Back in February of this year, PayDivvy, a social payment platform that lets people split bills for utilities and other services and each pay their share, announced that it had been acquired and that it was no longer accepting payments on its platform. We reached out at the time and Mike Melby, the co-founder and CEO, said that he would be able to tell us more when the time was right. Today, nearly six months later and now that the deal has finally closed, the company has finally come out with buyer’s name: it’s Higher One, the publicly-traded universities and students payments and financial services company.
Higher One is not planning to reopen PayDivvy’s service as such, but it will be integrating PayDivvy’s technology into its platform and offering it to its target student customers.
“We’re excited about the foundation that PayDivvy has created to allow consumers to easily split and track their bills and share expenses,” said Whitney Stewart, the VP of product for Higher One. “We plan to incorporate these new features into our student account offering so that students can focus on the important stuff, like study and graduating while we help them get their shared expenses paid more easily.”
There is also a possibility that Higher One may eventually extend its services for users beyond those at university. “They are focused on universities but when people graduate they don’t have lose them as customers,” Melby noted today.
Terms of the acquisition have not been disclosed, but what Melby has done is give us some insight into how this deal came about. He says that in fact PayDivvy had been involved in a year-long sale process, with more than one offer falling through before finally connecting with Higher One. The reason for a sale was simple: after first launching in 2011 at Finovate, PayDivvy raised around $2m of angel funding but started to get offers for a sale at the same time that it was starting to explore raising a Series A.
That would have been a route to pursue, but as Melby told me, “payments are really hard.” Not only were there already other players out there trying to do something similar — specifically WePay and Venmo — but then Venmo was sold to Braintree for $26.2 million, and WePay has raised significantly more ($19.2 million) than PayDivvy had.
“Location was a disadvantage, too,” Melby says. “I was told by investors if we were had moved from Newport Beach to Silicon Valley, we would have raised twice as much and sold for lots more.”
More importantly, there were yet more companies jumping into the social payments space. And yet “no one has done anything extraordinary,” he says. “No one has the magic to overhaul the existing payment system,” which is still reliant on Visa and MasterCard networks. Dwolla is one that Melby thinks could possibly have a shot.
So because of all of that, PayDivvy pressed on with a sale, finally getting success on that front. “Higher One has proven to be a great partner,” Melby notes. “Aside from the fact that their strategy and customer base is a perfect fit for our technology, the team is super intelligent and picky about the assets they look to acquire.” Higher One is still run by its original founders.
While Melby and his co-founder Ray Tamblyn have both moved on to other places — Melby is back in private equity, as VP for New Evolution Ventures; Tamblyn working on something new — PayDivvy’s engineering team will continue to work with Higher One.
But the experience of starting a company, raising money, then deciding to exit the venture through a sale, and then having a sale fall through more than once, and then eventually, after months, get completed, is one that Melby will not forget soon. It’s the other side of the exit myth, in which a company like Yahoo quickly swoops down and scoops up small startups to beef up its talent and IP. For any startups out there who may be thinking of a similar route and wants to talk to someone who has been there, Melby says to hit him up.