A few weeks after a disastrous 7.0 magnitude earthquake struck Haiti, killing more than 150,000 people, Peter Groverman was organizing.
By the end of his planning, Groverman—a Villanova law student and CEO of local advertising startup Tapinko—had brought together 126 people from around the world and 40,000 pounds of cargo, including $1 million in medical supplies, which all traveled on an airplane chartered to fly to Haiti last month.
It was another drill for Groverman, who first began organizing relief efforts when Hurricane Katrina struck the Gulf Coast in 2005 and he gathered 40 students to head to New Orleans. But Groverman says another Philadelphia entity was helping drive his recent mission: Rittenhouse-based mobile payment startup Venmo.
Using the text message-based payment system, Groverman was able to raise $50,000 immediately—when that immediacy was vital. “Venmo [was] the whole backbone of our fundraising effort,” he says. “I cant imagine any nonprofit not using text message-based donation systems. There’s no need for a check, no need to go to a bank to deposit. I didn’t have time for checks to come.”
Having now returned, Groverman is focusing much of his time and energy on the nonprofit venture The Relief Foundation, hoping to make it a premiere foundation tapped into social networks like Twitter and Facebook to mobilize young people. Groverman is working to organize a second trip in June.
“Some people talk about these flash mobs, but we’ve created flash relief,” Groverman says.
Relief Foundation’s Haiti efforts are a powerful example of how Venmo can be utilized. But the mobile payment service’s value extends beyond charitable efforts.
The company hopes that it will become the standard for the cashless exchange of money between friends and at retailers where cash is not convenient, like lunch trucks and coffee shops.
Users sign up for the service and can send money to friends and retailers using a simple text message: “Send $12 to Tom,” you could type, to pay your friend for the cash he fronted for lunch.
Andrew Kortina and Iqram Magdon-Ismail—who were roommates at the University of Pennsylvania before graduating in 2005—founded the service last year, placing it in a private beta last fall.
“We were always exchanging money when we’d go out to dinner. A couple times, he sent me a check in the mail. I had to go to the bank and cash it. It was really inconvenient.” So, with cell phones in hand, it seemed like a natural fit to send cash through a medium they were both more familiar.
It’s a business model that’s seen traction, even here in Philadelphia. XIPWIRE launched its mobile payment service late last year, as we reported.
But what perhaps sets Venmo apart is its unique proposition of creating a financial network around its service, similar to Twitter’s network for communication or LinkedIn’s network for professionals.
“These are the people you got to lunch with everyday, the people you meet for dinner, the people you buy things from on craigslist, really anyone you need to exchange money with,” Kortina says.
By focusing on perfecting user experience, Venmo has serendipitously identified additional benefits. The team has found that simple features—like allowing notes to be added to transactions—can drive social benefits that compliment it as a financial utility.
“Users can send a transaction as a reminder or give props for doing something cool. It’s a behavior that I haven’t seen on any other payment service,” Kortina says.
With a beta being tested by friends and an increasing number of users, the team has been taking it more seriously.
Magdon-Ismail started working on Venmo full-time in January, giving up a position at TicketLeap as a Director of Engineering. Kortina left URL shortener Bit.ly, based in New York, the same month.
When we spoke to the Venmo team in February, they were hoping to raise some funding by the end of the year. In March, the company closed its first round of funding, of between $300,000 and $400,000.
Last week, the company announced a partnership with the Black Eyed Peas and the i.AM Foundation to offer mobile payments for the group’s fans to donate to its Haiti cause, indicating that there’s likely much more to come for the Philadelphia startup.
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