The march of consolidation in the world of e-commerce has claimed its latest victim. Balanced, a payments platform for peer-to-peer marketplace businesses, is closing its doors after failing to grow fast enough, or as co-founder Matin Tamizi describes it, “reach the escape velocity necessary to be a large, innovative, independent player in the payments space.” The company, a Y-Combinator alum, has struck a deal with one of its longtime rivals, Stripe, to act as its transition partner for existing customers.
Balanced itself, including its API and dashboard, will shut down in 90 days (up to June 11, 2015). The startup will keep a small team on for nine months from today to support issuing refunds, querying transactions, and fighting chargebacks (until October 9).
“We had a lot of respect for what Matin and the team had accomplished, and the broader importance of the market segment,” Stripe CEO Patrick Collison said in an interview earlier today.
In an interview, Tamizi told me that the closure will affect around 320 customers, with the current list including sites like crowdfunding platform Tilt, RedditGifts, Tradesy, Relay Rides and Artsy, processing “hundreds of millions of dollars” annually.
As a point of comparison, Stripe’s CEO Patrick Collison told me today that Stripe processes “billions of dollars a year for thousands of businesses in 18 countries around the world.” Balanced also competed against companies like WePay, Dwolla, Amazon Payments and PayPal.
This is not an acquisition neither of tech nor talent, and there are no financial terms to this deal that are being disclosed. Stripe will honor all of the existing pricing agreements that Balanced has with its customers, and will migrate card, bank account, and seller identity data as part of the deal.
Balanced, which was incubated in the YC Winter 2011 class, raised at least $3.4 million in venture funding (some funding was undisclosed), from high profile backers like Andreessen Horowitz, SV Angel, CollabFund, Airbnb CEO Brian Chesky, Ashton Kutcher, and former Reddit CEO Yishan Wong.
And — with a payments platform that tapped specifically into the rising number of marketplace startups that connected buyers with a number of sellers of goods and services — it got off to a running start, with companies like CrowdTilt (now called Tilt), Zaarly and The Fancy all picking up its services.
The company played up its competitive edge against other payment companies like Stripe specifically in targeting businesses that are built around peer-to-peer businesses. “Balanced’s customer is the marketplace. Stripe’s customer is the merchant. Everything else stems from that difference,” as Tamizi wrote in a post on Quora.
And it seemingly co-opted some of its customers to spread the news, too (see here and here for examples). By offering volume based pricing, it attempted to be very competitive against Stripe, Braintree and others.
But despite adding some interesting customers to its platform, and passing $370 million/year in payments processed at the start of 2014, that wasn’t enough.
As Stripe expanded the kinds of services it offers to compete more squarely against the likes of Balanced, the smaller startup’s customer numbers started to wane. It’s telling that when Balanced reported those momentum figures in January 2014, its customer numbers were approaching 450, compared to the 320 it has today.
Among the more notable wins that Stripe has had in the peer-to-peer marketplace segment has been its recent deal to power payments for Kickstarter (which it won off Amazon). Others include Shopify and Squarespace, Collison pointed out to me.
That has ironically made Balanced’s biggest competition into its most natural heir.
“We tried to choose one best option and in terms of similarity of products and having things that our customers also want in marketplaces. The needs are unique and much more than [what] a standard payments processor provides,” Tamizi said, with that focusing on needing to provide both payment but also payout services. “Stripe has built a lot of that functionality.”
But there is also the basic economics of payment services. Many payments platforms — like many of the marketplaces themselves — operate on thin margins that need large volumes to work as businesses.
“I think you are right that there are some economies of scale and it is pretty difficult to be a startup payments company in the earliest days,” Collison said. “We were acutely aware of this for the first two years or so. We were lucky that we crossed that chasm.”
Tamizi says that today’s decision didn’t come lightly, something you could very much tell from the tone of his voice. “We spent a lot of time thinking of where we are as a company then we made the decision to shut down Balanced,” he said. “The question was whether we could find a graceful transition for our customers and my team.”
RIP Balanced, and here’s to brighter days ahead for the team. Full notice below.
== Balanced is shutting down in 90 days ==
We started building a payments service for marketplaces in 2011. We
were shocked with the state of payments at the time, and the pains a
marketplace had to go through. Despite the many challenges in the
industry, we’re proud of how much we’ve been able to help marketplaces
thrive over the last four years.
Unfortunately, we haven’t been able to reach the escape velocity
necessary to be a large, innovative, independent player in the
payments space and have decided not to continue building Balanced.
It’s important to us to identify a graceful transition for our
customers, employees and investors — and honor our existing
agreements. To that end, we reached out to Stripe and have been
working with them to provide a smooth path forward for our customers.
We respect how Stripe has been able to innovate, grow, and become the
best solution for marketplaces. Stripe has agreed to honor our
existing pricing agreements and work closely with us to seamlessly
migrate card, bank account, and seller identity data.
Our full API and dashboard will be available over the next 90 days
(until June 11, 2015), and support for issuing refunds, querying
transactions, and fighting chargebacks will continue for the next nine
months (until October 9, 2015).
We realize this is sudden and we’re sorry for any inconvenience this
causes. The full Balanced team will stay on for the 90-day migration
period and a portion of the team will continue beyond then to make
sure we’re able to provide you with the level of support you need. We
appreciate you working with us and want to do everything we can to
minimize the impact on your business.
To learn more about the migration, what it means to you, and the steps
required to make the switch, go to balancedpayments.com/stripe. You’ll
be able to sign into your dashboard and begin the process to migrate
your data to Stripe.
Feel free to reach out to us at firstname.lastname@example.org or me at