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PayLoadz moves to Philadelphia without a geographical agenda, passes $50m in transactions

When Shannon Sofield talks about Philadelphia’s technology community, he says there’s a lot of potential. He’s watched it mature alongside New York City, where in 2002 he founded his company PayLoadz, an e-commerce platform to sell digital goods. He sees that the East Coast is increasingly a place where technology entrepreneurs are looking to base […]

When Shannon Sofield talks about Philadelphia’s technology community, he says there’s a lot of potential.

He’s watched it mature alongside New York City, where in 2002 he founded his company PayLoadz, an e-commerce platform to sell digital goods. He sees that the East Coast is increasingly a place where technology entrepreneurs are looking to base their businesses.

“People started looking outside of Silicon Valley,” he says, to places that weren’t the “center of the universe” for tech.

Six months ago, he decided that Philadelphia was maturing fast enough and had become attractive enough for him as an individual, that it was time to move the company here.

“New York rates were a little bit challenging: the price for developers, designers, were a much higher premium,” he says.

He’s counted on opportunity and skill, and not geography, when it’s come decisions that effect the growth of his business. The dozen PayLoadz employees are based around the globe, including a development team in India and a support staff in Washington.

Sofield, who grew up in Vorhees, New Jersey, started working in web development in the late 90s as a consultant. As his business grew, he realized the value of scalable technology: building applications once and selling them to his clients.

Payloadz was built to solve a problem that was affecting his own sales: there was no way to easily sell the digital assets he was building. The service’s core process is in transferring digital assets securely after payment. Someone creates a digital media file, like a PDF of a book, for instance, and uploads it to PayLoadz. The service then provides an embeddable link and digital rights management settings that a seller requires. For the buyer, its as simple as using PayPal to purchase the item and then being redirected to download it securely from PayLoadz.

Watch a video of that process below.
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PayLoadz processes a surcharge off of its $8 million to $9 million transaction volume each year. The service costs $14.95 per month plus a per-transaction fee which comes to about 6% per transaction. The company is cash flow positive, Sofield says, and revenues passed $1 million in 2011. After nearly ten years in existence, the company reached a $50 million total transaction volume this summer.

Business is going strong, despite early setbacks to the company’s growth by big competitors.

In 2003, a year after launch, Sofield says that PayLoadz was approached by many large record companies like Warner Records, Maverick and Disney, who wanted to test the service. They were some of the first to experiment with digital downloads, Sofield says. “We sold a DRM-protected file next to an MP3 for Madonna and the MP3 outsold the DRM file 15 to 1,” he says.

Then in 2004, Apple launched iTunes and everything changed. “They put their foot down, launched with DRM and the industry went away from it,” he says.

The rise of iTunes no doubt hurt PayLoadz growth potential, but it also helped Sofield focus the vision.

Today, Payloadz targets users that will transact about $1,000 to $50,000 per month. Anything more then that, and a company or user is likely to start thinking about developing their own customized delivery service, he says. “The premise is turn-key for people who don’t have tech experience to handle that kind of development,” he says.

The company hasn’t yet taken on funding, despite having been in touch with venture capitalists through the years. “Being cash flow positive, there hasn’t been a reason to take on funding,” Sofield says.

Sofield has also recently launched Batchex, an outgoing payment service provider, seeing a need not met in the industry. The API service allows companies to process, cut and track payments sent to partners automatically. He’s investing his own money into the spin-off company and is working on a presentation to seek funding.

“I know we have great angel and venture capital groups that are starving for investments. It’ll be interesting to see how it will shape out in the next couple years,” he says of Philadelphia and his own ventures.

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