steve case left aol and started a VC outfit called revolution (nice). they purchased a company that was developing a competitive framework to credit cards and focusing on online payments, and now they have sold out to amex for $300M…
When Steve Case’s internet payment startup Revolution Money raised a $42 million round last April from Goldman Sachs, Morgan Stanley and Citigroup, Chairman Ted Leonsis said the company had no plans for a sale or IPO before 2011. Looks like the calendar pages—and the company—flipped a lot faster than Leonsis expected: Revolution Money just went to American Express for $300 million. In two disclosed rounds, the startup founded by Steve Case and his DC-based Revolution LLC in 2007, Revolution Money raised close to $100 million.
Writing about the sale on his own blog, Leonsis described Case and himself as “the most significant investors in this enterprise” and said he will work with AmEx as a special adviser on “overall digital and online payments strategy.” The post includes the formal deal announcement.
The deal is subject to the usual regulatory approval but they expect it to close in the first quarter of 2010.Revolution Money will be the first “component” of a new Enterprise Growth unit at AmEx. They plan to keep the team actually running it intact, including cofounder and CEO Jason Hogg.
Steve Case’s investment company Revolution LLC has announced the launch of Revolution Money, a new credit card firm that will use the internet to offer lower interchange fees and PayPal-like money transfer. The company, which was formerly GratisCard before Revolution took a controlling stake in 2006, has raised $50 million second round from Citi, Morgan Stanley, Deutsche Bank, Ted Leonsis, the vice chairman emeritus of AOL (NYSE: TWX) and chairman of Revolution Money, plus more funds from Revolution LLC. It says its RevolutionCard credit card will offer payment processing at a fraction of what traditional firms charge. It’s also promising better security, as the cards won’t have the individual’s name on them.
In addition to its credit card, the company is also establishing a PayPal competitor dubbed Revolution MoneyExchange. The company is partnering with AOL’s AIM service to deliver free peer-to-peer money transfer, which is along the lines of eBay’s (NSDQ: EBAY) plans to integrate PayPal with Skype. Eventually, the company plans to link the money transfer and credit card services.
In addition to the involvement from Case and Leonsis, the board carries some heft in the financial community with members including Larry Summers (former U.S. Treasury secretary), Franklin Raines (former CEO of Fannie Mae), David Potruck (former CEO of Schwab), and Russell Hogg (former CEO of MasterCard), whose son Jason Hogg is the company’s co-founder and CEO.
By going after interchange fees, Revolution Money is hitting on a vulnerable area for credit card companies, which are dealing with increased frustration among merchants and politicians