The “largest seed round” in Silicon Valley history raised by mobile payments startup, has been met by the usual scepticism reserved for those three quoted words. News provider Business Insider, was representative of press coverage, when it reached for the word “shocking” in its description and name-checked large early stage rounds for much-hyped start-ups like Color Labs and Airtime, which failed to live up to expectations. The fact the Stanford graduate founder, Lucas Duplan, is aged 22, only added to the disbelief.
Yet interestingly the strength of the syndicate suggests this may be more than just the Silicon Valley hype machine going into over-drive.
US-based semiconductor company Intel Capital and US-based finance company Intuit are as respectable a pair of corporates as you can get in a syndicate. Presumably they must have taken some painful convincing to lend their name to something like this? Intuit itself runs a mobile payments business, while Intel Capital has netted an exit in the sector from Mfoundry, and has backed others in the sector including Estonia-based mobile payments company Fortumo.
The presence of top-tier venture firms Accel and Andreessen Horowitz equally suggests this formidable pair have decided this is a company which might succeed in the sector. In the payments space, this pair are arguably playing catch-up against rival venture firms Khosla Ventures, Sequoia Capital, and Kleiner Perkins Caufield & Byers, backers of payments business Square. To bring this home, it is worth watching this clip where Andreessen Horowitz’s Ben Horowitz was asked by PandoDaily’s Sarah Lacy why he thought passing on Square was its biggest mistake.
The investment also includes a highly respectable list of angels: Andrew Viterbi, co-founder, Qualcomm; Bob Joss, former dean, Stanford Business School, Diane Greene & Mendel Rosenblum, co-founders, VMWare; Dick Fredericks, former United States Ambassador to Switzerland; Gordon Eubanks, former CEO, Symantec; Jim Breyer, partner, Accel Partners; Marc Benioff, founder and CEO, Salesforce.
Equally, of relevance to our sister title Global University Venturing, the startup, beyond having the former dean of Stanford Business School investing, is being rolled out across university campuses having started at Stanford.
When asked why Intel Capital backed the company, a spokeswoman said: “The payments space has not evolved with Moore’s law like other industries. It costs almost nothing to make a phone call or send data. It is cheaper to manufacture goods, cheaper to distribute, cheaper and easier to find products, etc. Yet, payments still extract some 2-3% of each transaction and that hasn’t changed. It should be less expensive given the infrastructure to process, transmit and secure transactions has all come down. There is an opportunity to be disruptive here.”
She added Clinkle also met five criteria:
1) It amassed a great team of engineers and designers who are exceptionally capable at building and designing a great product
2) They are fundamentally taking a consumer first approach vs merchant first. It is unique and well thought out
3) They are taking a unique approach to distribution by focusing on closed ecosystems rather than mass market upfront to address the issue of having ubiquitous merchant adoption
4) It is a big market ripe for disruption without anybody to date really replacing the wallet
5) Unique and proprietary technology
The sector is hotting up. Joaquin Ayuso de Paul, founder of a rival mobile payments start-up Kuapay, which has its chairman Myron Scholes, the economics Nobel Prize winner and inventor of the Black-Scholes formula, said, when asked about the big Clinkle round: “It is a land grab market now, the more the merrier!” Ayuso de Paul added: “Clinkle is another player more in the market. With a lot of noise, whistles and bells. But in the end, they have just started.”
In sum, it certainly makes sense to be sceptical of a $25m seed round, but do not be surprised if you start to hear a lot more about Clinkle in the near future.
