Paydiant Banks $15M, Shows Patience in Mobile Payments
You hear a lot about the Series A funding crunch for startups these days. But just as telling, maybe even more so, is the Series B crunch. And the Series C crunch.
For New England tech startups, there’s a fair bit of seed funding going around—and growth capital, too—but less money seems to be flowing to the middle, into the fledgling companies that are trying to become, well, real companies.
That’s all anecdotal—and so is this counterpoint. Paydiant, a Wellesley, MA-based mobile payments startup, has just raised a $15 million Series C round led by an unnamed strategic investor (who’s also a customer). The 70-person startup’s previous investors—StageOne Ventures, North Bridge Venture Partners, and General Catalyst—also participated in the round, along with another unnamed customer. The deal brings Paydiant’s total raised to just under $40 million since its founding in 2010.
The new cash in the bank elevates the company—for better or worse—into the echelon of some of Boston’s biggest venture-backed technology bets. And that’s just fine with Chris Gardner, Paydiant’s co-founder. “You need gas in the tank to get anything done” in mobile payments, he says. (The sector is going through its own crunch at the moment.)
Paydiant makes a software platform that helps banks and retailers—mostly banks so far—add capabilities in mobile payments, offers, and rewards to their own apps. For example, a financial institution can put a payment button inside its existing mobile-banking app. The startup’s white-label approach is in contrast to the Googles, Squares, PayPals, and ISISes of the world, which offer branded mobile-payment systems that ultimately make money from transactional data and advertising.
“We and our customers are very into the notion of creating a neutral, shared platform,” Gardner says. “We’re providing them with a platform where they can own and operate that experience and keep that data under their control.”
In other words, a bank with millions of mobile users would much prefer to keep those users (and their data) in its own banking app if possible. Same with big retailers. That’s Paydiant’s advantage.
The flip side? A major player like PayPal has 100 million-plus users and lots of data and leverage. Meanwhile, Paydiant must keep winning over corporate customers, and has to wait (like everyone else) for retailers and other businesses to come around to mobile payments. “When you’re white label, you depend on the success of your partners,” Gardner says. “You don’t 100 percent control your own destiny.”
Nobody has it easy in this sector, of course. Plenty has been written about the ongoing challenges of mobile payments and wallets in gaining adoption. But Paydiant thinks its own behind-the-scenes approach will help it ease into mainstream use without relying on any new technology, new apps, or disrupting customers’ business as usual.
Paydiant’s Gardner, who seems ever patient, admits that things will take a while to shake out. Right now even the term “mobile wallet” can mean lots of different things, he says. For a financial institution, it’s about mobile banking. For a restaurant, it might be about placing orders in advance. For other businesses, it could be about any number of mobile commerce features.
“We’re a space in search of something better,” he says.