This morning, a syndicate comprising Accel Partners, Andreessen Horowitz, Intel Corp. and Intuit — along with more than a dozen tech celebrities, including Peter Thiel, Marc Benioff and Diane Greene — unveiled a $25 million investment in a new mobile payments startup called Clinkle. The financing is being billed by Clinkle and its backers as the “largest seed round in Silicon Valley history.”
That’s right, a $25 million “seed” round.
While you’re spurting out your coffee, here are a few things to know about Clinkle. First, the San Francisco-based company has been operating in stealth mode for nearly two years. It already has 50 people on the payroll, many of them former Stanford University students who met the company’s founder, Lucas Duplan, in the school’s computer science department.
Duplan, 22, who graduated from Stanford two weeks ago, even convinced former Stanford dean Bob Joss and Mehran Sahami, an associate chair of the school’s computer science department, to invest in his company.
Clinkle may have revealed the names of its investors, but it isn’t coming entirely out of stealth. Duplan still won’t say exactly what the company does, other than “provide consumers with a way to basically use their smart device instead of their cash and credit cards” to pay other individuals, as well as merchants.
Dozens of startups have made that same elusive promise, as Duplan readily acknowledges. In fact, he calls mobile payments adoption “gargantuan and nearly impossible for companies of any size to solve.”
But Duplan believes Clinkle has a winning approach to slowly convincing both consumers and merchants to use its software. Its plan? To roll the service out this fall to the “closed loop communities” of college campuses across the United States, where students are likely to try out the service, and the number of merchants that cater to them is limited enough that striking a balance between the two should be “very manageable.”
It’s akin to the adoption strategy employed a decade ago by Facebook.
Of course, Facebook’s Series A was half the size of Clinkle’s “seed” round, and it came almost entirely from one firm, Accel Partners. The old startup-investing adage holds that the more money an entrepreneur raises at the outset, the worse his or her company tends to perform. Just two recent examples are Color and AdKeeper, both of which drummed up widespread press coverage for raising roughly $40 million each before rolling out their products — and whose promises almost immediately fell flat afterward.
To be fair, Clinkle isn’t just a big idea. Says Duplan: “We spent two years insanely focused on building this product, then we went to investors and said, ‘Here’s what we have. We think it’s important.’ They invested off a live working demo.”
As for why the company is calling what would traditionally be considered a Series A round a “seed round,” a term that’s sure to attract some negative bias — along with a mountain of media attention — Duplan says the company decided to do a “minimal level of press” largely for hiring purposes. “It’s difficult to be able to attract senior talent if they aren’t aware the company exists,” he says. More to the point, he notes that for Clinkle to succeed, it needs a “very different set of competencies” and the knowledge that its very wide investor group can provide.
“The margin of error here is zero,” he notes.
With a little luck, billing Clinkle’s pre-launch funding as the “largest seed round in Silicon Valley’s history” won’t prove to be its first mistake.
Image credit: Photo of Lucas Duplan courtesy of Clinkle