Interested in revenue vs exit valuation... Can you say anything about it? The margins must be phenomenally low if the valuation was only 10% of what you process yearly...
If you process $260mm and charge 0% it's not really fair to view $26mm as a 10% revenue multiplier.
(Even for the small part of their business funded by credit cards, there's a $500 per customer lifetime exemption, and 3% minus higher fraud rate and 2-2.5+% CNP processor and interchange still puts their revenue at less than a small team's salary with 100% credit cards, and probably less than $100k/yr revenue on credit cards overall.
They're obviously being bought for team, technology, and growth potential; current customers are just traction, not revenue.
What I love about Venmo is that they took payment processing and aggressively went after a niche - 'spotting' or paying back a friend for cash - tailoring the app to that unique experience. Good job Venmo!
There have been several "pay-your-friends" apps that achieve a lot of success for a while because they're free, then lose all momentum when they start charging. I'm not sure if Venmo is in the same boat, but it seems possible.
Venmo hasn't been very successful thus far. They have a small to mid sized user base and they are currently operating at a loss (no fees on transactions that cost them money), so I think $26m is a pretty good number.
They're only processing $10M of transactions/month, so even if they were to start charging fees, that wouldn't translate into much revenue. Agree that this is a great exit for the team.
Their pricing is 3% on credit cards, and 0 on everything else. At best they would see 1% margin on credit cards, so $250M at 1%, is $2.5M/year. 10X optimistic projected revenue is a great deal for Venmo, and BrainTree is getting a functioning custodial account system and the team that built it.
- Multiple of revenues
- Tech acquired vs time to build and opportunity cost.
- Braintree's perception of how much they can aggressively grow the offering when they offer it to their much larger customer base
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[ 3.0 ms ] story [ 65.3 ms ] thread(Even for the small part of their business funded by credit cards, there's a $500 per customer lifetime exemption, and 3% minus higher fraud rate and 2-2.5+% CNP processor and interchange still puts their revenue at less than a small team's salary with 100% credit cards, and probably less than $100k/yr revenue on credit cards overall.
They're obviously being bought for team, technology, and growth potential; current customers are just traction, not revenue.
- Multiple of revenues - Tech acquired vs time to build and opportunity cost. - Braintree's perception of how much they can aggressively grow the offering when they offer it to their much larger customer base
So it is what it is.