Dwolla raises $5m Series B round led by Union Square Ventures (Video)
Dwolla, now at around 20 employees, expects to double in size following its latest raise of funds. Above, the Dwolla team at its meetup in December.
Dwolla, an online and mobile payments network based in Des Moines, announced today it raised $5 million in a series B round led by Union Square Ventures of New York, with participation from Village Ventures and Thrive Capital, also of New York, Artists & Instigators of West Conshohocken, Penn. (Marc Eckō's venture innovation company) and angel investor Paige Craig of Los Angeles-based Betterworks.
"The first round, the million-dollar round (in Dec. 2010), was really all about how do we get the product into the marketplace with the right partners?" Dwolla CEO and co-founder Ben Milne (below) said in an interview Monday. "This one's really all about how do we scale the product in the marketplace we're already in with the right partners?"
Fourteen months after its December 2010 national launch, Dwolla boasts more than 80,000 users and a merchant community of more than 7,500 accounts. The startup, which charges 25 cents per transaction of $10 or more and is free for transactions less than that – be they consumer-to-consumer, consumer-to-business or business-to-business – moves $30-$50 million a month across its network, according to a company press release today.
With the new funds, which bring Dwolla's total amount raised to date to around $6.3 million, the company plans to bolster its product development and support and aggressively expand its API offerings. Milne said in the immediate future Dwolla will focus on supporting financial institutions' integration of its Fisync feature, which is similar to its recently released Instant feature in that it aims to cut down the time it takes to load money into Dwolla, a common user complaint of the product.
Dwolla's team now stands at around 20 employees in Des Moines – a base city Milne said was important to maintain as he brought on new investors – and should double in size in relatively short order, the CEO said. "That's not going to be a hiring spree," Milne said. "We expect to bring on quite a few more (users) and continue to scale with (their) needs." With the employee expansion will also come a move from their current office in the Midland Building to the Wells Fargo Financial Center in downtown Des Moines, the Des Moines Register reported today.
With strategic investors on board, Milne is now focused on scaling a company he founded in 2008 as a result of his frustration with credit card fees. "We're focused right now on becoming a billion dollar network, that is not to say worth a billion dollars but move a billion dollars." With sights set high, he's pitting Dwolla's network against established networks, such as Visa, Mastercard and PayPal, and startups like Square and Clover Pay.
"We're focused right now on becoming a billion dollar network, that is not to say worth a billion dollars but move a billion dollars." - Ben Milne, CEO of Dwolla
Expansion to global markets is also in the future for Dwolla. Milne said the expertise of Union Square Ventures will be a valuable asset in that growth.
"At the end of the day," Milne said, "we want anybody who's connected to the internet to be able to instantly access their money and instantly send it to anyone else at a very low cost … I don't care if you're in Dubai or Des Moines, you should be able to do that."
Dwolla's relationship with its two strategic partners and early investors, The Veridian Group and The Members Group, both of Iowa, hasn't changed. As a result of this recent round, Union Square Ventures' partner Albert Wenger earned a seat at Dwolla's board of directors, joining Milne and J.D. Geneser of Dwolla (CFO) and Jeff Russell of The Members Group.
Though Milne declined to disclose details of the round or Dwolla's current valuation, Milne answered the question about valuation by saying, "It's good, like, life is good.
"The core focus has to be on building the company," Milne continued, "and today is not about celebrating what happened. It's about celebrating the opportunity to grow the company into what it should be."
Milne's 'dream team'
Two Silicon Prairie News event speakers, Marc Eckō at Big Omaha, left, and Paige Craig at Thinc Iowa, were participants in Dwolla's latest round. Milne said he met both individuals through the events.
Milne spoke about what it means to have a lead investment from Union Square Ventures. The venture capital firm touts a number of notable investments, such as Twitter, foursquare, Zynga and Etsy, and has a management team that includes avid VC blogger Fred Wilson.
"There's a lot of relationships and social validation inside of consumer brands or even consumer markets that I think this helps Dwolla be perceived not as a fly by the night idea but something that has legs," Milne said.
"If we could've picked a dream team, it would have been hard to argue with this," Milne said referring to Dwolla's five investors. "It worked out really well for Dwolla."
Milne said Union Square Ventures brings expertise in the consumer market, Village Ventures (Simple, TxVia) is heavy in payments, Thrive Capital (Warby Parker, Kickstarter) and Eckō of Artsts & Instigators (Zaarly, Nutrisystem) are strong in branding and Craig (Klout, Kiip) brings critical feedback to Dwolla's product strategy. To assemble this group, Milne said he spent 12 weeks straight in airports in latter half of 2011.
"Dwolla reminds us of Etsy," Wenger (left) of Union Square Ventures said in an email interview on Monday. "Like Etsy, Dwolla seems to have struck a chord with its early adopters by taking a different approach from the existing alternatives and focusing on value to the participants."
Craig, who was on the speaker lineup with Milne at our Thinc Iowa event in October, said Milne's passion initially captured his attention. "Many founders I meet have passion, but with Dwolla I saw passion paired with genuine purpose," Craig said.
"(Dwolla's) asking 'What would payments look like if we started everything from scratch today without being tied to legacy systems?' " Craig continued. "I love the big dream, and more importantly they've already shown incredible success executing against it."
Craig concluded his email interview with an unsolicited comment about what it means for Milne to build his company in Iowa.
"Well, this isn't actually core to my investment," Craig said, "but the fact that Dwolla is in Des Moines is important – it's representative of a recent trend in the US. Innovation is happening everywhere and Silicon Valley is losing its importance.
He added, "I think Ben and the Dwolla team have a unique opportunity to leverage Midwestern culture, attract a unique and stable team that loves the city, and take a leadership position in the Des Moines community."
Check out the video below to hear more from Milne on raising the Series B round and having the support of the Dwolla community.
Update 10:10 a.m. – On the Dwolla blog, Milne provides more insight into the raise and shares a bit about each participant in the round: "Dwolla – Entering a growth stage with new partners".
Update 11:10 a.m. – On the Union Square Ventures blog, Wenger shed more light on his firm's investment in Dwolla: "Dwolla".
Image credits: Photo of Dwolla team and Ben Milne by Anna Jones | Art of Photography. Photo of Marc Eckō by Malone & Company. Photo of Paige Craig by Anna Jones | Art of Photography and Ikonix Studio. Photo of Albert Wenger courtesy of Union Square Ventures.