was led by Anthos Capital with participation from Ventura, Outrun Ventures, CreditEase, and Moneta.¹¹ Mars Capital provided the debt portion of the Series C.¹¹ The Series C round was a down round, valuing Railsr at around $250 million.²¹¹ In total, Railsr raised more than $185 million, and one source states $187 million.²¹⁰ In the prepackaged bankruptcy, Railsr was acquired for $500,000 plus up to another approximately $500,000 in trailing collected receivables.¹⁰

Investors named in the sources: D Squared Capital²¹⁰, Moneta VC²¹⁰, Ventura Capital²¹⁰, Anthos Capital⁸¹¹, Outrun Ventures⁸¹¹, CreditEase⁸¹¹, Mars Capital⁸¹¹, Double Prime LLP⁸, Target Global⁸, Andreas Mihalovits⁸, Broadhaven Capital Partners⁸, Commerce Ventures⁸, Freestyle Capital⁸, Ftac Ventures⁸, Sorenson Ventures⁸, Fabric Ventures⁸, Guerrilla Capital⁸, Insight Partners⁸, Partech Ventures⁸, Meirav Harnoy⁸, TowerBrook Capital Partners¹³.

What happened

Railsr was founded in London in 2016 as an embedded finance platform.²⁴⁸ The company provided APIs for banking, payment cards, and credit products to other fintechs and brands.²¹⁰ Railsr aimed to be the 'AWS equivalent of the financial layer of the internet'.⁴ In August 2020, Railsr acquired the UK arm of Wirecard Card Solutions.¹⁰ The Wirecard acquisition was much bigger than Railsr at the time and caused speculation about integration challenges.¹⁰

Railsr raised multiple funding rounds, including a $70 million Series B in March 2021 led by Anthos Capital.⁸¹¹ In July 2021, Railsr reported a valuation of $1 billion.¹⁰ In June 2022, Railsr laid off 14% of its staff, about 70 people.¹¹ Railsr downsized its operations in Southeast Asia and Australia to focus on the UK and Europe.¹¹ In October 2022, Railsr raised a $46 million Series C round at a valuation of around $250 million, a significant down round.²¹¹

The company was not yet profitable and described the round as a step toward profitability.¹¹ Railsr's revenues grew 50% in the first half of 2022, but expenses ballooned after the Wirecard acquisition.¹⁰¹¹ Net losses increased from £1.2 million in 2018 and 2019 to £13 million in 2020.¹⁰ By the end of 2022, Railsr was insolvent.¹⁰ In the summer of 2022, Railsr engaged FT Partners to run a sale process.¹⁰

FT Partners approached 248 strategic and financial investors but could not find an attractive buyer.¹⁰ In February 2023, Railsr's Lithuanian subsidiary PayRNet was accused by the Bank of Lithuania of grossly and systematically violating anti-money laundering and terrorist financing laws.¹²¹⁷ The Bank of Lithuania sought a court order to force PayRNet to temporarily stop taking on new clients.¹² On 8 February 2023, the sale to D Squared Capital was blocked due to the investigation of the Lithuanian subsidiary.¹⁰ On 20 February 2023, Railsr management decided to run an accelerated sales process.¹⁰

D Squared Capital emerged as the preferred buyer after other bidders declined to submit offers.¹⁰ On 9 March 2023, Embedded Finance Limited, a consortium of investors, acquired Railsr as part of a pre-packaged bankruptcy.²¹⁰ The acquisition price was $500,000 plus up to another approximately $500,000 in trailing collected receivables.¹⁰ Railsr's bankruptcy documents reported that the company owed £36 million to creditors.¹⁰ The creditors included £22.1 million to subsidiaries, £4.9 million to trade creditors, £4.3 million in employee liabilities, £3.3 million to Foris, and £1.4 million in tax payable.¹⁰

The buyer, Embedded Finance Limited, included former investors Moneta Venture Capital and VCapital, and former management.¹⁰ Railsr's chair Rick Haythornthwaite said the company was 'absolutely delighted' to rebuild momentum and return to growth.² The company stated that while in administration, no services were interrupted.² Railsr's subsidiaries Payrnet Limited in the UK and UAB Payrnet in Lithuania were not in administration and continued to trade.² In July 2023, the Bank of Lithuania revoked the EMI licence of UAB PayrNet.¹⁴

In March 2024, Equals Group confirmed receipt of a non-binding proposal from a consortium comprising Embedded Finance Limited (Railsr) and TowerBrook Capital Partners.¹³ The proposal was for a possible offer for the entire issued share capital of Equals.¹³ There was no certainty that a firm offer would be made.¹³

Legal outcomes

• filedThe Bank of Lithuania accused Railsr's subsidiary PayRNet of grossly and systematically violating anti-money laundering and terrorist financing laws.¹²¹⁷
• filedThe Bank of Lithuania sought a court order to force PayRNet to temporarily stop taking on new clients.¹²
• filedThe Bank of Lithuania revoked the EMI licence of UAB PayrNet.¹⁴

Where the founders are now

Nigel Verdon was the co-founder and CEO of Railsr.⁴¹¹ Clive Mitchell was a Railsbank co-founder and non-executive Director of Railsbank Tech.¹⁰ Rick Haythornthwaite was the chair of the board prior to the sale and stayed on in that role.²

Sources

2. Railsr, the UK embedded fintech once valued at nearly $1B, goes into bankruptcy protection under new consortium owner | TechCrunch, TechCrunch, 2023-03-09
3. Railsr, the UK embedded fintech once valued at nearly $1B ..., yahoo.com
4. The journey from Railsbank to Railsr, railsr, 2022-07-08
8. Railsr: Funding, Team & Investors, Startup Intros, Jul 13, 20
9. Railsr secures $46m in Series C funding, fintechfutures.com, Oct 4, 202
10. Highlights from Railsr’s Bankruptcy Document and Lessons Learned | Flagship Advisory Partners, Flagship Advisory Partners, 2023-11-29
11. Railsr, the fintech formerly known as Railsbank, raises $46M | TechCrunch, TechCrunch, 2022-10-04
12. Railsr, FStech, Feb 17, 20
13. Equals confirms receipt of proposal from Railsr and TowerBrook for its entire share capital, FX News Group, 2024-03-20
14. Bank of Lithuania revokes EMI licence of PayrNet, fintechfutures.com, Jul 4, 202
17. British fintech champion accused of 'systematic' failings ..., telegraph.co.uk, Feb 16, 20

How this case file was put together

Every statement on this page carries a numbered note, and every note points to a court record, a regulatory filing or a named publication in the list of sources. Each statement was checked against the text of the sources it cites before it was published: a figure, a date or a name the cited source does not contain was cut rather than kept. Allegations are shown as allegations, with their status at the time of the source (filed, charged, convicted, pleaded, settled, dismissed or pending). Quoted lessons are the words of the person or publication named with them, copied from the cited source; nothing here is our own opinion of why the company failed.

If a fact on this page is wrong, use "Report an error" below and attach the record that shows the correct fact. Every report is reviewed by a person before anything changes, and a corrected page says when it was last corrected.

All case files2023fintech