Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.
eBay Inc. (EBAY) announced two weeks ago that it had agreed to acquire Braintree, the innovative global payment platform powering the next generation of leading online and mobile-first start-ups, for a total consideration of approximately $800 million in cash.
Braintree's global payment platform expects to process approximately $12 billion in payment volume in 2013 for thousands of online and mobile commerce innovators, not limited to Airbnb, Fab, LivingSocial, OpenTable, TaskRabbit and Uber. Merchants in more than 40 countries across North America, Europe and Australia can accept payments in more than 130 currencies using Braintree. Today, Braintree powers single-click purchasing for more than 40 million consumers and its mobile app Venmo gives people an easy way to pay using their mobile devices.
"Braintree is a perfect fit with PayPal," said eBay Inc. President and CEO John Donahoe. I personally agree it was long overdue. The deal is basically a technology play considering PayPal is known to have long struggled with its PayPal X product and likely sees the transaction as a way of bringing more channels into PayPal.
While congratulations are certainly in order for all the seed investors and VCs who invested in Braintree leading up to the recent acquisition, the transaction itself caused me to wonder just how can us retail investors participate in this space? Most of the companies in the emerging mobile commerce space are private VC funded companies. Pure publicly traded plays are few and far between, almost non-existent. Considering mobile payment transactions are projected to rise to $721B globally by 2017, it can only be considered an opportunity that average investors would be well served to consider.
This brings me to a small up and coming company named Spindle Inc. (OTCQB:SPDL) which may be a possible way to do just that. I believe they are as little as 12 months behind Braintree in terms of its evolution. Incredibly, despite the Braintree deal and a slew of recent positive news, it currently only boasts a mere $35M valuation. The company was originally written about in the following article here at Seeking Alpha, Spin Up Massive Profits in Mobile Payments with Spindle, Inc. and recently in Why Facebook Should Acquire Mobile Payment Provider Spindle Inc.
Spindle bills itself as offering mobile commerce technology, as opposed to just mobile payments technology, clearly differentiating itself from Braintree and others in the space. Currently, there are over 6,000 merchants and more than 300,000 consumers engaging with Spindle's products. Just last week, the company unveiled its latest market solution "MeNetwork 360" at the Money2020 show in Vegas.
Spindle's platform allows merchants to add both mobile payments and mobile marketing to small, medium and large businesses alike, and their customers. Its mobile demand marketing and payments services enable merchants to attract and retain customers as well as allowing consumers the ability to discover new merchants, subscribe to their favorite merchants, and make purchases using their mobile device. I strongly believe that Spindle's approach represents a significant advancement in mobile payments. It goes without saying that whatever company's payments platform has the most success at attracting customers to engage with merchants and build loyalty, will clearly have a distinct marketing advantage.
Similar to Braintree, Spindle delivers a simple API for eCommerce and mCommerce merchants to accept multiple forms of payments and it is integrating with the largest point of sales systems in the US and abroad, including NCR, SalesVu, and Zing, to name a few. As acceptance is key, Spindle has worked diligently to develop a commercial platform for both consumers and merchants, thus closing the loop on usability, and creating a much more attractive package for potential merchants and channel partners.
Another market differentiator is that unlike Square, LevelUp, and others in the market today, Spindle is hardware and point of sale agnostic. It focuses on developing solutions which do not require significant capital to get started. In addition, Spindle offers a new breed of cloud based financial services. This unique low-cost combination allows it to offer highly competitive fee benefits to merchants, another significant marketing advantage for Spindle. I strongly believe that these benefits will also translate into faster growth, and thus considerably less time to reach cash-flow breakeven and profitability.
There are two main reasons for Spindle's fast start out of the gate. First, its sophisticated technology has been carefully crafted and tested for a considerable period of time prior to its rollout earlier this year. Second, Spindle has entered the market with a highly experienced leadership team of payments and mobile marketing executives from Fortune 250 companies, who have previously led multiple similar and successful payments processing start-ups. Its products are gaining worldwide acceptance where its go-to-market approach is already present in 80 regional US markets and 20 countries. Because its executive team has already done this before, they know the merchants and channel partners in the space. Importantly, they also know exactly what they need in the new mobile arena to successfully attract consumers.
Spindle's platform has many other attributes that further distances it from its competitors.
- Flexible, Custom Solutions: Spindle takes a "Lego" approach which allows any partner or client to "snap together" a mobile commerce solution that works best for their business, using technology building blocks it supplies. This allows businesses to create exactly what they need to compete successfully in the rapidly emerging mobile economy.
- Ease and Speed of Implementation: Fully cloud-based for agile, rapid deployment and scalability.
- Consumer-focused to Promote Loyalty: Critical instant-on mobile marketing tools designed specifically to allow merchants to connect directly with consumers via their mobile devices. Merchants, financial institutions and channel partners will gravitate towards payment solutions that consumers embrace.
- White-label Option: Unlike other mobile payment providers, Spindle enables its partners to enter the mobile commerce marketplace under their own brand, further building consumer loyalty.
- Mobile commerce-ready ecosystem facilitates both POS and consumer-not-present purchases.
- Global reach with baked-in language localization.
- Intellectual Property: Spindle has quietly assembled a robust IP portfolio that protects numerous elements of its platform. This has recently been mentioned in a Seeking Alpha article (see Massive Growth Potential In Spindle Inc.).
A white paper from Mercator Advisory Group further speaks to the uniqueness of the Company's model, and where Spindle fits in the mCommerce world.
As with any development-stage company, there are risks. So far Spindle has not had to raise any significant amounts of capital as compared to many VC based start-ups. As revenues quickly ramp over the next several quarters, it is very likely it will need further funding to support this growth before it gets to a positive cash flow situation. Investors should watch to see who is involved in any fund raising and what the terms are.
In summary, no other payments company has the multiple offerings and benefits to customers, merchants, and channel partners in the mCommerce ecosystem that Spindle has. Don't be fooled by its size, a short year ago nobody had heard of Braintree either. Spindle has swiftly, quietly and definitively positioned itself as a clear mobile payments gold standard in the mCommerce ecosystem.
Further industry consolidation is likely, and just like eBay's acquisition of Braintree, someone will soon recognize the incredible accretive value that Spindle would bring to an established player in the space.