The Pitch: "Kids are spending more time online, and they need to pay for their iTunes downloads and Webkinz subscriptions. Yet many don't have debit cards. We offer three products. PAYjr Visa Buxx is a prepaid debit card for teens. It costs $3.95 a month, and refills are 50 cents. We also have a prepaid card for kids age 12 and under; it has no monthly fee, but refills cost 50 cents. Only Target accepts it now, but we're working on deals with other merchants. Then we have a customizable gift card for adults. I need working capital and money to hire some key executives and sales reps."
Owner: David S. Jones, 34
Location: Frisco, Texas
Founded: August 2004
Clients: 30,000 cardholders
2007 Revenue: $711,000
2008 Projected Revenue: $3.7 million
Raised So Far: $4.5 million from angels
Needed Now: $5 million to $7.5 million to hire executives and sales reps
Recent Buzz: Mentions in the New York Daily News, The New York Times, and BusinessWeek and on the Today show and CBS News
The Experts Weigh In
Give us a call
This is a brilliant concept. It helps parents teach kids financial responsibility. And the cost of delivering the cards is very low compared with the amount PAYjr can make in fees. To raise $7.5 million, Jones would have to add several product lines, because the market he's targeting may not be big enough to interest a VC. If he prefers to keep his mission narrow, he can probably raise $2 million from a specialty investment boutique that focuses on the financial services sector. Jones is welcome to give us a call. We might be interested in offering the product to our customers.
Founder and CEO
Virgin Money USA (formerly CircleLending)
Focus on the teen card
It's an interesting niche, but for a little company like that to have three products is crazy. The teen card makes the most sense. Building your own merchant network for the kid card is too expensive, and marketing gift cards to adults is a whole other world. I'd tell Jones to pick the card with the most potential and be prepared to prove to investors that its return on investment is better than the market average. Eventually a VC will want to sell PAYjr to a large credit card issuer, and it would have to make a profitable add-on for the acquirer.
I'd invite him for a meeting
This is an execution play, so I'd invite Jones for a meeting and try to understand how savvy he is. There's a need for a product like this. But Jones needs to prove that his metrics are trending in the right direction: that the rate of customer acquisition is growing and marketing costs are under control. Once he raises money, I don't think he should spend it on a big executive team. He needs a good analyst, someone closely tied to the marketing team who can look at these statistics honestly and figure out which strategies are working.
Menlo Park, California