Andrew Kortina and Iqram Magdon-Ismail were randomly paired as freshman roommates at the University of Pennsylvania and have been cooking up ideas together ever since. First there was a classified ad service for Penn students, and then a web-based iTunes competitor. Magdon-Ismail went on to work for Ticketleap and Kortina landed at Bit.ly. But not for long. Last spring, Magdon-Ismail called Kortina and announced, "I'm thinking of leaving my job." Kortina's response: "The second you're ready to leave, then I'm ready to leave." That's all it took for the two to embark upon their next entrepreneurial venture. But what form would it take?
Magdon-Ismail, who was living in Philadelphia at the time, traveled to New York City to spend a weekend brainstorming with Kortina. Inspiration came in the form of an unmet need, as it so often does. Magdon-Ismail had forgotten his wallet and wrote a check to Kortina to cover his share of the weekend expenses. "We thought, 'Why are we still writing checks?'" recalls Kortina. "'Why aren't we using a web service to pay each other back?' So we decided to build something that would let us do that." The result was Venmo, a mobile-based platform that allows friends to exchange money using their phones.
Say you're having a drink with a friend and you're short on cash. If your buddy also has Venmo, you can use your iPhone or Android to pay him for your share of the tab by simply texting Venmo "pay Andy $12.50." You can keep a balance to draw from in your Venmo account, or your payment can be charged to a credit card or bank account that you register with the company. Your friend can then transfer the money from Venmo to his bank account. "Every time a payment is issued from your account, you get a text message and an email," says Kortina. "And you can pin protect your transactions." Venmo also allows you to set up "trust" relationships with other users - typically family members or close friends - who can draw upon your Venmo account without prior authorization.
Kortina says that Venmo's peer-to-peer mobile payments will always be free, and the company will make its money by changing a small fee to merchants who accept Venmo payments. "We already have a couple of restaurants in New York using it," says Kortina. "And there are some coffee shops in Philly and some food trucks on [the Penn] campus. College kids love it because they never have cash."
Venmo is currently still in beta but Kortina says they'll start opening up the service, city by city, toward the end of the summer. The idea is to get a critical mass of individual users so that the service becomes attractive to businesses. With a modest capital infusion from RRE Ventures and Betaworks, the company is flush for at least until the end of the year, when Kortina estimates he and Magdon-Ismail will need to raise more money. In the meantime, they have some serious competitors: both Amazon and PayPal are delving into the space as well. "Our focus is the social transaction," says Kortina. "Our bet is that we can do a better job of giving the user the best experience, and the best product will win."