TipJoy Shuts Down

8/21/09Follow @wroush

TipJoy, an Arlington, MA-based startup that created a micropayment system designed to allow Web users to reward content providers with small tips, announced on its blog yesterday that it is shutting down.

Launched through the Y Combinator startup incubator program, TipJoy collected a Series A venture investment of nearly $1 million less than a year ago. Founders Abby and Ivan Kirigin said in their blog post that the company had failed to gain enough traction to justify raising additional capital.

In fact, they questioned the practicality of TipJoy’s business plan to provide a third-party system that would use existing social networking platforms such as Facebook as a medium for reimbursing writers, artists, musicians, and other digital content creators.

“We strongly believe that social payments will work on a social network, provided that they’re done within the platform and not as a 3rd party,” the Kirigins wrote. “‘Simple, social payments’ is *the* philosophy needed to do digital payments right, but once a service groks that, they need only to implement it on their own. We’ve been the thought leaders in this space, we see the hype and excitement, and yet we know very intimately the difficulties in gaining actual traction. The only way to get around this is for the platforms themselves to control payments—then all people wanting to operate on that platform would have to play along. We believe that a payments system directly and officially integrated into social networks such as Twitter and Facebook will be a huge success.”

People who were earning micropayments through TipJoy can still log into the system and cash out their funds, but the collections side of the platform has been turned off.

TipJoy’s investors included New York-based seed stage investor Betaworks as well as the Accelerator Group, David Shen Ventures, and private investors Chris Sacca, Taavet Hinrikus, and Ron Bouganim.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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