Petal has tapped Goldman Sachs to advise on the process, they said. It’s unclear how much the startup is seeking. Petal was valued at $800 million in January 2022.

Founded in 2016, Petal offers Visa credit cards that help consumers establish their credit. The cards are geared toward consumers who are new to credit. They could be young, or immigrants, or even divorcees who lack a credit history. A Petal algorithm analyzes a consumer’s banking history and determines whether they are eligible for a card. Nearly 400,000 people have been approved for Petal’s three credit cards. The New York startup, however, isn’t a bank—its credit cards are issued by WebBank. Petal has raised more than $300 million in equity capital and over $680 million in debt financing. (Petal uses this debt to fund the lines of credit it extends to cardholders.)

In 2018, the startup introduced its flagship product, now called the Petal 2 credit card, which didn’t have any fees. That continues to this day. Petal does charge fees with its other products. The Petal 1 card, launched in 2020, charges fees for bounced checks and missed payments. There’s also the Petal 1 Rise card, launched in fall 2022, which charges a $59 annual membership fee

Continued high interest rates have impacted consumer lenders like Petal this year, making borrowing more expensive. Petal in August unveiled a $200 million debt facility from Victory Park Capital, agreed to a multi-year extension of an existing term loan, and closed term loan for up to $20 million with Trinity Capital.  

“The cost of capital has been much higher given the macro rate environment, and this puts pressure on lenders’ P&Ls,” one VC said.  

Petal has raised $55 million in equity funding this year, including a $35 million round led by Peter Thiel’s Valar Ventures in May. It announced another $20 million in equity funding from existing investors in August.

In May, the startup said it generated more than $80 million in annualized revenue last year and was on a path to reach profitability by 2024. At that time, Jason Rosen, Petal CEO and co-founder, told employees that the company had about years’ worth of cash left, The Information reported in October.

Petal has also undergone two rounds of layoffs. In June, the startup cut 20% of its employees. It also reduced staff last year. Petal’s staff currently numbers about 100. Only business critical employees are left at the startup, one former worker said. 

“They have been struggling for a while,” a second VC said.

If Petal doesn’t find a buyer, the startup is expected to go out of business, the VC, PE and bankers said. However, others think that’s unlikely. “Petal has received multiple acquisition offers,” said one person close to the process. It’s a matter of who will buy the company, not if, they said.

If Petal doesn’t find a buyer, the company still has options that don’t include winding down its business, the person said. The startup has money left from the $55 million it raised this year, they said. Petal can draw additional liquidity from its existing loan agreements, while its current stakeholders are also willing to providing more funding if the company needs it, the source said.

News of the Petal sale comes six months after the company spun off Prism Data, its B2B-focused data infrastructure and analytics subsidiary, in May. Rosen is the CEO of both Petal and Prism. Rosen is expected to step down from Petal by the end of the year, the second VC said. However, this could happen as part of a sale. New owners typically install their own management teams in companies they acquire. Rosen could also stay if a possible buyer requires management to remain at businesses for a set amount of time.