Hounding Your Roomies for Rent, Beer Money a Cinch with WePay

The fridge has been stripped of beer, the rent payment is delinquent, your roommates have conveniently disappeared, and it’s your job to make them pony up. What do you do?

It is a conundrum faced by untold numbers of treasurers, frat boys and non-profit fundraisers: getting people to pay or donate some cash, often in very small increments.

Enter WePay, a Palo Alto-based startup that makes collecting money online fast, easy, and if co-founder Rich Aberman has his way, a more popular alternative to PayPal.

“We have the transactional payment platform that PayPal has,” said Aberman. “So, it’s easy for both sides to collect payments online, but at the same time we provide very simple tools that allow anybody, whether you have a website or not, whether you know how to program or not, to start collecting money online the way that you want to."

PayPal isn't exactly the kind of adversary most people would want. With a 100 million active users, it's on track to become eBay's biggest business in 3-5 years. Last year, it reported $3.4 billion in revenue and expects to double that by 2013.

Launched last year after a bootstrapped two-year grind, WePay is now processing millions of dollars in monthly transactions, has tens of thousands of monthly users, 33 employees, and is growing its user base and revenues by at least 30 percent month over month, Aberman said.

What began as an attempt to make online payments easy has, according to Aberman, morphed into a product tailored, for now at least, to the long tail of the online-payment market. That is, non-merchants.

“Fifteen years ago it was eBay merchants who wanted to collect payments online for the first time,” he said, “and PayPal kind of satisfied that need. But I think it’s going down-market a lot more, where it’s normal people like you or me—that are, say, planning a bachelor party, or throwing an event, or, say, want to accept donations for a sick friend—that know that there are easy online tools for that.”

Networked media consultant Barry Parr thinks the market for an alternative to PayPal is out there, but cautions against getting too excited about any competitor, given the difficulty startups have in getting buyers to switch platforms. 

“Paypal has fallen behind the industry in innovation and user experience,” said Parr. “But, they're deeply embedded in the economy of the web. WePay looks like a good solution for markets where the buyers and sellers have a long-lasting relationship and relatively high unit price. But I don't see how it can disrupt Paypal's core business. Anything that causes buyer hesitation, such as a new payment service or additional registration process, will cost more in sales than it saves in fees.”

Aberman is quick to note that WePay’s core user group is not made up of PayPal defectors, however, but rather individuals discovering for the first time the ease of collecting cash online.

Many of the early adopters were San Jose and Stanford-based student groups and fraternities. Last week, when a San Jose State University frat house burned down, they set up a fundraising event and collected donations with WePay. Indeed, online ticket sales for fundraising events comprise an increasingly large share of WePay’s business, Aberman says.

And last summer, the company earned the love of Burning Man artists when the group building the Temple—a recurring installation built by a different crew each year—hit a major snag.

Flux Foundation, which was using PayPal as their donation platform, had their assets frozen after a spike in donations triggered an anti-fraud mechanism. With just weeks to go before the event, the story got picked up in the San Francisco Bay Guardian, and Aberman picked up the phone.

“I called them and said, look, we’ll give you an interest-free loan so you can get out there and build the Temple at Burning Man,” Aberman said, “so you’re not getting stuck having no funds whatsoever, and then you can pay us back once PayPal releases the funds.”

Having never been to Burning Man before, Aberman nonetheless wanted to build “good karma” in the community.

The next day, perhaps in response to the bad publicity, PayPal unfroze Flux Foundation’s assets, but the group decided to stay with WePay, and this year Flux continues to use the service along with the 2011 Temple crew, Rue Morgue, The Great Lakes C.O.R.E. Project, and a girl named Amber, to name a few.

“We will endeavor to define ourselves as a human version of PayPal—a site that you will enjoy using, and where there are real people on the opposite end of the phone,” said Aberman. “I think that kind of resonated with the Burning Man people.”

Institutional investors are also coming on board. WePay raised $1.7 million a year ago from August Capital and closed $7.5 million from Highland Capital Partners a couple of months ago.

Joshua Goines, CFO of Tempo Payments, a web-based debit card solution provider, says WePay has tremendous potential, but an uphill battle.

“WePay has developed an intriguing payment platform focused on simplifying the group account management and payment experience,” said Goines. “The company has found several rich consumer veins for its product, including the university and non-profit segments, and is poised to grow rapidly. WePay’s creative product and team have the DNA to become a tremendous company.”

 To do so, however, will require anticipating what could be a major fight with the web’s go-to transaction provider, Goines said.

“PayPal has built a phenomenal business with an accelerating growth curve and is more important to eBay every day,” he said. “It has become part of the web’s fabric.  I would expect PayPal to defend its turf vigorously and invest significant resources in the segments showing the greatest promise.”

With a flat 3.5 percent fee on transactions, WePay is cheaper than PayPal for payments under $50. But it needs to find a way to court bigger spenders. Aberman thinks the next version of their API, due out in the next few weeks, may be that golden ticket. 

“I think it will take what is basically a better product to get these big ticket companies, these donation companies to say oh, we’re currently integrated with PayPal, our customers don’t like using PayPal, our customers accounts are getting frozen, the technology is crappy, cards are getting declined—we don’t know why—we need to redirect our users offsite all the time," said Aberman. "If WePay provides a better solution for accepting payments, we’ll integrate with their payment piece.”

“We think it’s a real possibility,” he said.