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Dwolla Raises $16.5M from Andreessen Horowitz (dwolla.com)
121 points by mschonfeld on Apr 30, 2013 | hide | past | web | favorite | 50 comments

So I tried Dwolla last week to pay somebody back for some concert tickets and it was not a good experience. I, naively I suppose, thought that maybe Dwolla had come up with some clever new workflow for on-boarding people you wanted to send money to. Alas, I got a few angry texts from the person complaining about having had to input their social security and bank account numbers and, after feeling uncomfortable about having done that, not knowing how to cancel their account. The transaction did eventually go through after I convinced them to be patient, but it's not a rousing endorsement of the platform.

I echo some of the other concerns in this thread that there just may not be an easy way to transfer money to people given all the security concerns. I still far and away would prefer to have my bank send a physical check to somebody I owe money too because at least that doesn't require them divulge sensitive information to an entity they don't know.

Come on. That may have been a bit of an uncomfortable situation, but it was primarily your fault. Just forcing some unknown service on someone you owe money to that they then have to provide all kinds of rather sensitive information to is not good etiquette. If someone owes you money and you offer that they transfer it using Dwolla, and tell them they'll have to sign up for an account and add their SSN of security, sure. But I would then also suggest explaining what Dwolla is.

Also, transferring money from bank to bank or even using checks is not a fair comparison in any way, shape, or form. When you create a bank account you have to provide your social and all kinds of information too. And if you don't have an account and try to cash a check they even take your finger print and then gouge the heck out of you where they can.

You are being kind of ignorant in your gripe about how the service didn't work out well for you because it was your fault and you are comparing two incomparable scenarios.

I think he understands this. But believed Dwolla was the different based on reading all the hype that has been posted here over the years.

I believed it once. Even Dwolla believed they were going to be different than PayPal, but now I'm sure they realise the reality they live in.

Capital One 360, formerly ING Direct, has nailed this on the sending side. The sender needs to know the recipient's email addr and the last four of their bank acct # -- the recipient will receive an email which takes them to a page where they enter the full account # and, if those match, money transferred.

SSN to receive money from Dwolla!? Holy cow. Yes, I like the ING solution very much as well though for repeated (but not recurring) transfers, the need to re-enter the bank account number gets a bit cumbersome.

Hopefully they can use some of that money to safeguard my information since they refuse to delete it from off there servers. Or alternatively they could use that money to issue their federally mandated privacy statements that they refuse to do.

As a developer, the biggest concern I have with Dwolla is the initial friction for new users, e.g. entering their bank account number. I would like to see the complete end user signup flow featured more prominently. I didn't see anything on the topic while signing up for a developer account.

Criticism aside, I'm definitely rooting for Dwolla. I don't think they need to match the comparative ease offered with credit card purchases, but they need to be in the same ball park.

It's coming! I work on partnerships at Dwolla and full account creation as well as getting money into the account quicker are big initiatives for us. Hit me up at AlexT@dwolla.com if you want to chat more.

What would be great would be if you could fund and de-fund your Dwolla account using Bitcoin.

Bitcoin is either going to be important, or it isn't.

If it is going to be important, somebody is going to make it easy to transfer money between Bitcoin and USD, and they're going to be hugely rewarded.

Dwolla is _extremely_ well-positioned to do this in the sense that it already is an established company that has banking connections and is in a good spot regulation-wise.

The only company competing in this space right now is coinbase, but I think the part of the problem Dwolla has already solved is harder than the actual bitcoin part of the problem.

So this is Dwolla's opportunity to lose, pretty much.

Disclaimer: This is probably laughable to any company insiders because there is no way you all haven't already thought through this kind of thing (and probably found good reasons to reject it...).

with coinbase, I transferred maybe $600 to Bitcoin. With Dwolla, I transferred maybe $60,000. That should be an indication of the potential.

The reason is that with Dwolla / Mt Gox, I could control my purchase much better. I love ooinbase: they are a GREAT consumer service. But for large sums, I think Dwolla could have a huge win.

Yeah. Similar story here.

Dwolla possibly (probably?) does more Bitcoin business than coinbase does, and that has probably been true since before coinbase existed.

why can't you all delete dkhenry's account information from your system?

I've considered using it to have clients pay me because the only other options are to give away 3% to CC processors, or wait a week+ for a check to come in the mail.

If there was a way for me to pass new client onto a single sign-up process (whether I built it via an API or whether it was on Dwolla's page and tracked via referrer), that would go a long way to convincing some of them to use it.

I tried this last summer. It was fairly disastrous. It usually takes 2 weeks to get paid via Dwolla, and if a banking holiday is involved it may take even longer. I had support issues that were not resolved promptly, or in some cases, not at all. If you make a mistake in the UI, your 2 week wait can grow even longer; they've since corrected some of the phrasing, but it used to be unclear if you were putting money into Dwolla or taking it out. If you accidentally put it in when you meant to take it out, you're looking at ANOTHER 2 week wait to get your money, and hopefully the account you ordered a withdrawal on has enough room for that transaction not to overdraft. They won't and supposedly can't reverse that kind of operation.

As a developer, I attempted multiple times to get information on the FiSync APIs, as I have connections to some local financial institutions. I was thoroughly ignored despite some significant persistence.

Like all banking startups, Dwolla is just a frontend for a real bank and they can't control flow or do anything once a "real bank" operation has been handed off. Dwolla therefore sucks. It'd be nice if they used that money to become a bonafide, real banking institution.

My clients and I went back to check via parcel carrier. It was still usually at least a week faster than Dwolla.

Just an FYI, if by clients you mean for consulting work, Freshbooks has an arrangement w/ Paypal (yeah, I know) where payments are a flat $.50 (yes, 50 cents) for all invoices up to $10,000. You will still have to put up with a wait to get that money in your bank account (3-4 business days if payment is immediate), but it can all be handled online. I've had all my payments over the past year go thru Freshbooks and the lifecycle of invoices/payments is tracked in their system.

Thank you for this contribution. My business uses Freshbooks, and I was unaware of this.

you can use guest checkout for this. Right now its only in the offsite gateway, but eventually we will add it to others- check it out here: http://developers.dwolla.com/dev/pages/gateway/guest

In Australia we can login to Internet banking and send money to another account with any bank in Australia free of charge and usually within 2 business days.

Is something like this not possible in the US?

The user experience for person to person transfers varies and is usually poor.

Electronic transfers (ACH) only take a couple of days though, and for things like payroll, once the accounts are set up it all works fine. They also work pretty well for making payments to businesses and what not.

Nicely done. I really love the mission, driving the payments market to be being brutally efficient. Some nasty brutes[1] on the other side of the fence but they can be contained.

[1] Various established payment processors who would have you believe that if you aren't related by marriage to the CEOs of the big banks on Wall Street you will be killed.

How is Dwolla better than bitcoin? It seems like it has the same drawbacks of credit cards (chargebacks), without very much benefit.

Maybe I'm missing a killer feature, but Dwolla doesn't seem all that interesting, just another paypal competitor.

Dwolla is one of the many ways you can transfer money from your bank into Mt. Gox to purchase Bitcoins. It takes the longest but is also the most above the board method. If they can make it easier to do this they will surely gain an advantage over the shady (looking) russian sites offering the same things.

Dwolla has lower fees than credit cards or PayPal.

Dwolla better than Bitcoin? Way, way better marketed. Better UX.

Dwolla can improve its tech stack and have it be the UX layer on top of Bitcoin if it chooses. I guarantee you there are folks at Dwolla working on this. Dwolla = front end of payment protocol. Dwolla = bank?

Competing payment protocols = Bitcoin; Bank routing/Swift + Forex. There were efforts to abstract gold into a payment protocol in the 90s but they failed.

Bitcoin or one of its numerous derivatives (feathercoin, litecoin, terracoin, ppcoin, ixcoin, novacoin, namecoin, freicoin, "govcoin") will likley win as a payment protocol.

The bitcoin investors have zero incentive to spend the money marketing it and building a sexy interface on top of it. There is money in interface.

BTW, a paypal competitor IS interesting! It's a 10bn+ market. but dwolla could be the "bank". it could be the secured storage. ....

note: andreesen has also invested in ripple/opencoin. reminds me of their simultaneous bets on dalton cadwell (immeem)'s picplz, and instagram.

Andreessen Horowitz just put a lot of money into OpenCoin/Ripple, I guarantee you they are going to knit the two services together. Dwolla w/ happy PR buzz, back end provided by OpenCoin.

A lot of money? They only raised $1M - so how much could have they put in? Dwolla raised $16.5 with AH leading.... Probably a check of $10M or more...

I thought it was an "undisclosed" amount

two different bets- one is series C, one is seed.

Didn't a few people voice their concerns with Dwolla recently on HN? Something about trouble with getting their money?

i think the general consensus there was that signing up for a service and immediately trying to transfer $40k was a bad idea.

That was part of it. The main takeaway for many is that Dwolla is super friendly until you actually need to get your money out of it. I tried to get my $18 out of it but they insist on giving them a scan of my drivers license, a requirement that they didn't have at the time I signed up.

When the entity is defined as a money transmitter, you need to abide by their legal requirements. One of those includes having photocopies of government issued id. They choose to lower the initial barrier to sign up at the expense of a bad one time user experience for getting the money out.

Dwolla does not call itself a money transmitter, and is not licensed as one. Many people feel they're wrong, but to every state that's inquired, they've argued that they're only acting as an agent for the recipient of money, and are not transmitting money themselves.

Wow, good point, faulty assumption on my part.

Here are some further details on their stance:

Dwolla does not receive, hold, or transmit User funds; Dwolla only maintains and manages information associated with User ownership of the funds; (3) Veridian is the entity that provides money transmission services upon instructions issued through the Dwolla software platform; and (4) Funds in the Veridian Holding Account are held in a pooled account.

Veridian, a major investor and bank processor manages the funds. In other words, all funds withdrawn from a user’s bank to be put into their Dwolla Account is placed into the pooled Veridian Holding Account. This legal loophole allows Dwolla to operate outside the state of Iowa, since it is technically never a money transmitter, merely a service provider for a processor, and therefore not subject to the expensive registration and licensing process.


This is nonsense. Although I'm not a lawyer...

Dwolla is a money transmitter according to most (if not all) state statutes. Its relationship with Veridian does not satisfy any statutory requirement necessary for exemption. Veridian itself does not have a charter, and is not a credit union. In my personal opinion, Dwolla has been breaking laws since day one and continues to. Its investors are no different.

Veridian is indeed a Credit Union and a member of the NCUA.

Mission: Allow anyone [or anything] connected to the internet to move money quickly, safely & at the lowest cost possible.

Fantastic mission statement: clear, concise and it sounds almost impossible to do.

Although they didn't like my take on it when I was at a certain unmentionable payments company, it was my intuition several months ago that a price war is inevitable in this space. Whatever company initiates it will be the one that gains enough momentum from the tail to scale efficiencies best. Namely: any and all efficiencies that are "left over" after price for fellow companies in the space to compete on (great support, a beautiful API, etc.) Dwolla's aggression here shows that they understand the future of money transfer.

Fantastic mission statement: clear, concise and it sounds almost impossible to do.

It seems like people really get behind startups with the biggest, craziest visions....it almost serves as a built in rallying cry.

I wonder if A16Z used Dwolla to send Dwolla their many millions of dollars.

That would be cool

Ending the 3% tax on transactions (which ends up being what, 5-10x on the year, due to multiple transactions with the same dollar?) would be a huge boost to the economy.

Will Dwolla bring back support for bitcoin transactions?

Dwolla never had native support for bitcoin transactions. We've always been used as a gateway between USD -> BTC by exchanges such as MtGox, BitInstant, etc.

This is still the case, and is still very much possible and active.

Sorry, I should've been more clear; I didn't intend to talk about native support. I was referring to the "gateway" service explicitly. The only reason I brought this up was because Dwolla was missing from BitInstant last week, but now Dwolla appears to have resurfaced back on BitInstant's form.

Right... I've been working with the BitInstant guys to bring back Dwolla support, and make it better than before :)

Maybe they can use the money to help settle the lawsuit [1] that TradeHill (a bitcoin exchange) has brought to them.

[1]: http://venturebeat.com/2012/03/07/tradehill-sues-suing-dwoll...

I don't want to flame the shit out of you, but I don't think you know what you're talking about. Did Dwolla ever support Bitcoin transactions directly? (I only ever did personal trading with Dwolla/Bitcoin, and transactions with Mt.Gox)

The ability to send and receive USD from Mt.Gox with Dwolla is still there (although MtGox USD codes are gone from what I've heard), and you can use Dwolla to fill up your Mt.Gox account with USD, which you can use to buy bitcoins.

If there's something I've missed, please speak up! :) I am an unverified Mt.Gox speculator so I can't use Dwolla anymore, only send and receive bitcoins as well as trade.

You didn't miss anything. I was referring to the gateway service; not native service. BitInstant had supported Dwolla in the past, and then it went missing from their site, and now it appears to be back.

Oh. That's why I didn't notice, because I don't use BitInstant. TY.

I guarantee you that part of PMarca and co's game plan here is to integrate the OpenCoin/Ripple technology with the Dwolla network.

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