This 28-year-old's Iowa startup moves $350 million a year. | Hacker News Reader

This 28-year-old's Iowa startup moves $350 million a year.

businessinsider.com

92 pointsanandkulkarni34 comments

Great quote: "In my own naive way, I would never build a company anywhere but Iowa so maybe I just don't know any better. My personal feeling is, if you want to build it, where you are is just an excuse. Figure out what the area has to offer you and then leverage that. Hustle your ass off and make it work."

Surely the problem at hand is not simply an atomic transaction in a distributed system, any HN reader worth her salt can do that.

The problem is satisfactorily handling money laundering, fraudulent transactions, and a myriad other user-facing issues. A better question is what regulation should exist in this space, and the actual mechanics of the payment.

Who gets to say the buyer's money is good, and that the seller has adequately dealt with the conditions of sale?

I have strong feeling that majority of money flow comes from Bitcoin-related services. Would be interesting to see real numbers.

Dwolla lost a lot of Bitcoin business when they started doing chargebacks (the only reason Bitcoiners were using Dwolla to begin with was the claimed lack of chargebacks).

Right, but Dwolla is still an option to fund tradehill/mtgox/etc. I.e. PayPal similar problems, but is not listed as a funding option on any of these exchanges. My gut feeling says Dwolla profit a lot from bitcoin exchanges and that's a reason they allow exchanges to use their services.

This solves a problem of exuberant costs for large payments, but my main problem is the reverse: small payments, transactions of a few dollars each. $0.25 cents for a transfer of just a few dollars is way too high.

We're working on it, and so are a number of other startups (I'll have to refer you to BuySimple - https://www.buysimple.com/ - I guess, since we're not operative yet, and there are dozens of others)

That's what cash is for.

Wait. What?

In Australia, we have "EFT" - electronic funds transfer (between banks). Typically, there's no cost and it's accepted between all banks. If you have to transfer to another bank though, it can take one business day.

We also have BPay, which is simpler and a little easier.

The USA seriously doesn't have these?

It does but it also requires the payee to give away personal information (e.g. routing and bank account number). It also means the payer needs to get this information before they can send money. This is essentially EFT payments but simplified. Instead of needing banking information from the payee you can just send it to them using their email address, phone number or Facebook.

Oh awesome. Thanks for clarifying :)

My creating a dwolla account is a direct result of my interest in Bitcoin exchanges. I wonder how many of their users have a dwolla account for this purpose.?

If the average transaction is $500 and they move $350MM a year, that's only $175,000 in revenue. I know they are still a young startup but that's certainly a less sexy number than the headline tries to imply.

Am I missing something?

Money isn't everything, I think he's more interested in changing the world: those 2% banks take for every transaction is a relic from the past that still exist because of a lack of competition, and the greed of those who dared to compete. I am really impressed by this guy.

Those 2.0% the bank take for every transaction is because they own the transaction network.

I think the more impressive stat is the growth in volume. Explosive it is.

If they succeed, it will mean the financial transaction space is truly becoming efficient. At $.25/transaction and an average transaction size of $500, that means a charge of %0.05 or 5bps. Compare that to most credit card companies that charge 2% plus a fixed transaction fee.

That also means their current run rate is $175,000/year which is not a huge business.

If it catches on in retail - like coffee shops, restaurants, etc..., I bet that average will go far down. Sounds like the average is weighted towards with the renters/landlords they have.

Yah - even if they get to 3.5bn it's a tiny business for taking so much risk. They need to re-think their (pricing) model.

That's awesome that Dwolla is moving 350 million a year, but I wonder how many total transactions that sums up to. Since they're charging per transaction, showing a net transfer amount doesn't really give any ideas about total revenue or if they are profitable yet.

It's an interesting price model for sure, but I'm surprised they just didn't do the typical "under-cut everyone else" strategy. It would be hard for me to stomach seeing $1 million transfer through my system and only 25 cents getting deposited in the company bank account. I mean that's a %0.000025 cut, and since this service is so convenient, I imagine they could charge more.

Remember, things aren't priced at what they are worth but what people will pay for them. Even a 0.5% cut gives you 5k on a million dollar transaction, and that's still tons better than paypal.

From the article: "The average transaction volume for Dwolla is right around $500 dollars. We move between $30 and $50 million per month."

So that's 60k to 100k transactions for $15k to $25k per month in fees.

Ah thanks, I missed that. So 180k a year? That's honestly not a whole ton for a startup that big...

Dwolla is one of many companies violating money transmitter laws. Having a bank processor as an investor does not make one exempt, nor is such an excuse consistent with the fact that Dwolla had to register as a money transmitter in Iowa.

Our formal complaint to the DFI is below.

https://www.facecash.com/legal/20111102.dwollapacket.pdf

As I've made clear in the past (http://www.aarongreenspan.com/writing/brown.html), I'm not at all a fan of the laws, but if I have to obey them, so should everyone else.

Ok, so no one likes the law. I've read your stuff - you are scared of going to jail while your competitors are building up cash to defend themselves against potential enforcement. Meanwhile you are filing complaints against them.

You are complaining about a slow government, while your competitors are moving around the government, building their business and waiting for the whistle to be blown (if it ever is).

Seems like they are taking a risk, and putting themselves in a position to gain reward.

In the end, won't your competitors be the people that actually impact legal change by spending earned dollars to fight enforcement in the courts? How does your strategy to impact change through filing complaints have any chance of success?

Do you always drive under the speed limit, 100% of the time? Do you call the police when you see people speeding? Do you complain about speeding laws? Or do you take part in the class action lawsuits that crop up when a group of citizens is sick of being fined by illegal red-light cameras?

Later this week you'll see exactly how.

Aaron, I hold you in the highest regard, but this makes you look less than nice.

Essentially what you have done here is rat out a competitor who may have broken a law (how do you know they have not registered?), presumably because you are in competition, not because you are concerned for the well being of your fellow citizens.

If you really are not a 'fan of the laws' and you are just mad at having to obey them I think that you should stand up against those laws, rather than to rat out those that break them.

It's like someone driving 55 Mph on the highway calling the police because they're overtaken by someone else doing 60, after all, if you have to obey the law so should everybody else.

Technically you're in the right, but this leaves me with a weird taste, especially because you say you don't like those laws.

Fair points, all.

The list of registered licensees is public...

http://www.dfi.ca.gov/directory/mt.asp

...as are lists of recent applicants (updated monthly)...

http://www.dfi.ca.gov/publications/summaries/2011/september....

http://www.dfi.ca.gov/publications/bulletins/2011/october11....

The complaint against Dwolla is one of 34 I have filed with the DFI. I don't plan to file any more complaints, but I'm not done yet.

I don't think the intent here is to put others out of business. The intent is to force the legal system to clarify the rules for playing in a new disruptive game. In fact, if his plan succeeds, he will surely have many more competitors than the handful of companies at the fringes now. If the courts rule that the laws on the books regulating the industry are invalid, I'm sure Dwolla will thank him for suing them.

Besides,many Supreme Court cases originated with deliberately provocative lawsuits and/or violations of unclear or unjust laws.

I like to believe the motivation is not because of competitin, jealousy or holding a grudge, but because of a deliberate strategy to raise the stakes of the game and getting others, that should be concerned but aren't, involved when different companies can make a stand together, to change something that someone strongly believes is wrong.

Of course, you may disagree that it is worth the cost, but I don't feel there's any need to assume malicious intent.

False analogy. The guy doing 60mph does not compete with the one doing 55, and even if he was the reward is simply reaching his destination a few minutes earlier, not millions of $$$ that are at stake here.

So you confirm my suspicion that this is all about competition and not about equality before the law.

The analogy is predicated on both parties wanting to break the law, one does, the other doesn't.

It is then up to the authorities to establish that the law was indeed broken and to decide to prosecute.

Filing a complaint about a competitor breaking a law that you yourself say you do not agree with looks pretty sleazy to me.

Everybody can deal with this in their own way, some will break the law some will abide by it. In the end it is up to the authorities to decide who to go after. Some of those may decide to sue the state and try to get the law rescinded or changed.

No need for tactics like these. If this was a principled matter than the amount of money should not matter. The fact that there is a lot of money at stake is why this was done, not because of some other concern.

Basically the government and a law perceived as unjust by all parties involved are used to attack a competitor.

The whole reason this law exists in the first place is because large companies have managed to lobby to get this law on the books, what better end result for them than that would be competitors use it to destroy each other?

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I'd happily agree with you if Aaron would have written that he agreed with those laws. If you think a law is unjust then I think that you should not be doing the authorities work for them.

Aaron, in this case you can't beat 'em. I'd recommend joining them instead. (Dwolla, not the gov)

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