On Sunday Square announced it was
gobbling up Afterpay
in a deal worth $29 billion at the time of announcement. Alex followed up yesterday with more details on why the deal made sense for Square and Afterpay over here
, but we wanted to ask some notable VCs what it means for the startup market.
For context, the Square deal follows a ton of money and interest flowing into the BNPL market. Just this year, VCs have invested in companies like
Alma
($59.4 million, January 2021), Scalapay
($48 million, January 2021), Wisetack
($19 million, February 2021), Zilch
($80 million, April 2021) and Dividio
($30 million, June 2021).
Most of the investors we reached out to were generally bullish on the Square and Afterpay integration, but they were less excited about opportunities for other consumer BNPL businesses to emerge.
Then there’s Klarna, which
raised $639 million
at a post-money valuation of $45.6 billion in June, after raising $1 billion in March
at a post-money valuation of $31 billion.
There’s also interest from some major public companies. After a slow start, PayPal is
aggressively pushing BNPL services
with merchants that offer it as a payment option. And there are reports that Apple is building its own BNPL offering
through Apple Pay.
We reached out to
Commerce Ventures
founder and GP Dan Rosen
, Better Tomorrow Ventures
founding partner Jake Gibson
, Fika Ventures
partner TX Zhuo
, and Matthew Harris
of Bain Capital Ventures
to see what they thought of the deal, as well as what it might mean for the opportunity for other BNPL companies and startups.
The main takeaways? “Buy now, pay later” may be effective at driving retail conversion, but scale matters and long-term margins look slim for BNPL startups.
Now, let’s hear from the venture community.
The venture view
Why is the BNPL market so hot?