Highland Capital Leads $7.5 Million Series B Round for Group Payments Startup WePay
Lexington, MA-based Highland Capital Partners is the lead investor in a $7.5 million series B round for WePay, the group payments startup that emerged from the Mountain View, CA-based Y Combinator startup incubator last year.
WePay co-founders Rich Aberman and Bill Clerico confirmed news of the funding round, which was first reported tonight by the tech blog Mashable. “We’re very excited,” says Aberman.
The startup, which was born in Boston in 2009 and relocated to Silicon Valley after Aberman and Clerico were admitted to Y Combinator, opened its online payments service to the general public in March. (For the full story on the company, see this July 8 Xconomy Q&A with Aberman.) The service enables members of organizations such as fraternity houses or homeowner’s associations to handle joint expenses by creating group financial accounts. Members can send money to the account from their bank accounts or credit or debit accounts, and group coordinators can spend the money by check or using a special WePay credit card.
All funds are kept in FDIC-insured accounts at Minneapolis-based Bancorp, the nation’s sixth-largest bank. Aberman and Clerico argue that alternative ways of organizing group payments are awkward and old-fashioned, and that other online payment processors like PayPal have failed to address this need, leaving a big opening for WePay.
On the strength of that argument, WePay closed a $1.65 million Series A round last November, with August Capital and a high-profile group of angel investors contributing. Since then, “We’ve been operating at an extremely low burn rate and have plenty of cash in the bank,” says Clerico. “But we’ve seen some pretty impressive growth numbers, and we’re excited about the going-back-to-school season. So we wanted to make sure we have the capital to scale our operations, based on the demand we’re seeing.”
Fraternities, college clubs, and rooming groups have been signing up at high rates, Clerico and Aberman say. But WePay is also popular among non-profit groups and professional association. The founders say the services is used by groups as diverse as roller-derby clubs and groups of artists preparing projects for the Burning Man festival.
WePay’s B round was “extremely competitive,” according Clerico—the implication being that the startup turned away a number of eager venture investors, though he couldn’t name them due to confidentiality agreements. Highland won the lead spot in part because of a Boston College connection. Aberman and Clerico are both BC alums, as is Highland partner Peter Bell (who has now joined WePay’s board).
“Peter is actually a trustee at Boston College, and one of my first college internships was at one of Peter’s portfolio companies,” a small medical tourism company called HealthBase, Clerico says. “Peter has made great investments across the board, including Ocarina Networks and SCVNGR, and we have great respect for him as an investor and for Highland as a firm.”
August Capital returned for WePay’s B round. But Aberman and Clerico aren’t commenting on whether any of the startup’s stellar lineup of Series A angel investors—who included PayPal alumni Max Levchin and Dave McClure, former Googler Paul Buchheit, Swipely founder Angus Davis, and super-angel Ron Conway—also ponied up.
The Series B funds will help the company staff up. “We think that in this space, the best product wins, and the best product comes from having the best people building it,” says Clerico. “So we’re aggressively hiring engineers, and also staffing up in customer support and sales and marketing.”
Interestingly, six of the company’s nine current employees—counting Aberman and Clerico—hail from Boston, where Clerico says the startup has had the most recruiting success. The most recent addition is product manager Kyle Paice, whom WePay hired away from Cambridge, MA-based Hubspot.
“Out here I’m competing [for job candidates] with Facebook and Twitter and eBay and all of these big Internet companies,” says Clerico. “Boston doesn’t have that level of competition, but it has the same level of talent.”