Founder of failed fintech Synapse says he's raised $11M for new robotics startup

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render of Synapse CEO Sankaet Pathak

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Tens of millions of customer dollars remain unaccounted for at his previous startup, fintech Synapse. But that’s not deterring Sankaet Pathak from forging full steam ahead with his new robotics venture.

Foundation is a robotics startup with a self-proclaimed mission to “create advanced humanoid robots that can operate in complex environments” to address the labor shortage. The company has already raised $11 million in pre-seed funding from Tribe Capital and “other angels,” Pathak told TechCrunch on Thursday.

Tribe co-founder and managing director Arjun Sethi is also a co-founder of Foundation, Pathak also said on Thursday. Tribe did not immediately respond to our request for comment. In June, The Information reported that Foundation had $10 million in capital commitments from Tribe Capital. 

Synapse operated a service that allowed others — mainly fintechs — to embed banking services into their offerings. The San Francisco-based startup had raised a total of just over $50 million in venture capital in its lifetime, including a 2019 $33 million Series B raise led by Andreessen Horowitz’s Angela Strange.

Synapse wobbled in 2023 with layoffs and filed for Chapter 11 in April of this year. As of July, millions of consumers (mostly customers of fintechs that worked with Synapse) with nearly $160 million in deposits remained unable to access their funds. It’s not clear today just how much of those deposits remain unaccounted for.

When asked about the missing customer funds, Pathak — who founded Synapse in 2014 and served as its CEO until May — pointed me to an August 20 post in which he charges that Synapse’s former partner Evolve Bank “needs to start paying out customers and cover the deficit they created.”

He added in the post: “To that effect, I’m making all known Evolve deposit shortfalls and their causes public. Any customer, regulator, government agency, or member of the press can contact me directly for more details.”

TechCrunch has reached out to Evolve for comment. But, when Pathak or Synapse have made similar accusations previously blaming Evolve, most recently in May, Evolve has said it is not responsible and pointed the finger right back at Synapse.

Meanwhile, in a video posted on social media on Thursday, Pathak revealed more details about his new startup, Foundation.

On X, Pathak said that Foundation’s goal is to “automate GDP through AI and robotics to free people from labor jobs, allowing them to pursue their passions.”

He added: “To automate GDP, we need real-world foundation models. The challenge is the massive amount of data required for effective training, which hasn’t been collected yet. The company that deploys the largest fleet will likely win. Success won’t come from just software or hardware alone — it requires strength in both, plus the right infrastructure (more on that later). Near-term goal is to have a walking humanoid robot by year-end.”

He also, boldly, claims that Foundation’s model now “fully handles scene depth, object detection, semantic segmentation and unseen object pose estimation — exceeding what any autonomous vehicle perception stack can do.”

In general, there are mixed views on the near-term likelihood of a general-purpose humanoid robot, as TechCrunch’s hardware editor, Brian Heater, wrote in June. There are, as Pathak points out, myriad engineering problems to solve first.

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The demise of BaaS fintech Synapse could derail the funding prospects for other startups in the space

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Welcome to TechCrunch Fintech! This week, we’re looking at the long-term implications of Synapse’s bankruptcy on the fintech sector, Majority’s impressive ARR milestone, and more! 

To get a roundup of TechCrunch’s biggest and most important fintech stories delivered to your inbox every Tuesday at 7:00 a.m. PT, subscribe here. 

The big story

Last week, we reported on how Copper Banking, a digital banking service aimed at teens, abruptly discontinued its bank deposit accounts and debit cards. The startup stated that its banking middleware provider, Synapse, was sunsetting its service “imminently.” The situation was just one of many where companies and consumers are being impacted by the implosion of banking-as-a-service company (BaaS) Synapse. I wrote a deep dive into the potential short- and long-term implications of its demise for the fintech sector. Though certainly not the only bit of bad news, it shows just how treacherous things are for the often-interdependent fintech world when one key player hits trouble. 

Analysis of the week

Besides Copper, so many niche digital banks have struggled as of late that it was even more notable to see immigrant banking platform Majority not only raise more money, but also reveal that it had achieved $40 million in ARR as of April. That’s no easy feat, especially in a crowded space that includes competitors such as Comun, Maza, Alza and Welcome Technologies. Founded in 2019 by Swedish immigrant Magnus Larsson, Majority says that over the past year, the company grew its revenue three times while the number of users doubled.

Dollars and cents

U.K. fintech Vitesse, which targets insurance companies with an all-in-one treasury and payment management platform, closed a $93 million Series C round of funding led by investment giant KKR. The company said it’s doubling down on its U.S. expansion efforts.

Finout, an enterprise-focused toolset designed to help manage and optimize cloud costs, last week closed a $26 million Series B round led by Red Dot Capital. We covered the company’s launch out of stealth in 2022. Finout says it has attracted high-profile customers like The New York Times, Tenable and Wiz in spite of this crowded market and has grown annual recurring revenue ninefold from 2022 to 2023.

Peter Thiel-founded Valar Ventures — which has backed a number of fintechs — raised a $300 million fund, half the size of its last one.

What else we’re writing

Google Pay announced last week the rollout of several updates that capitalize on its integrations with other Google products, like Android and the Chrome browser. People who check out with Google Pay can now see their card benefits and perks before selecting a card. In addition, they can use “buy now, pay later” through partners like Affirm and Zip and can fill in their card details through biometrics or a PIN, instead of by entering their security code. The changes are designed to enhance the consumer experience of using Google Pay and make it a more competitive option against other payment methods.

Indian digital payments platform Paytm warned of job cuts after reporting that its net loss widened in the fourth quarter as it grapples with a recent regulatory clampdown.

High-interest headlines

Stripe launches new payments and financing tools to accelerate UK business growth

Rho partners with Navan for travel and expense management

Capchase secures $114 million to provide funding for SaaS businesses

ICYMI: Federal prosecutors are examining financial transactions at Block, owner of Cash App and Square

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A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites 'gross mismanagement'

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The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday. 

The trustee is asking to convert the company’s debt reorganization Chapter 11 bankruptcy into a liquidation Chapter 7, according to court documents.

The trustee wrote that the need for Chapter 7 resulted from Synapse “grossly” mismanaging its estate so that losses were continuing with little “reasonable likelihood of reorganization” that would allow the company to emerge on the other side and carry on.

This new development is significant because Synapse founder Sankaet Pathak earlier this month alleged that its former partners owe it millions, by its own accounting, and were not paying up. Those partners have been insisting that Synapse’s allegations have “no merit.”

San Francisco-based Synapse, which operated a platform enabling banks and fintech companies to develop financial services, was founded in 2014 by Bryan Keltner and Pathak. It was providing those types of services as an intermediary between banking partner Evolve Bank & Trust and business banking startup Mercury, among others.

Synapse filed for Chapter 11 bankruptcy on April 22 and, at the same time, announced its assets would be acquired by TabaPay.

But on May 9, TechCrunch reported that TabaPay’s $9.7 million planned purchase of Synapse’s assets fell apart. At the time, Synapse said the problem was banking partner Evolve Bank & Trust. Evolve alleged that it was not involved in the sale, and was not to blame. Mercury also claimed Synapse’s allegations of being owed money had “no merit.” 

But the infighting between the companies continued. On May 13, Evolve Bank & Trust filed a motion for an order restoring access to Synapse’s dashboard system after alleging that it had been denied access to the startup’s computer systems and had been forced to freeze end user accounts.

The U.S. Trustee alleged, according to court documents, that Synapse “inexplicably cut off access to its computer systems on a weekend.”

“While disputes exist among the parties there appears to be no reasonable explanation for the Debtor [Synapse] cutting off access to its computer systems and indeed the Debtor has since represented that full access has been restored. There appears to be no dispute that these actions have played a material role in end users losing access to their funds. At a minimum, an independent fiduciary is needed to see if a resolution can be reached that minimizes further harm to depositors. For all these reasons, the Debtor has grossly mismanaged the estate and ample cause exists to convert this case to chapter 7.”

Synapse admitted that it had “no more cash or approval to use any cash after Friday, May 17.”

A hearing is scheduled for the U.S. Trustee’s emergency motion for May 17.

Hope remains that the proceedings could continue with no further shenanigans. In a creditor committee meeting that took place on May 15, shared on LinkedIn by Fintech Business Weekly’s Jason Mikula, “it was suggested that fintech clients of Synapse might provide some kind of funding to the company to enable it to keep operating in Chapter 11, presumably in an attempt to resolve the disruption to end users.”

TechCrunch has reached out to Synapse for comment.

An Evolve spokesperson confirmed to TechCrunch that on May 11, “Evolve Bank & Trust faced an unexpected challenge when Synapse abruptly and without prior notice disabled our access to an account and transaction information dashboard controlled by Synapse and needed by Evolve. This sudden disruption significantly impacted our ability to maintain the visibility and transparency that Evolve needs to have into accounts and transactions. In response to this situation, Evolve took swift and decisive action to safeguard the security of end user funds and ensure compliance with applicable laws. As a precautionary measure, we made the difficult decision to freeze payment and card activity until we could successfully re-establish access to the dashboard as well as receive necessary account and transaction data and reports. While we understand the inconvenience this may have caused, this step was taken with the utmost consideration for the security and integrity of end user accounts. Evolve continues to work diligently to obtain necessary information from Synapse.”

The spokesperson added that Evolve has not unfrozen this activity because “Synapse has failed to provide daily transaction and account information that is necessary to process transactions…The account freeze was a precautionary measure to minimize the risks to end users and to Evolve.  At this time, Evolve is not aware of any end user funds being lost as a result of Synapse denying Evolve dashboard access.”

The previous $9.7 million purchase price that TabaPay was going to pay for Synapse’s assets are significantly lower than the over $50 million in venture capital that Synapse had raised from investors such as Andreessen Horowitz, Trinity Ventures and Core Innovation Capital over time.