Thursday, March 18, 2010

Sticks and stones

Mom was right about many things, but she was wrong about this one. I have been an initial investor and board member of Payoneer for the past three years. The Company, under the leadership of its CEO, Yuval Tal has performed admirably through the start-up twists and turns, and now the exuberence of torrid growth .

The company started its life offering debit cards to teens. Yuval figured that commerce was going to explode for teens online and it would be a natural outgrowth of this trend for parents to move allowance dollars from cash to stored value cards. Thereby, enabling teens to shop online, with limited downside liability and no downside link to their parents credit (e.g. parent card numbers will not be floating around the net). When he launched the business, there were two metrics we kept a close eye on; fraudulent applications, and cost to convert leads to card holders. The initial thesis was the internet would bring incredible efficiencies to the market. Boy, were we wrong!

We bought some Google media and found fraudulent applications ran >60%, driving the cost of leads to a level that was not even in the ballpark of being economical. Fortunately, Yuval was able to find a market, that had a crying need for a stored value solution; affiliate payments. Today, Payoneer is a preferred way that hundreds of sites pay their affiliates. For example, iStockphoto, Elance and Odesk all use Payoneer as a way to transfer funds to their affiliates. His team has now expanded beyond affiliate payments to several wonderful verticals where the customer need is pronounced.

Recently, Payoneer has been in the news owing to a situation where they were, at most, tangentially involved. It's been yet another CEO trial by fire. For me, it again highlights why I invest behind people. They bring you to markets and there's no replacing the passion of a founder.

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