WePay's (YC S09) next chapter | Hacker News Reader

WePay's (YC S09) next chapter

blog.wepay.com

147 pointsstevewepay81 comments

The enterprisiest announcement I've read in a long time. And I work at a big corp. Wouldn't be surprised if many people who read this actually don't even understand that it basically says "hi guys, we got bought."

It's also hard to figure out what WePay has actually been doing. Great enterprise speak again.

So, that's what the banking world looks like? Even more enterprisy than the Enterprise despite being a start-up?

Yes? People are not generally interested in financial institutions saying “bae is lit AF” or whatever.

What are you trying to say?

I thought it was fairly clear. Chase wants to get into the fintech space so they acquired WePay.

Is there a a good definition for companies in the "fintech" space? Is it anyone building a product that lets consumers/enterprises receive and send payments over mobile/desktop/internet rather than physically going into a branch?

Curious as it seems to me (uninformed) that basically all banks already have fintech offerings and are built around networking and payments technology at their core.

I think fintech (like "edtech") is a little bit nebulous. I would say anything involving handling money is fintech. So stuff like Venmo or Robinhood. I would even go so far as to say certain data science companies are fintech in that their offerings cater to financial institutions.

Yeah but it is written indirectly, and the only reason why it's clear to you is because you are probably trained (willingly or not) to interpret such announcements.

Between my quote "hi guys, we've been bought" and this statement, you can see the difference, right? One is very clear to the point, the other talks about lot of things but actually doesn't literally spell it out once.

>so that's what banking looks like?

Unfortunately I'd say yes. Consider that Goldman Sachs has 38,000 employees and the average compensation is 350k-400k per year, per their recent quarterly filing.

It is an elite world based on signaling and deep relationships, because there is a lot of money at stake.

I'd be interested in seeing the median salary, I imagine that's quite a bit lower.

I completely agree, I bet you have 100 people making 10m+ per year, and 20,000 staff and interns at the back office in New Jersey making 45,000 maximum, hired from SUNY schools.

What do you think of my estimation?

You can find salary info for gs grads right out of college.

Hint: its a lot more than 45k

Care to share the source/link for such info.

For IB, sure. But are most GS employees traders? It looks like most of the support staff is in the $20-30k range[0], which includes help desk and the like. Even certain analyst positions seem to be in the $45-50k range. On page ten of ascending salaries I've just barely passed $60k.

My point is that while the "average" compensation may be $400k, that's going to account for a very small percentage of the employees. The median is probably well below $100k, dependent largely on just how many support staff there are compared to traders. And even the traders who only last a year or two before getting fired will probably only make $100-150k.

[0] https://www.glassdoor.com/Salary/Goldman-Sachs-Salaries-E280...

Thank you for your thoughtful, reasoned reply, and the effort you put into confirming what I have said anecdotally.

It is often a thankless job and I appreciate that you've provided these numbers. It really shows the income disparity between the top dogs and the unwashed masses and Goldman.

pc86 is exactly correct and I'm glad that person tore apart your argument for me.

How dare you tell me "hint, blah blah blah" when your source literally confirms what I have stated.

The young and inexperienced workers are just there for data entry and errands for the SMALL percentage of workers who are high powered investment bankers.

I had breakfast with Bill a few years ago in Palo Alto. It was clear pretty quickly that WePay wasn’t a good fit for us, but he still managed to navigate me through the competitive landscape and helped me figure out which product was right, pitfalls to avoid, regulations, etc. He even offered his help for the future, even though we were giving him zero business.

I’m writing all this because I left with the feeling that he was a genuinely great guy and that he deserved success. I’m glad it has finally come his way!

Best of luck!

PS: stay away from bitcoin.

Probably like many others, in the first part of 2012 I invested about $10k in some bitcoins that I still continue to keep untouched today. Tell me once again what should I stay away from??

Have fun with the hard fork.

Please cash in at least some of that; it's too sad to think of a conventional amateur investor approach of "always hold out for more" wiping out that potential fortune. Take your 5000x gain and be happy with that phenomenal performance instead of being concerned about the infinite "I could've gotten more if I just sold on Magic Date X".

A materialized gain that you can actually use is more valuable than a paper gain that may not be there when you need it, especially in an instrument as volatile and immature as Bitcoin.

I appreciate your concern. I am keeping them not for more gains, but to pass it on to my child eventually, although I believe single bitcoin will end up costing north of $25,000 since #1 there is only limited number being eventually in "circulation", #2 you can safely use 0.0001 bitcoin to process transaction worth $5.

What's with the PS? Did he tell you that or are you saying he shouldn't waste his newfound riches on bitcoin? Seems really out of context otherwise.

Maybe they just assume that all discussions on HN lead to bitcoin given a sufficient time scale.

I believe he's referring to the statements made by Chase CEO Jamie Dimon on bitcoin: https://www.cnbc.com/2017/09/12/jpmorgan-ceo-jamie-dimon-rai...

> It's just not a real thing, eventually it will be closed,

> Dimon also said he'd "fire in a second" any JPMorgan trader who was trading bitcoin, noting two reasons: "It's against our rules and they are stupid."

Ah, good catch!

BTFD!

I'm not sure what the PS has anything to do with the comment? I don't like these kind of "hints". If you have something interesting to share, please do. Some on Hacker News are definitively into bitcoin/blockchain stuff. So your info will be valuable.

This is a pretty authentic and fairly clear note from an acquisition.

It's pretty clear it wasn't the home run that so many set out for when founding a company. I do expect this is a good landing out of this for many, yet now there are new challenges to navigate.

Nine years is no short time to labor through, especially when you're taking a giant risk and giving up things that software engineers could easily get in terms of work/life balance at an AWS/Google/Microsoft. Yet, you set out to change something in a noticeable fashion.

I truly hope Chase gives you the chance to do that, yes it's a big company. But, in the spectrum of big co's in the financial space they seem more open to innovation than so many others so... best of luck with what's next at Chase.

Sources say it's north of a $220m acquisition - I mean I know that's not a home run but I'm also pretty certain it's not a nothing outcome at all.

That is a solid outcome, but with nearly 80m (publicly) raised, likely not a giant return based on those numbers and length of company existing. Some may have done quite well, but plenty of unclear details. There are many notable home-runs for all players involved, FB, Whatsapp, etc, but those are often the exception.

This isn't to say it's a bad acquisition or should be dismissed as a failure. It just re-iterates that it's not all easy, glory, and success.

I do hope for the team involved it worked out just as they'd hoped, but from their post it feels like many hard years and more of a next chapter than the end. Best of luck to them all in the future.

A $220m+ acquisition is absolutely a home run, and likely a win for all involved, even with $80m raised.

FB and WhatsApp are once-in-a-decade type returns. In baseball parlance perhaps a World Series winning grand slam or a perfect game. You needn’t exit for $19B for it to be a great outcome.

I mean, don't common stockholders (i.e. all employees) still basically get shafted in a down acquisition?

It’s not a down acquisition...

Say investors own 60% of the company. In an acquisition worth $220 million, 60% of the company would be worth $132 million. It's common for investors to have a 2x liquidation preference, meaning they get up to twice their money back before anyone other shareholders get $1. $80 million invested means investors get $160 million, more than the $132 million. $60 million would be left over for the founders and employees. There's enough money there to be a life altering amount for many people.

If you see a 2x liquidation preference on a term sheet in this market I would be really surprised. Virtually every term sheet that isn't the one before an IPO or a recap will be non-participating preferred.

I confess I'm not an M&A/finance/VC-funding wizard. Would you mind giving an example describing the scenario you describe?

Non-participating preferred means that either you are the first to get money off an exit up to the amount of your investment OR you convert to common and get your ownership percentage. For example, say you invested $10m into a company at $30m post and then owned 33%. If the company sold for $20m, you would get $10m and the common would split the remaining $10m. If the company sold for $30m you would get your $10m back either way. If the company sold for $100m, you would convert to common and get $33m.

2x liquidation is not standard anymore - 1x is far more likely. This was an "up" acquisition too so it's possible they exceeded 2x for most if not all investors.

It's not a down acquisition

For the founders this represents a very nice exit but for investors, not so much. It obviously depends on when they entered, but later stage investors aren't likely to be making much (if anything) off the exit. Getting money back from a struggling investment is always nice, but I doubt the VCs will be touting this as one of their success stories in the quarterly report.

Later stage is also a different risk profile. They don’t need 100x returns, and their investment is very de-risked compared to early stage. It’s a different game, and returning 2x consistently is solid performance.

If you think a $220M acquisition is a home run for anyone involved, you don't understand the Venture model. Liquidation preferences means that investors are probably getting around 1x their money back, which will be considered a failure in their portfolio. They need a 10-100x win to pay for all of the losses. Common stock holders will be seeing less than their pro-rata allocation of the acquisition price (e.g. if you own 1% of common stock, you are getting less than 2.2M).

The top line acquisition price is probably the full package including costs and retention bonuses, not all of which will be paid out. The only people who will get something for their time are the founders, but they're probably looking at low to mid 8 figures at best.

If we say 1x preference, there’s still at least 160m left over. Early investors that need a 10x return were investing in 2009, so let’s say 3m valuatiom? They might not get 100x, but they’re going to return way above 10x. The investors putting in in later rounds don’t need to see 100x returns, as their investment is more derisked, and series C+ is a very different game.

That’s what people don’t get. It’s only really a decent outcome for the investors and the founders, and then only until you consider how long it took to get there. Front line grunt gets bupkis, and now has to find another job, because fuck working for a bank.

I mean, there are many reasons to work for a startup but pay is not one of them. If you want the payout, work for one of the majors.

That’s not what the founders will tell you. Even for employee #1 in 999 cases out of a 1000 it’s not really worth it, if the goal is to get ahead financially.

If "the number" is, say $220m, it could be a number of things. If it's cash today, others have done the math on how things could get divvied up.

The "top line" number can mean a lot of things though; it almost certainly includes the assumption of hitting several targets, some of which are reasonable and some are probably stretches. It's also a very real possibility that the "real" cost that Chase paid was just the right amount to make the common stock evaporate; investors get their money back such that $0 is split amongst common stock. Employees then are given a sheet to sign saying that their stock in WePay is now worth $0, but here's an offer for Chase stock vesting over 4 years.

Anecdata, for sure, but most of the deals I've seen have been something like this. The top-line number is all well & good, but the real dollars people extract from it are invariably less (again, just in the limited set of things I've seen). I'm sure there are exceptions (I bet the Instagram folks did just fine). But if I had to make a guess, it'd be that the founders will come out with a good chunk of cash, and employees will get a job at Chase out of it (with the valued employees getting a nice bonus at the "new car money" level)

>"It's also a very real possibility that the "real" cost that Chase paid was just the right amount to make the common stock evaporate; investors get their money back such that $0 is split amongst common stock."

Would you mind elaborating on this? What causes the common stock to "evaporate" exactly? Is this a side effect or is this intentional?

>"Employees then are given a sheet to sign saying that their stock in WePay is now worth $0, but here's an offer for Chase stock vesting over 4 years."

For an the average rank and file employee who has been grinding it out at Wepay through the ups and downs I am imagining this might not be a "feel good" moment.

> "What causes the common stock to "evaporate" exactly? Is this a side effect or is this intentional?"

This would mean something like paying exactly what the valuation at the last round was, such that it'd cause the cap table to unwind leaving precisely $0 to split amongst common stock. It's not a huge win for investors, but if it's clearly not going to be a huge win, they get their money back (plus whatever conditions they had for more), and can move on.

> "For an the average rank and file employee who has been grinding it out at Wepay through the ups and downs I am imagining this might not be a "feel good" moment."

Probably not. I've had friends who have been at companies that have sold at these "big numbers", but come to the sad realization that the numbers aren't "real" (e.g. their 1.5% stake of $250m is worth $0). I'm sure it's a weird feeling to see the "congrats!" messages! However, the "retention bonus" of $100k over 4 years on top of their salary is usually enough to keep people from burning the place down (being facetious).

Thanks for the clarification. I do feel for the employees that are realizing their equity they took in lieu of cash is worthless.

The retention bonus is nice provided you don't mind working for a Goliath bank I guess.

This is really interesting, because if I understood it correctly, WePay was basically a layer that sat on top of Vantiv's PayFac and made it easier for businesses (SaaS) to take payments on behalf of many merchants. In other words, let's say you setup a SaaS called "GymSAAS" that billed monthly fees (and took cut of each transaction) and your client was "Globo Gym" . GymSAAS could use WePay to collect the money for Globo Gym, take a cut and then pay Globo Gym every month the remaining amount. Using Vantiv's PayFac, it means you skip the tedious process of assigning a new merchant account for Globo Gym as they get underwritten in the industry of "gyms".

So what does this mean for Chase? Do they gut all of the plumbing out with Vantiv and move it over to Paymentec for processing? Does Paymentec even have a PayFac capability built into it?

Great question. I'm curious about this, too. My impression from the way they described what it will become ("WePay and its employees will operate as Chase's payments innovation incubator in Silicon Valley") really makes it sound more like an acquihire or something.

No its not. What you describing is called "collusion fraud" and if caught it can land you/your company on MATCH list.

No, you're wrong. Collusion fraud is (generally) when a merchant uses stolen credit cards to process payments then absconds with the money before the customer disputes the charge.

What the parent is describing is PayFac (payment facilitator) which is where the card network and acquirer are aware of the merchant/sub-merchant relationship. You can determine if a payment is through PayFac by the tell-tale asterisk after the first 2 characters on the statement descriptor. For example, Square transactions process as "SQ*[Merchant Name]"

You are spreading misinformation. Collusion fraud occurs when you are approved for selling ebooks and you endup selling e-cigs, for example. Has nothing to do with using stolen credit cards, which obviously is a crime.

Source: 12 years of experience processing cards in CNP/MOTO environment.

> Collusion fraud occurs when you are approved for selling ebooks and you endup selling e-cigs, for example.

This has literally nothing to do with what I originally posted.

Source: The parent comment.

Early WePay customer. Implementor of a Java WePay API.

Huge congrats to the team!

One feature that stood out for me was the ability to issue refunds without fees. It was not common a few years ago. This allowed me to build an event ticketing platform where promoters could sell tickets. If an event is cancelled and we had already paid out funds to the promoter, my business could have been 'on the line' for the refunds.

Even though we were never a huge customer, the business didn't succeed, they still always treated us like we were important. This was a stark contrast to PayPal, whom they were originally trying to take down.

I suspect this merger is also about their fraud detection system. I hope Chase can put it to good use, they need it.

Chase just finished switching their "Quick Pay" infrastructure over to "Zelle", and now they're buying WePay. I wonder what they intend to do with it?

As I recall, they were good at detecting fraud in marketplaces. After a certain point, payments is all about fraud management.

Chase QuickPay has always been Zelle. Or, more accurately, QuickPay was Chase's branding of the clearXchange system, which has been rebranded everywhere as Zelle.

Also, Zelle and WePay are in two completely different spaces. Zelle is consumer-to-consumer money transfer. WePay is a merchant payment processor.

Zelle is not really the same thing as what WePay does. Zelle is peer-to-peer payments, competitive with Paypal, Square Cash, Venmo, etc. (P2P is a term of art in the industry; it's not P2P in the Bittorrent sense. :)

WePay is about providing payments infrastructure to marketplaces and crowdfunding platforms (Lyft, GoFundMe, etc.). WePay are competitive with Stripe's Connect product (disclaimer: my employer). Braintree and Adyen also have similar products.

Congrats to the WePay folks. I hope this new chapter works out well for them!

Zelle is more than that: Zelle is a new interbank network for free and instant money transfers that avoids the Federal Reserve ACH system that PayPal, SquareCash, etc use which takes 24-36 business hours for money to move.

I'm surprised that Zelle is moving so slowly - it's a great selling point for a bank/CU. Alas, the system doesn't allow for non-personal payments, so the banks want to preserve their commercial payments processing income.

Zelle is not new. Zelle has existed as clearXchange since 2011. The Zelle branding is new as of 2016, but the underlying service has not changed. Most of the participating banks individually branded the service prior to the Zelle rebranding.

https://en.wikipedia.org/wiki/ClearXchange

Zelle and Wepay have nothing in common - you may be remembering Wepay's old business.

Pumped for these guys. I had a few different interactions with them in very small capacities over the years and they were always humble, genuine and supportive of the different projects/businesses.

Just nice, smart, unpretentious guys.

Congrats.

I met Bill and Rich a decade ago in the Andala Coffee House in Cambridge.

They were kind, warm, quick with a joke, and even quicker to offer support, insight, and help to the fledgling group of young entrepreneurs.

I've taken vicarious delight from watching their success!

Congrats Bill and Rich, and good luck at Chase.

More consolidation in the age of corporate monopoly... I'm sure a nice exit for the founders and their investors.

Congratulations to the WePay team! As a partner(At JotForm, we integrate forms with WePay), we are excited to hear that Chase is planning to grow WePay.

Congratulation to Bill, Rich, Mark and Tina! I'm sure everyone else involved deserved this success as well.

A bit of trivia: Chase was founded by Aaron Burr.

“WePay and its employees will operate as Chase's payments innovation incubator in Silicon Valley"

Uh, oh. Does such a thing ever work?

For a while. All the big companies have external innovation acquisition as a yearly budget item.

Chase App is top-notch, not some random corporate bloatware, really easy to use. I feel they are pretty competitive.

The current wisdom is that if you leave yourself weak to disruptive innovation.

In the automotive world, everyone has a bet on self driving cars, for instance. Ford has Argo AI, GM has Cruise Automation.

For a contrast, look at Kodak. They pioneered the tech for digital camera sensors... and then did nothing with it, because they made money on film. Digital camera sensors killed film.

If you want a longer discussion on this, The Innovator's Dilemma is highly recommended. Here's a short summary: https://www.youtube.com/watch?v=yUAtIQDllo8

For what it's worth, Chase has quickly been becoming the most consumer-focused and technically-capable financial institution that I routinely interact with. They may have someone competent in the leadership over there, and I find acquisition of WePay another potential positive indicator of that.

Congratulations on exiting.

Congrats, well deserved.

tl;dr - Their Incredible Journey (TM) ends at Chase

https://ourincrediblejourney.tumblr.com/

ROFL, this reminds me of Google Fiber's infamous "Advancing Our Amazing Bet" blog post, which was essentially an announcement that they were giving up on actually advancing the amazing bet. It became a running joke internally (at Alphabet) for a while.

I hope not.

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