I was out of the office on Thursday and Friday for the Jewish holiday of Sukkot. I’m now just absorbing the info about Paypal buying Braintree. I have a few thoughts about it and thought this would be a good platform to share them.
First a few disclosures :)
1) I have friends at Braintree/Venmo, Stripe, Square, Paypal, etc. I think they are all swell folks and really hope they all succeed in life, both professionally and personally.
2) I run BD/partnerships focusing on online integrations for a payments company called Dwolla. Some people think we are competitors to some of these companies. I personally see us as mostly complimentary. We are building a 21st century Mastercard or Visa- a 21st century payment network. All of these companies aggregate MC/Visa/Amex/Discover and have built their company and product on top of the existing infrastructure. Our theory is that if you want to build a new network, and do it right, you need to build the payment network from scratch (not dependent on Visa/Mastercard/Amex/Discover). I imagine some of these other companies will say they are also trying to build a new payment network but are just going about it differently. Time will tell, but even PayPal hasn’t been able to shake MC/Visa/Amex/Discover once they built their network on top of them (so there is still the same CC fraud/fees). This is all meant for another post though- just wanted to disclose.
Some thoughts on the acquisition (in bulleted form):
- It can’t be said about most deals, but almost everyone won on this deal.
- Braintree got a big exit (for employees, investors, etc)
- PayPal got old users/customers back with a more agile team
- Chicago wins with a nice exit
- Payments space wins with a good exit
- If you work at a payments company that isn’t Braintree/Venmo or PayPal stay focused and try not to get too distracted by this big acquisition. It is easy to, but try to spend your time talking to your customers, improving your product, etc. It’s all that matters in the end.
- A lot of the press played up the reason for the acquisition was that this is PayPal trying to get back in with developers. Maybe it is just me, but when I think about developers and payments- I don’t think of Braintree. I think of Stripe. It’s not to say Braintree isn’t good to developers- they are. Just they aren’t the first company association when I think of the two words “dev” and “payments.” The press played this up (not sure if it was a focus in any release from PayPal or Braintree)- so it is interesting to note that a few outlets claim that Stripe was PayPal’s first choice.
- That being said, I think Venmo Touch and mobile commerce is the big diamond here (Dudas alone is worth at least $300M out of the $800M :D). Stripe doesn’t have a big mobile side, so this puts Braintree a leg up. Frictionless payments are all the rage now and PayPal knows this. I think this is a great pick up.
- However, separately, I think there is a point of diminishing returns on frictionless payments (when receipt comes after the fact and you only opt-in the first time). I saw this tweet from Megan Quinn last week and it made me think that at a certain point, payments like this get looked frowned upon by customers that overspend (I don’t think it’s as bad as a justFab tactic- but very hard to track spending and people may revolt against it at some point). But that’s also for another blog post.
- Braintree probably won’t lose existing deals (as much as HackerNews commenters thinks it will) because they are going to be owned by PayPal. I would say that except maybe the super anti-PayPal customers that Braintree caters to (and that moved to Braintree for the fact they aren’t PayPal), they should be fine.
- One question remains though is will Braintree be able to get new business from the up and coming startups. I’m sure some startups will be wary of their overlords. Also- if Stripe comes out with a good mobile solution, this will complicate things for Braintree.
- The last unanswered question is can PayPal let Braintree win or is the PayPal brand for developers so toxic + the fact that Braintree markets itself as anti-PayPal help or hurt them win/lose new customers vs a stripe or square. PayPal’s president was very particular on his words of saying that they are staying independent “for now.” This clearly means they have plans to merge at some point. It will be interesting to see 6 months to 1 year down the road on how it plays out.
These are all of my general thoughts. Some were general, others critical, and I think the payments space got 10x more interesting.