PayNearMe is a financial services startup that has managed to fly under the radar of the tech-savvy. That’s largely because the six-year-old company is focused on the roughly 25 percent of people in the U.S. who don’t have bank accounts to pay for things like rent and utilities and online purchases. In fact, its customers largely interface with PayNearMe’s brand when they’re at a 7-Eleven or Family Dollar or Ace Cash Express store, all of which have partnered with PayNearMe to transform customers’ cash into payments.
It’s a big market, but it’s also highly challenging and fragmented, and the road, apparently, has been bumpy.
For one thing, Family Dollar stores, which first partnered with PayNearMe in early 2014, recently stopped accepting rent payments in its roughly 8,000 stores across the U.S.
A landlord source says the decision was made out of safety concerns over customers who were walking in with large piles of cash. (Family Dollar did not respond to a recent request for comment about what drove its decision.) Given that PayNearMe sees a cut from every transaction and that rental payments is how it produces much of its revenue, the decision has to sting.
PayNearMe also failed to secure a major new round of funding, says an outsider who is close to the company and who says that earlier this year, employees were told that PayNearMe was looking to raise between $50 million and $80 million in new funding before later settling for a $14 million round from earlier investors. (PayNearMe has so far raised $71 million altogether, including from True Ventures, Khosla Ventures, and August Capital.)
In fact, according to this source, PayNearMe abruptly laid off roughly one-third of its employees several weeks ago, forced by investors to scale back on costly efforts to cultivate relationships with third parties and to focus more instead on its business-to-consumer efforts. The cuts apparently came in sales, marketing and business development.
Founder and CEO Danny Shader declined to comment for this story except to say that he has “never been more bullish” about PayNearMe’s prospects and that his investors “are super enthusiastic” about its future, as well.
A source inside the company adds that our external source’s claims about layoffs and fundings are simply “not true.” While there were layoffs, they represented far less than a third of the now 50-person company, says this person, who declined to answer how many people were let go.
The source inside the company also says PayNearMe was not in the market for a new round of funding – that instead it’s embarking on some new initiatives that could meaningfully enhance the valuation of the company. PayNearMe is waiting on those to take hold before talking again with investors, according to this person.
Certainly, PayNearMe appears to have some things up its sleeve. Shader hinted at them several weeks ago in an interview with this reporter for StrictlyVC. Said Shader at the time, “I can say that we now have a complete set of money transmitting licenses in the U.S. and Puerto Rico that we spent the last three years and millions of dollars [to obtain]. The licenses allow us to act as an agent of a consumer, taking their money and delivering it to some other location. It lets us enter adjacent markets. [But that’s all I can say.]”
Put another way, in the not-too-distant future, PayNearMe might not be needing so many third-party relationships after all.
Still, one suspects that for Shader — a well-liked Silicon Valley veteran who has variously been the CEO of Good Technology, an EIR at both Benchmark and Kleiner Perkins, and who co-founded a company that sold to Amazon in 1999 – not all has gone exactly as planned of late.
For example, we were told of one employee who recently moved across the country to work at PayNearMe. In an account that our internal source confirms, the employee was laid off along with everyone else who was cut in the firm’s recent, broader restructuring. It was his third day there.
Update: After this article’s publication, Shader reached out to us to say that, “We actually grow more in one month than the revenue hit from Family Dollar due to rent . . .we absolutely will be expanding our retail relationships, not shrinking them,” and “no RIF’d employee ever moved across the country — or even across a state — to work for us.”