Matin Tamizi is not Santa Claus. (At least we don’t think so.) And his company is not in the North Pole. But the chief executive and founder of payments startup Balanced does play a major role in Reddit’s worldwide gift-giving affair.
Palo Alto-based Balanced runs the financial show behind Reddit’s annual Secret Santa, which last year set a Guinness world record for the largest gift exchange ever. It operates under standard Secret Santa rules: a Redditor draws the name of another Redditor from anywhere in the world, and he or she must send that person a gift. To facilitate the process, on Black Friday, Reddit launched a marketplace full of about thirty merchants where redditors can buy and ship their gifts. Balanced handles all the transactions, secures credit cards, holds the money in escrow, and makes sure the merchants get paid quickly. Reddit CEO Yishan Wong is a personal investor in the company. Other investors that helped the Y-Combinator alum raise 1.4 million are SV Angel, Ashton Kutcher and Airbnb CEO Brian Chesky.
The peer-to-peer marketplace has been a staple of the Internet since the dawn of the Web. (EBay and Napster are early examples, though anyone in the RIAA at the time would laugh in your face if you called Napster a marketplace.) But it has been heating up of late, especially for physical goods and services, and corners of the Internet are becoming one big swap meet. Airbnb sells shared vacation rentals while Kitchit sells a chef’s services.
Somebody has to power the commerce behind these sites, and that’s where Balanced steps in. The company says it has tailored its service to the individual companies it works with, and not their merchants. “The marketplace is our customer. We don’t try to build an experience for the buyer or seller,” says Tamizi.
But the payment industry is tough and the company has some fierce competitors. Stripe, while it doesn’t have a focus on peer-to-peer, is already well established and has thousands of customers like Foursquare and Fast Company and smaller sites like Indie Aisle. (PandoDaily also uses Stripe for its PandoMonthly transactions.) To help in the showdown, Balanced has tapped for its board Akbar Thobhani, who formerly held posts as head of payments at Airbnb and director of product management at BOKU, a mobile payments company.
Balanced’s sweet spot is that it can make sure merchants get paid within 24 hours of the marketplace giving the go-ahead to send out the money. Other places like Stripe can take up to a week. For those transactions, the company takes 25 cents per next day deposit. Matin would not share specifics about the volume of transactions for any of Balanced’s customers.
As the battle for the online marketplace heats up, Tamizi isn’t shy about throwing elbows at competitors. Tamizi mentions a few clients that actually use both a competitor like Stripe or Braintree, as well as his own company: Customers will use the other guys to take in money, and use Balanced to send money out, presumably because of its next day option. So I ask him if there is any way Balanced and the other companies may be complementary at all.
“No. We are competitors,” he says blankly. “As these costumers scale, they want all of this stuff to come from the same place,” he says. Eventually, those companies just switch to Balanced full time, Tamizi says. It’s happened with about five customers, he says, including with startup Gittip. He insists it’s never worked out the other way, with the client leaving Balanced.
As is customary in Silicon Valley, the edge will probably go to the one that innovates first. A Forbes contributor recently implored Balance to work with a form of digital currency like Bitcoin. Reddit, one of Balanced’s customers, has also been kicking around the idea when it charges users for its premium service. Matin said his company will add the currency if there is enough demand. It might just tip the scales in Balanced’s direction.
[Image credit: StockMonkeys.com at Flickr]