Friday, March 29

Turbulence for “pay in one click” startups


April has been a lousy month for Bolt, one of the most famous startups in the “pay in a single click” sector, which make purchases as easy as possible because of their speed and also because of their immediacy: they reduce the wait between the decision of a purchase and the time of your payment. As soon as a product is discovered, it becomes easy to drop the money it costs, something that can presumably trigger impulse purchases. In addition, the payment process came with protection against fraud and other measures that enabled her to arouse the interest of many companies and investors, and thus achieve financing rounds worth 1,300 million dollars and be the one who bought other companies to grow.

Nevertheless, Bolt has been sued by “his biggest client”, Authentic Brands Group, according to Bloombergfor not delivering the technology that he had promised and that had cost him more than 150 million dollars in sales during integration with Forever 21, a fashion retailer. Authentic Brands Group (ABG) owns Forever 21 and dozens of other clothing brands. Only that and Lucky Brands managed to have the promised technology integrated.

And not just Bolt

Along with the complaint for this undelivered technology that led to a financial hole for the company’s coffers, there was also an accusation for having achieved financing rounds at increasingly higher valuations… at the cost of disseminating their integrations in such a way that it seemed that they had a much higher number of clients than they actually had.

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The company’s last round of financing, a series E, amounted to 355 million dollars for just over 3% of the shareholding, something that put Bolt at a valuation of $11 billion.. To put the figure in context, it is a similar valuation to that of listed companies such as Domino’s Pizza, Hasbro, Puma, Siemens Gamesa or Lyft.

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Its CEO, who left the company earlier this year, said in an interview earlier this month that Bolt had struck a host of huge deals that would generate “billions” in revenue. There is no trace of these agreements since May started. Bolt also used ABG’s trademarks to promote them as success stories of integrating their technology, even though the integration had not yet taken place. In some cases, he used brands that weren’t even part of the ABG portfolio yet, like Reebok.

The complaint is especially worrying because Bolt’s business model is based on volume, requiring a high number of users in order to be profitable. Some saw this scenario coming before this complaint was made public:

These turbulence for Bolt was preceded by the final incident for Fast, another startup in the same sector that announced its final closure in early April. The causes: raising 120 million dollars and only being able to reach a turnover of 600,000 in 2021, well below expectations, without much room to grow or to obtain more financing. Among his investors was Stripe itself.

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There are more cases of fintech with the alarms on. They do not have to be severe or catastrophic, but they are bad indicators. For example, Coinbase, which has lost 60% of its stock market value in a year. SoFi Technologies, other fintech geared towards personal finance, it has lost 40% of its value since its IPO… and 75% from all-time highs just over a year ago. Robinhood, 71% and 81% respectively, and just a few days ago announced layoffs for 9% of its workforce.

It is true that it is not a great year for stock values, but the fall of the SP500 from its maximum does not reach 15%, the correction is especially severe with this sector, perhaps stemming from excessive optimism on the part of private equity, especially in the segment of payments in one click.

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In this tough month for the sector, especially for Fast and Bolt, another startup from the same guild has taken the opportunity to stand out and obtain financing despite adversity: Volume. Of British origin, it has raised 2.4 million dollars to once again implement its one-click payment proposal, compatible with any bank in the world. The idea, make it as easy as possible to pay in any corner of any application for any countrysomething that Amazon masterfully sublimated and that has an entire sector looking for the best way to replicate it.

Volume, as its name suggests and as it happened to Fast and Bolt, requires a high volume of clients to be able to cover expenses and reach the black numbers. After all, the commission for each transaction is a small percentage. Time will tell if his formula succeeds against giants like PayPal and Shopify, which are also launching their own proposals in this regard.

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