balance

A few weeks ago, I wrote about the group of current and former Facebook employees who meet via the social network to discuss investments, a la Angel List. The first big investment involving many group members was in the online payments startup Balanced.

The company is getting a little more help, as it just announced two institutional investors: Andreessen Horowitz and Collaborative Fund, and closing the round at $2 million. AH partner and former PayPal president Jeff Jordan led the deal on Andreessen Horowitz’s side, and it’s of note that AH is also an investor in Balanced’s worthy competitor, Stripe.

Balanced is a payments service that specializes in online marketplaces, where there are two parties transacting – a merchant and a customer. Balanced powers the site with a white label API, so a customer doesn’t have to create a Balanced account, like they would using PayPal. The company also differentiates itself from others by making sure merchants get paid quickly, in 24 hours or less. Customers include Groupme and Reddit Gifts (Reddit CEO Yishan Wong is an investor.)

The new funding adds onto a bridge note that will keep the company apace toward a Series A. Cofounder and head of growth Jareau Wade says the company has been growing by about 30 percent the past few months, and almost 70 percent in terms of sign ups for the past two months.

But more interesting than the venture capital announcement is what the money will be enabling. CEO Matin Tamizi has said he intends to build out the product, but the company is doing it in a very hacker oriented way: Open source the code, and invite as many developers as you can to the party.

The company has been active on GitHub, the social community for developers, in hopes that third party devs will give them another perspective. Wade says that Balanced is different from other companies in that it makes its product discussions public earlier and more often.

The approach started as a scrappy necessity – the only way to compete with companie that have larger teams was to hope “superfans,” as Wade puts it, would help out. Indeed, it’s worked: recently an outside developer built an iOS client library for the company, which lets the team easily integrate Balanced to mobile apps for iPhone. Wade says the company offered him compensation, but the dev wasn’t interested.

Being active on GitHub also has some subtler perks. Attracting the attention of a well-regarded developer – having him or her respond comments or follow your thread – is an indirect endorsement of relevance. This is especially helpful when, as a payments company, you’re essentially selling to the developers who will be using it. And they are a tough crowd, Wade says: “Developers require social validation more than anyone else.”

Of course, there are obvious concerns about being so open with your developmental process. It’s a balancing act (no pun intended). For one thing, being too open might lead to security risks. Wade also concedes that there’s a risk of ideas being poached. “We know competitors are lurking in our chat room,” he says, mentioning that there is nothing wrong with that. “Just like we compete with them, and sometimes borrow some of their ideas and product inspiration, they do the same with us.”

He adds: “It’s worth it. There are some unintended cons. But maybe there are also some unintended pros.”

[Image courtesy: StockMonkeys.com]