Thursday, April 7, 2011

Why PayPal should buy WePay

Last week a big discussion broke out on HN about WePay's last prank. This isn't their first - they pulled one on PayPal in the latter's X conference last year, winning them TechCrunch fame and some resumes of disgruntled PayPal workers. This last prank, however, started a discussion about who WePay was, what their credibility is, and should we trust "these guys" with "our money". I don't think that's the question at all, since most of the participants in the discussion haven't and will not use WePay; WePay is not targeting them. What I think is the question is - when will PayPal step up and acquire WePay in a talent acquisition.

It's not a secret that PayPal is having a hard time to hold on to middle-level technical talent. Over the years, there have been multiple exoduses - most notable (in my time) to LinkedIn in 2008 and to FaceBook's Risk and Payments teams in 2009 (not to mention Google this year). I'm not talking about poaching - simply people changing companies since senior managers they believed in moved. Looking at open positions at PayPal it seems like some of them take many months to fill up, and some of them never meet the original requirements; and since hiring out of college to key positions is out of the question, PayPal is left in a growing problem.

WePay has taken on itself to build an ACH-based payment product that can compete with PayPal, but building a network of dedicated payers is a hard business. It's growing, but not exploding, and without a viral product or a strong distribution channel it's hard to see it growing exponentially to a point where it can really compete. You can say it's a product market fit thing but from my point of view, it just seems like WePay has entered a field where I think others (like Apple and Google) will have a hard time competing in, and without the heavy guns. But they have built a payment product from the ground up and created an experience that is at least at par with some of the better payment experiences that are out there. This is something they need to be recognized for. In addition, the acquirer gets a closely knit team that is connected with the younger crowd in the valley, has been around in hackathons and meetups, and can help invigorate a product organization. Plus, if that's PayPal, they get Aleksey Sanin (ex Lead Architect) back in the team.

So on one side we have a team that delivered on a complex product within a decent number of years and could be a player in the market if it wasn't so heavily dominated by stronger consumer brands. On the other hand we have a juggernaut that's struggling to get young talent in its hallways to rethink some of the more innovative parts of its product. A match made in heaven!

(Although I have briefly worked with Aleksey and met Bill in a meetup or two, I am not affiliated with either company in any way. This is my free advice and two cents ;) )

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