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Hi friends 👋,

Happy Thursday! We have a little early Fall treat: the first-ever-back-to-back Not Boring Investment Memo. This one has a little something for everyone:

• Angel Investors: A high-potential ecommerce software play that I think can become an important piece of the Modern DTC Value Chain.

• Ecommerce People: A better checkout experience that helps your customers share your product, increases conversion, and lowers CAC.

• Business Nerds (all of us): A look at an early stage company and an explanation of alternative payments and the Google/Facebook duopoly.

They’re longer than a typical investment memo — which you’ve probably come to expect from me at this point. That’s because I want everyone to come away with some new knowledge and a little glimpse into the future courtesy of the stories of the founders who are shaping it. And if you’d like to invest too, great.

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Now let’s get to it.

Not Boring Investment Memo: Swaypay

Meet Swaypay

Whether you like it or not, you’re an influencer. 

Every time you post a pic in your new kicks or answer the question, “Where’d you buy that dress?!” you’re influencing people’s purchasing decisions. Because it’s historically been hard to wrangle, track, and direct small amounts of influence, until now, you’ve done it out of the kindness of your heart. That’s very nice of you, but it causes a couple problems: 

1. You don’t get any value from your influence other than nebulous social capital. 

2. Brands are forced to pay Facebook and Google to acquire customers. 

As a result, according to reformed VC Chamath Palihapitiya, “Startups spend almost 40 cents of every VC dollar on Google, Facebook, and Amazon.”

Swaypay wants retailers to pay you instead of paying Google, Facebook, and Amazon. 

Its mission is to bring financial empowerment back to retailers and shoppers alike by rerouting the billions of advertisement dollars back into shoppers' pockets as savings directly at the point of sale. 

When Swaypay’s CEO, Kaeya Majmundar, first walked me through the deck, I wrote in my notes, “Fucking love this mission.” I also love the investment, for five reasons:  

• The Product is Already Magical. Swaypay already makes good on its promise of a frictionless experience. I went from homepage to discount to checkout in 15 seconds.

• Ecommerce is Growing. This is a recurring theme here at Not Boring, because the shift towards ecommerce is massive. Swaypay is well-positioned to ride the wave.

• Strong Early Traction. After a successful beta, Swaypay has 60 retailers on board for its Q4 launch and is targeting 200-300 by end of year.

• Swaypay is Ecommerce Robinhood. I believe that anything that takes money from Facebook and Google and gives it to shoppers and retailers will win. 

• Kaeya and Team. Kaeya has been in ecommerce since going on Shark Tank at 19 (video below, of course) and has been on both the seller and platform sides. She’s building a high-quality team with super relevant experience.

Product: Frictionless Savings for Sharing

Swaypay is the first payment method that plugs into eCommerce storefronts and lets shoppers convert their “sway,” or social influence into currency for online purchases. 

Swaypay believes that there is tremendous untapped value in bringing influencer marketing downstream to the 99% of people who have small amounts of powerful social capital, or sway, that they have not been able to exercise. To make the long-tail viable requires clear value and a frictionless experience. That’s what Swaypay is building: 

• Clear Value: Discount on items shoppers are buying anyway based on sway. 

• Frictionless: Discount applied via Swaypay checkout button in the checkout flow. 

The product is dead simple. Shoppers shop online like normal and when they get to the checkout page, they’re presented with the Swaypay Checkout button next to the regular checkout button. 

When a shopper clicks the button, they’re prompted to enter their Instagram handle, and given a discount based on their sway. The shopper checks out, the discount is applied automatically, and they have 30 days to post on Instagram and share the link through Swaypay or they have to pay back the difference. 

You know what, let me just show you. Let’s say I was planning on having a few too many drinks tonight and wanted to buy some hangover prevention. I head to Akalo and… 

Did you catch that? That’s not a company demo. I just did that myself. Within 15 seconds (the max gif length), I found a product and got a 35% discount based on my Instagram handle. I tried it on another site, Made au Gold, and it was just as easy, but I only got a 15% discount. I guess I’m more valuable as a hangover influencer than as a women’s socks influencer. Makes sense… 

The product is kind of magic. And retailers seem to agree. 

Here’s a reply that Swaypay’s VP of Growth, Maggie, got to a cold outreach yesterday: 

Retailers respond to Swaypay because by offering discounts in exchange for social sharing, they can increase conversion at checkout, acquire new shoppers while generating margin on the first sale, and drive stickiness by working with shoppers. The shopper wins, the retailer wins, Google and Facebook lose (a little).

Currently, Swaypay works with Shopify retailers and Instagram posts. In the next couple of quarters, Swaypay will diversify into other ecommerce platforms (like BigCommerce) and more social channels (like TikTok). 

It also plans to implement a public-facing SwayScore that travels with shoppers wherever they shop. If you remember Klout, it’s like that but way better. Klout gave users a score based on their Twitter activity, and monetized by letting brands run campaigns in which they rewarded high-Klout users with prizes. The only thing I ever got was a four-foot-tall plush GEICO Gecko. 

Swaypay, on the other hand, lets users monetize directly through discounts on things they were going to buy anyway. In the future, Swaypay will introduce Live Receipt, a Venmo-like feed of users’ purchases that will let people monetize even more directly through affiliate payments. It’s like Pinduoduo embedded into storefronts, gamifying the shopping experience and allowing friends to buy together in exchange for bigger discounts.

Business Model

Today, Swaypay’s business model is straightforward. Retailers pay Swaypay 5% on every transaction that goes through Swaypay. Here’s how it works: 

• I see a $100 shirt on shirt.com 

• I check my Swaypay discount: 40%! 

• I buy a shirt for $60

• Shirt.com pays Swaypay $5

• I have 30 days to post a picture of myself wearing the shirt to Instagram

  • If I post, I keep the discount and Swaypay keeps the $5

  • If I don’t post, I pay back my discount, and Shirt.com still pays Swaypay $5 because it helped convert me

On its roadmap, Swaypay plans to monetize in at least two additional ways:

1. Recurring: Today, brands need to get permission from each user who posts a picture using their product to re-use that content in campaigns. Swaypay gets that permission automatically in exchange for the discount. Swaypay retailers will pay for content usage rights for all of that UGC. 

2. Transactional: Swaypay will take a richer affiliate-like cut on sales generated through its native environments - the store directory on its site, its own app, or on Live Receipt.

If Swaypay is successful in convincing merchants to install its checkout button and expanding its product line once they’re in, the opportunity is massive. 

The Growing Ecommerce Market 

Since the start of COVID, ecommerce penetration has doubled. I’ve written about this before. 

When the pandemic began, we bought 16% of our things online. Now, we buy nearly 34% of our things online. 

Shopify has been one of the biggest beneficiaries of retail’s move online. It grew its Gross Merchandise Value (GMV), the total amount of all goods purchased on stores powered by Shopify, 73% between Q1 and Q2, to $30.1 billion. 

Within that universe, to start, Swaypay is targeting the brands that have the shoppers most likely to share content in exchange for discounts. Namely, it’s targeting emerging DTC ecommerce brands serving social media savvy Gen Z and Millennial consumers. 

Once it has the young users on lock, it plans to swim upstream and reel in the big fish. L'Oréal is already excited.

Luke Weston, Chief Digital Officer at L'Oréal Luxe and an early Swaypay believer, says: 

Social media influence is critical to all DTC brands, but has long been an untapped currency largely because it’s painful to wrangle. And I know first hand that rings true for any sized ecommerce company. Swaypay is the first model I’ve seen that has real potential to remove all the barriers and create a win-win scenario. 

It’s not worth spending time calculating TAM here because ecommerce is so huge, but suffice it to say, it’s hundreds of billions of dollars. Within that, the checkout flow is a great place to sit. It’s why I’m so excited about Stripe (which Swaypay uses). 

Because ecommerce is such a big market, there have been many attempts to do pieces of what Swaypay is going. There are platforms and agencies like Tribe that match influencers with brands, and there’s a growing number of alternative payments solutions that offer customers a different way to pay at checkout. 

No one currently does both, and that’s where Swaypay’s magic lies. By sitting at checkout and offering regular people discounts for using their untapped sway, Swaypay can increase conversion and lower acquisition costs without asking anyone to change their behavior. 

The idea makes so much sense that it’s surprising it hasn’t been done before. I asked one of Swaypay’s investors why not, and she pointed to two things, in addition to Shopify’s success:

1. Nano-influencers are becoming more important as big name influencers get more expensive and Gen Z looks to more authentic sources. 

2. Affirmproved that third-party checkout solutions are viable. 

This point can’t be overstated. This is the main answer to the question, “Why now?” 

• For the action to be frictionless, it needs to sit in the checkout flow. 

• Previously, it was hard to imagine a retailer giving their valuable checkout space to an unproven startup. 

• Max Levchin, the founder of PayPal, used his own social capital to convince retailers to try his new “buy now, pay later” solution, Affirm. 

• Affirm worked. By giving shoppers 0% interest rate payment plans, Affirm increases conversion rates, which helps retailers’ bottom lines. 

Solutions like Affirm, Klarna, and Afterpay proved the market, and are attracting eye-popping valuations.

• Affirm was valued at $2.9 billion in April 2019 and announced plans to go public.

• Klarna raised at a $5.5 billion valuation last summer, from investors including Snoop Dogg.

• Afterpay, which is public, has seen usage increase 30-40% and its market cap increase by 142% YTD to $15 billion. 

Now is the perfect time for Swaypay, and its early traction is proving out the thesis.

Early Traction

Before doing a full build, SwayPay ran a beta with companies from Kaeya’s Shark Tank network and ecommerce contacts. The beta was small but the numbers were strong: 

• Five retailers and 200 transactions representing $14k

• 13% of the retailers’ transactions went through Swaypay

• 12% increase in conversion

• 2x lift in shopper Instagram posts. More importantly, average engagement on Swaypay posts was 9% compared to ~2% average influencer post engagement.

A picture is worth a thousand stats. Here’s a recent Swaypay post from a shopper with 700 followers - the picture perfect (pun intended) shopper for Swaypay...too small for existing platforms but high value to retailers in the aggregate. She got 12% engagement within 3 hours of posting.

Swaypay also generated an early TikTok proof point when it went viral on Kaeya’s TikTok account here and here, generating 1M views on an account that only had 18 followers at the time. The TikTok drove over 300 members to Swaypay’s waitlist.

With early proof and a v1 of the product built, Swaypay is fully focused on onboarding new retailers. 

Recently, the company brought in Maggie Braine to lead growth, and Maggie is bringing structure and contacts to the retailer signup process. Already, Swaypay has 60+ retailers representing $120M in annual revenue signed up for its Q4 launch. 

A few are live in the wild right now. You can check out Swaypay for yourself on: Madeaugold.com, Cortexbeauty.com, Akalo.co, Aeris.one, Meetaila.com, or Swaypaymerch.com (its own play store). 

Swaypay is targeting 200-300 retailers by the end of the year, and much of the money from the pre-seed extension will go towards acquiring and onboarding retailers and beefing up the engineering team to handle the anticipated influx.

I strongly believe that this is just the beginning, because Swaypay is stealing from the rich and giving back to the rest of us.

Swaypay is Ecommerce Robinhood

I already told you how much I love Swaypay’s mission, but I’ll repeat it. By taking the money that usually goes to Facebook and Google -- up to 40% of every dollar that startups raise -- and giving some of it back to shoppers and retailers, Swaypay is like an ecommerce Robinhood.

I touched on this idea in Shopify and the Hard Thing About Easy Things. Far too often, the money that companies spend on digital marketing is just lit on fire. All the companies are competing for all of the same shoppers using higher bids as their only advantage. 

Swaypay flips that on its head. It amplifies an existing behavior - people telling friends about the things they bought - and rewards shoppers for doing so. It’s a modern vehicle for word of mouth. Every friend I can tell about my cool new shirt is someone that my favorite shirt company doesn’t need to pay Google or Facebook to acquire. It can take the money it saves and do two things: 

1. Reward me for sharing in the form of discounts, payments, or gifts.  

2. Invest in improving the product or doing other things that build a sustainable advantage.

And it’s not just me. Swaypay believes that the ubiquity of social media has given everyone sway that brands are becoming increasingly eager to tap into. Swaypay exists to facilitate this value exchange by:

• delivering a frictionless experience for retailers and shoppers

• quantifying each shopper's social influence to keep the system cost-effective and scalable

It’s combining viral marketing tactics with old-fashioned mass media in a way that yields much more reliable and cost effective outcomes than trying to go viral alone. 

The goal is to arm businesses with a repeatable, scalable, and cost-effective way to get their brands to self-distribute across the internet. It turns each audience member into a potential influencer, extending the reach of any campaign, even one started on Facebook or Google, and driving down customer acquisition costs. 

Part of Swaypay’s brilliance is that as its retailer customers’ products spread, Swaypay spreads with it. Every time a shopper checks out on a merchant’s site, the Swaypay brand is there. Every time they share a post and tag Swaypay, Swaypay gets more visibility. Swaypay spreads when its retailers succeed by tapping into the small networks of ordinary people. 

The power of ordinary people to drive sales is a lesson that Kaeya learned in the Tank. 

The Team: Shark Tank-Tested, Retail Approved

Kaeya is a born entrepreneur. When she was just a sophomore in college, she went on Shark Tank with her invention, BZBox. After standing strong in the face of tough feedback from the Sharks, she landed a deal with Lori Grenier. 

Her experience on Shark Tank sparked Kaeya’s passion for social commerce. She became fixated on figuring out how most effectively leverage social media to drive sales. She spent the next three years parlaying the Shark Tank exposure into “micro consumer product brands selling things like skincare, pillows, jewelry, apparel, you name it on Shopify storefronts.”

Kaeya and her team experimented with each brand, testing every which way to use social media to drive sales until one idea stuck: treating social media posts as currency. That planted the seed for Swaypay.

Kaeya even braved reality TV again on Project Runway: Fashion Startup to pitch a new product, ZipTank, which she describes as “a basketball jersey that doubles as a bag with a zipper on the bottom.”

Instead of an investment, she ended up with a job offer from one of the judges, Christine Hunsicker, who exited her first company to Yahoo for $850M and is now the Founder and CEO of CaaStle, which allows any retailer to rent its clothes as-a-subscription, a la Rent the Runway. 

Kaeya took the job with one goal in mind: to immerse herself in the inner workings at a hyper growth retail tech startup and fast track learning how to build her own.

She spent the next two years as a Product Manager at CaaStle, working directly for their CTO to build a new product. But Kaeya’s an entrepreneur. Early in 2019, she left to build Swaypay. 

To make Swaypay a reality, Kaeya has recruited an amazing early team:

• Maggie Braine, VP of Growth: From J.Crew to Bulletin, Maggie has spent the last 10 years working in large corporations and growing early stage start-ups from inception to launch, in leadership roles across multiple departments. She’s helped take a pre-seed company through a $7M Series A, built a wholesale tech platform from the ground up, successfully orchestrated the business model pivots of three start-ups, secured a pre-launch portfolio of 500+ accounts for a B2B retail tech company and exceeded revenue goals by 75% within her first 6 months in her last role. She’s a traditional retail veteran turned innovative retail tech expert.

• Naveen Bhavnani, Lead Engineer: Naveen has over 10 years of full stack development experience in web technologies with significant exposure to ecommerce. He worked at industry giants (Infosys and Samsung) then jumped into his first startup as a Principal Engineer at CaaStle where he met Kaeya.

Swaypay is Backed by Great Investors 

Still early in its life, Swaypay has already attracted some amazing investors. Anthemis and Barclays’ led the pre-seed round (of which this opportunity is an extension) through the Female Innovators Lab. Anthemis is an early stage fintech investor that backed Carta, which I wrote about as an example of a Worldbuilder, along with some of my favorites like Betterment, Messari, Pipe, Rally Rd., and StockTwits. 

Swaypay also has angels with relevant experience onboard, like Jeremy Voss (early Snapchat), Andrew Gluck (DTC Investor & NextGen Commerce Expert), and Rajiv Kapoor (ex-Marketo).

Risks 

Early stage investing comes with major risks, and Swaypay is no different. As with any early stage investment, the numbers suggest that you should expect any money you put into an early stage startup to go to $0. Here are a few Swaypay-specific risks:

• The biggest risk to Swaypay is that retailers don’t want to give Swaypay valuable checkout page real estate for its checkout button. 

• The second biggest risk is that shoppers don’t checkout with Swaypay, that the savings aren’t worth them posting pictures of their purchases to social media. 

• The economics may not work out - the discounts shoppers require to share products may be more than the retailer is able or willing to give. 

• Shopify, PayPal, or even… FAST might come out with a competitive product. 

• People may only be willing to share once or twice. 

• People try to figure out how to game things for a discount. 

• Social platforms might become saturated with product endorsements (this would be a good problem to have).

There are certainly risks that neither I nor the Swaypay team is currently aware of that could sink the business.

The Opportunity

Led by a brilliant, high-energy founder, Swaypay is: 

• Attacking a big problem -- merchants spend 40% of their money on paid acquisition for too little sustainable advantage

• In a rapidly growing market already worth hundreds of billions of dollars

• With a frictionless product that aligns with the way young customers shop and share. 

It has massive ambitions: to become more ubiquitous than PayPal. And it has a roster of merchants excited to launch with Swaypay in Q4. 

If Swaypay works, it both naturally spreads as customers shop and share, and creates high switching costs, as more of a business’ payments go through Swaypay. It has the potential to become an important piece of the Modern DTC Value Chain.

Plus, it’s just fun to use, and there’s a power in that delight. I’m already looking forward to checking my SwayScore and getting more than a gecko in return. 

If you’re an accredited investor interested in learning more and potentially investing in Swaypay with the Not Boring Syndicate, you can join at the link and I’ll send you the deal with more information, including terms and a deck. If you’ve already joined the Not Boring Syndicate, you’ll receive an invite to the deal shortly.

Apply to Join the Syndicate

And if you’re a retailer, you should work with Swaypay and stop giving Facebook and Google all your money. 

Apply for Swaypay

Disclaimer: This is not investment advice. Startup investing is very risky. You should do your own diligence and don’t invest any money you’re not comfortable losing.

Thanks for reading,

Packy