Two California Startups Create BitDazzle to Take Bitcoin Mainstream
Cashie Commerce, a San Diego startup that provides a purchasing platform for online merchants, has partnered with San Francisco-based Coinbase to create BitDazzle, a new online marketplace that accepts the digital currency Bitcoin.
The move comes just weeks after the feds shut down the illicit trafficking website Silk Road—where all transactions were conducted using Bitcoins—and arrested owner Ross William Ulbright on federal charges of money laundering, conspiracy to commit drug trafficking, and other crimes. On Friday, the payment processing company Dwolla unexpectedly disclosed plans to phase out its own Bitcoin-related businesses.
Yet Cashie Commerce CEO Hieu Bui said he does not view the development of BitDazzle.com as a higher-than-normal business risk. He welcomed government efforts to shut down the online black market for Bitcoin-based sales of drugs, guns, and other illicit products.
“We’re trying to make Bitcoin more mainstream, and one of the ways to do that is to have more products and merchants who are mainstream,” Bui told me by phone this morning. He said PayPal also was used in dubious ways at the beginning, and gained broader acceptance as the payment system cut ties with porn sites.
“I’m optimistic Bitcoin is here to stay,” says Dave McClure, the founder of 500 Startups and a Cashie Commerce investor, in a statement announcing the Bitcoin marketplace today. “Bringing together a Bitcoin market leader like Coinbase and an e-commerce leader like Cashie Commerce to create BitDazzle is a great step forward in offering Bitcoin to the masses.”
Coinbase, a Y Combinator startup, was founded in 2012 to make it easy for the average person and business to use Bitcoins in secure online transactions. Coinbase says it now has 254,000 users and nearly 200,000 transactions per month, and will handle all Bitcoin payment processing for BitDazzle. Despite the government crackdown on Silk Road, Bitcoin deals have been drawing increasing interest from Web investors, according to The Washington Post, which recently reported that Coinbase is now processing $20 million worth of Bitcoins a month, up from $1 million in February.
Cashie Commerce was spun out in 2011 from WebAssist, a private San Diego company (where Bui was a co-founder) that provides high-end software development for e-commerce websites. Bui, a longtime San Diego software engineer, said he saw the potential for a separate company that would provide a Web-based “shopping cart” platform for micro merchants.
“Their biggest problem is that they can’t drive traffic to their stores,” Bui said. Bui, who told me he escaped from Vietnam with relatives when he was 4, has raised $650,000 in seed funding from the San Diego Tech Coast Angels and 500 Startups for Cashie Commerce, which now has eight full-time and three contract employees. In a testament to his perseverance (and the fund-raising challenges for San Diego tech startups) Bui told me he took 200 meetings to raise the $650,000. “All the answers I had to come up with helped me make my business,” he says.
When I sat down with him a couple months ago, Bui said many of their customers “are the folks who sell on Etsy.” They are companies like Maple Rowe, which sells handmade, high-quality organic soaps; Words to Sweat By, which sells motivational fitness apparel and accessories; and Deano’s Jalapenos, which sells spicy chips.
Cashie Commerce now supports credit card and PayPal transactions for about 3,000 merchant customers around the world, Bui said. About a third of those customers are already able to create a listing on BitDazzle, which gives their customers the option of paying for products with a credit card, PayPal, or Bitcoin. Other customers will be encouraged to add BitDazzle as an option as Cashie Commerce expands its capabilities.
Bitcoin was conceived as an encrypted digital currency on a peer-to-peer electronic cash payment system that removes the need to deal with third parties, such as banks.
BitDazzle offers a better transaction price for online merchants, Bui explained. Where credit card companies charge merchants 2.9 percent plus 35 cents per transaction (with roughly equivalent terms charged by PayPal), BitDazzle charges a flat 1 percent fee per transaction. In August, Coinbase said its Bitcoin payment processing would be free to customers for their first $1 million in orders—an incentive that has been extended to BitDazzle, Bui said.
Transaction prices are lower, he said, because “there is no central authority. There is no central bank. There is no one entity that owns it.”