Thread: This 28 Year Old's Start Up Is Moving $350M

Damn. People are kicking ass. I need to get off my butt now.

"We grew that company from a $1,200 investment to over one million in revenue in four years with three or four people and without outside investment." (this refers to a past project)

I like all the naysayers acting like know-it-all d-bags in the comments section, too funny.

A great story that meets all 5 Fastlane Commandments, as well as exemplifies why "Someone is doing it" doesn't have to roadblock an idea from proceeding.

Originally Posted by MJDeMarco

A great story that meets all 5 Fastlane Commandments, as well as exemplifies why "Someone is doing it" doesn't have to roadblock an idea from proceeding.

On top of that, the "someone" was Visa and MasterCard. No big deal.

I'm going to use their services on my site!

Also observe the ignorance of the commenters ...

A few people stated "That will never work"

Really? Did you read that the service is processing $1M a day?

The market is proving otherwise.

Markets prove ideas -- that fact that a few idiots believe "that'll never work" is irrelevant. I'm sure these are the types that are "doing what they love" instead of offering what the market wants.

The only part I take issue with is, OK, it takes a flat rate of $0.25 per transaction. Great. This can benefit a merchant in obvious ways. However, as consumers, I don't "see" the fees of credit cards because they are tied into the cost of the goods.

Now, I get it (or at least I think I do); if something like this catches on, in theory, the savings would trickle down to me. Ultimate end result? Business pays less, and I pay less for the same transaction in the long run. Though in practice, would businesses really lower costs? Or would they just say, as in his case, "Hey, my costs just fell a cool $55,000 this year, right on," and continue as normal?

As a spectator to this, I like seeing someone get out there and take on credit card companies. As a consumer, and working off the assumption that business probably won't lower its costs (and I wouldn't blame them if they didn't), I think I'd be putting my direct bank account information at risk, where at least credit cards offer some fraud protection. At this point, direct pay doesn't seem YET to have a big discernible benefit, but I'm curious to see where it goes. Especially his latter points about the banking system.

Originally Posted by Davidla

CC rewards = marketing tricks

What % do you pay the company as interest compared the % of reward you get? (also rewards usually drop with time, but interest tends to accumulate and compound )

Now what if one pays off their card in full each month?

Originally Posted by winch

The only part I take issue with is, OK, it takes a flat rate of $0.25 per transaction. Great. This can benefit a merchant in obvious ways. However, as consumers, I don't "see" the fees of credit cards because they are tied into the cost of the goods.

Now the merchant can now offer higher rewards if you really care about the $5 you're getting back after spending $100 product. You're dealing with maybe hundreds of dollars a year, and businesses are dealing with tens of millions of dollars a year. It's better for business. It's better for consumers.

Originally Posted by MJDeMarco

Markets prove ideas -- that fact that a few idiots believe "that'll never work" is irrelevant. I'm sure these are the types that are "doing what they love" instead of offering what the market wants.

Or they hate what they do and are pissed off at the world because everyone else is wrong and they're right.

It's moving a lot of money but how much profit are they making?
Let's see. The average transaction amount is $500 as said in the article.
(350, 000,000 / 500 ) x .25 = $175,000 revenue. They have 12 employees and expenses. So they are losing lots of money right now and basically running on investor capital. They will need to move a lottt more money to become profitable. I'm sure other competitors will pop up as well. I don't think this business model will succeed.

Originally Posted by 911Carrera

It's moving a lot of money but how much profit are they making?
Let's see. The average transaction amount is $500 as said in the article.
(350, 000,000 / 500 ) x .25 = $175,000 revenue. They have 12 employees and expenses. So they are losing lots of money right now and basically running on investor capital. They will need to move a lottt more money to become profitable. I'm sure other competitors will pop up as well. I don't think this business model will succeed.

If Visa makes 2% of all transactions, a $500 transaction would result in $10. In theory, they would profit 1/40th of what Visa does if they switched places, and Visa has competition. Visa's net income is around $3 billion per year. All things being equal, this company could profit $75 million per year. Sounds good to me.

Originally Posted by wade1mil

If Visa makes 2% of all transactions, a $500 transaction would result in $10. In theory, they would profit 1/40th of what Visa does if they switched places, and Visa has competition. Visa's net income is around $3 billion per year. All things being equal, this company could profit $75 million per year. Sounds good to me.

Your argument is totally flawed because Visa doesn't just make 2% on all transactions. I'm not sure where you got that 2% from. You seem to forget that Visa runs a complex business and charges other fees besides transaction fees (like maintenance, interest, late fees).

2% was a guess. I worked for a small business a few years ago and I remember the rates Visa charging for merchants being somewhere in the 2-3% range. I could be mistaken. You're right. Visa has a larger number of services, I generalized a little too much there. They are doing $30 million a month, which is minuscule. If they get in more banks and grow their customer base, this has incredible potential.

Originally Posted by wade1mil

Now the merchant can now offer higher rewards if you really care about the $5 you're getting back after spending $100 product. You're dealing with maybe hundreds of dollars a year, and businesses are dealing with tens of millions of dollars a year. It's better for business. It's better for consumers.



Or they hate what they do and are pissed off at the world because everyone else is wrong and they're right.

To me the crux of this argument is that businesses will ultimately pass savings onto consumers in some fashion. That is an assumption I don't think anyone can make.

Originally Posted by winch

To me the crux of this argument is that businesses will ultimately pass savings onto consumers in some fashion. That is an assumption I don't think anyone can make.

That is a great point and one that I would guess the answer to be no. But, even without passing the savings onto consumers, their small business customers would see more cahflow/working capital. And that is a positive for business and the economy. And it is cheaper for the consumer albeit the smarter consumer who does not buy all of their christmas gifts on credit (sidewalkers).

Side note: Groupon's business model is recieving something like 60% of each sale from each business minus credit card fees. On a grand scale (a scale where dwolla is really capturing market share from the big CC companies), Groupon would see a real difference. A difference that they would love to see as they were operating from negative working capital pre-ipo.
A real Grand Slam for both Dwolla and Goupon? Have a Groupon introduce Dwolla somehow. Wouldn't cost either company a penny and have Groupon offer an additional 2-3% off (the CC fees) on every purchase that the consumer uses dwolla.