Credit card fees really add up. Ben Milne's business was losing $55,000 per year to them, so he created Dwolla to side step the charges altogether.
Dwolla is a 17-person startup that is creating a nearly fee-free payment network. Credit cards and PayPal charge merchants between 3 and 5% for most transactions. Dwolla charges a flat fee of $0.25. Transactions less than $10 are free.
The startup just raised a $5 million Series B round of financing to keep pounding the pavement. The round was led by Union Square Ventures; partner Albert Wenger is joining the board. Village Ventures, Thrive Capital, Paige Craig and Marc Ecko also participated.
Dwolla has grown its network to 80,000 account holders who are moving millions of dollars per day. "Since we passed over the $1 million per day mark, we've been focused on getting to $3 million per day; we haven't gotten there quite yet," says Milne.
With numbers like that, Dwolla could have raised much more than $5 million. In fact, Milne had to keep a spreadsheet of 700 names to manage all the inbound investor interest. But Milne kept his wits about him.
"We knew exactly how much we wanted to raise and had an idea of who we wanted to raise it from," says Milne. The fundraising process took 4-6 months to complete. "We wanted a partner to help us in the financial space -- that's Village Ventures. We wanted someone to help us with APIs -- that's USV. We wanted someone for marketing and growth and that's Thrive, and we wanted a couple of people we could completely trust, and that's Paige and Marc."
"The investment is all about getting the product out nationally," says Milne. "Union Square Ventures can help build the brand and build the beginning of something we think will be really, really badass," says Milne.
Village Ventures is also an investor in Simple, a buzzy new take on payments, which aligns well with Dwolla.
Josh Kushner of Thrive also impressed Milne. "Josh came out and spent time in our office. I was surprised how quickly he understood the big picture and started providing tons of value," says Milne. "He spent his winter holiday talking to me on the phone."
A lot of Milne's focus moving forward will be to educate users and merchants about Dwolla. "A lot of people think, 'Where the hell do I use it?' Our message will continue to get defined," says Milne. Part of that means building APIs so more people can implement Dwolla and understand how its process works.
The API-focus is part of a broader mobile focus too. "Mobile is important because people are going to transition away from using physical cards to make payments. We want to make sure, with our payment network, having a phone is useful."
Milne says his staff is moving across the street to a bigger office in Iowa where it plans to stay.
"The office is a little higher up than the last one and it has a better view -- we wanted to make sure our staff knew we were moving on up!" says Milne. "We will definitely be staying in Iowa and we picked investors who support where we're from."
