Dwolla Raises $21M for Customizable Payment Solutions

Dwolla Secures $21 Million to Expand its Fast Payments API

Valued at $95 billion, Stripe has significantly impacted the payments industry through a comprehensive platform strategy, integrating numerous related services accessible via APIs. However, within the realm of embedded finance, considerable opportunity remains for smaller companies to deliver more refined solutions for constructing complex financial processes. These processes can then be integrated by third parties to facilitate their own operations, and today, one such company has announced new funding to further its objectives.

Funding Details and Future Plans

Dwolla, a provider of an API enabling businesses to build and manage rapid payments, with a specific emphasis on ACH (automated clearing house – facilitating payments and transfers between financial institutions), has successfully closed a $21 million funding round. The capital will be allocated to enhancing the functionality of its service, particularly improving its responsiveness to mirror that of card payments.

Further investment will be directed towards expanding its team and initiating the process of extending its payment rails to new markets beyond the U.S., with initial focus likely on Canada, the United Kingdom, and Australia.

Investor Participation

Foundry Group spearheaded this funding round, with contributions from Park West Asset Management LLC, Union Square Ventures, Detroit Venture Partners, Firebrand Ventures, and Next Level Ventures. Additionally, Jeremy Andrus, CEO of Traeger, participated as an individual investor.

Existing investors include Andreessen Horowitz, High Alpha, Thrive Capital, and Ludlow Ventures. Dwolla’s CEO, Brady Harris, indicated in an interview that the company is not currently disclosing its valuation, but characterized it as “competitive” within the broader transactions and payments landscape.

Company Background and Growth

Headquartered in Des Moines, Iowa, Dwolla has maintained a relatively low profile throughout its history. Prior to this round, the company had raised just over $50 million since its founding in 2009 – a comparatively modest sum for a modern fintech enterprise.

This $21 million represents Dwolla’s largest single funding round to date.

Despite its understated presence, Dwolla has experienced substantial growth. In 2019, the platform processed $11 billion in gross payment volume. This figure increased to $20 billion in 2020, and is projected to reach $30 billion this year, according to Harris.

Customer Base and Applications

Dwolla’s clientele encompasses both large institutions and fintech companies seeking to integrate faster, more efficient ACH-based payments into their offerings without the complexities of in-house development. Businesses also utilize the platform for customized, white-labeled payment solutions.

The company currently serves approximately 3 million end users through a network of 500 customers. These customers include entities in real estate, education, and retail, as well as brands like GOAT, Ibotta, and Rally.

Notably, one of Dwolla’s customers, utilizing the API in a white-label service, processes around $9 trillion in gross transactions annually. (Dwolla is bound by a non-disclosure agreement and cannot reveal the customer’s identity.) Harris also stated that the user base is expanding by 1.5 million each quarter, indicating significant transaction volume growth.

Market Opportunity

While $30 billion is a considerable amount, it represents only a fraction of the overall payments market, which was valued at $5.4 trillion in 2020 and is projected to grow to $11.29 trillion by 2026.

Dwolla’s Differentiator

Harris emphasizes that while numerous options exist for companies aiming to incorporate payments, particularly bank transfer-based payments, Dwolla distinguishes itself through its efficiency and customizability. This allows for the integration of additional features and functionalities.

“While ACH products are readily available from payment companies like Stripe, our focus is on enabling greater customization,” Harris explained. “We frequently assist companies mid-integration with other providers who find those solutions lacking the flexibility they require. We aim to be a programmatic and flexible solution.”

This dedication and expertise in its niche have attracted both customers and investors, contributing to Dwolla’s increasing prominence.