Swipely is the first and only Rhode Island-based software company to ever raise a $7.5 million series A. And that series A was stacked with no slouches: It includes Reid Hoffman of Greylock, Josh Kopelman of First Round Capital, and Danny Rimer of Index Ventures.
That both points to something wonderful and daunting for the payments company. The wonderful is that, by God, Swipely must be doing something right to beat those odds. The daunting part is, well, there’s a reason that Rhode Island isn’t exactly a software paradise.
Swipely — which has raised $8.5 million in total– was started in 2009 by Angus Davis, a co-founder of TellMe. TellMe was cofounded with Flipboard’s Mike McCue, and sold for close to $1 billion. Like McCue, Davis grew out of the star-studded Netscape mafia. While TellMe got loads of early press as the dot com days waned, Swipely raised that series A back in 2010 and has been mostly quiet since then.
But it turns out no news wasn’t exactly bad news. After a lot of trial and error Swipely has hit on a hole in the overheated payments space, and merchants are responding. Tonight it’s releasing an update to the product it finally settled on and launched six months ago, and a significant milestone: In the six months this product has been in the market, Swipely has processed some $250 million in payments.
It seems the Rhode Island scrappy upstart has a shot. That’s great news for the state with the second highest employment rate, and a nice feel good story for Valley entrepreneurs who always wonder if they can make it again if they decide to leave the Valley for family reasons.
Here’s where Swipely found its lucrative niche: Selling to real-world merchants who are already accepting credit cards– unlike Square– but don’t get much more than the right to take credit cards for those hefty transaction fees. Think restaurants, high-end wine shops, and beauty salons. The kinds of companies who see some 70% or more of their sales go through the credit card machine and do at least $500,000 in annual sales. Not big chains, but not the guy selling Adirondack chairs at craft fairs either.
Swipely allows them to take credit cards with all the same hardware and software they were using before for roughly the same price. But it gives them very Web-like analytics on who their customers are, how much they are spending, and insights on how to drive sales.
It shows things like what percentage of customers are new versus repeating, and how much each group tends to spend. In the newer version launching today, Swipely can even tie in social media deals and weather reports into past sales, so retailers can get an entire picture of what might have caused a surge or drop at any given time.
These may all be things we take for granted in the online world, but the offline world hasn’t had much access to analytics like these– particularly when it comes to small merchants. “Can you imagine if Amazon deleted its customer database every night?” Davis says. “That’s essentially what these merchants do. We want to give them the tools to give every customer the ‘Norm!’ experience when they walk in.”
The closest these verticals have gotten to an analytics engine like this before are reservation tools like OpenTable and StyleSeat. But since these aren’t always tied into the payments systems, they only capture a fraction of the customers and the information about their spending habits.
In fact, the most common request that Swipely gets from its restaurants is for tighter integration with OpenTable so that it can know when a top customer has made a reservation or capture how much someone spent after the fact. Davis says he hasn’t had any formal conversations with OpenTable, but they’re working on it.
Other new features in the new product release include a partnership with American Express that allows Swipely vendors to get paid the next day for AmEx purchases, versus the normal three days. That can make a crucial difference in cash flow for a small business that’s heavily reliant on credit and debit purchases. It also allows retailers to look at several locations in one aggregate database, not merely a store-by-store basis. And Swipely has added integrations with more than 20 point of sale systems.
Of course anything can sound like a total no-brainer to small businesses and utterly fail because selling to them in meaningful numbers is time consuming and expensive. It’s a testament to Swipely’s value proposition that it has this much traction with just a handful of sales people, but it’ll need more — quickly. Davis agrees and plans to quadruple the ten person sales team next year.
The hardest part is just getting a meeting. Small business owners are deluged with people trying to sell them things. After you get the meeting the challenge is convincing them to take a risk on the system they may not love, but depend on to keep their cash-flow going so they can open their doors everyday. “This is not a self service model,” Davis says. “You need some hand holding.” He’s made some key senior hires out of companies that have done this, like Seamless Web and LivingSocial.
To support that kind of growth, expect Swipely to raise a series B sometime early next year– and break another Rhode Island record in the process.