Update (17:40 27th November): Updated with comment from Bobby Lee, Roger Ver and StrongVC.
Purse.io, a San Francisco-based startup that allows people to buy items on Amazon using bitcoin, has closed a $300,000 seed funding round involving prominent members of the bitcoin community.
The firm has also announced new data on the discounts provided by its platform for Amazon shoppers, along with a VIP membership scheme and a redesigned website.
Roger Ver, Bobby Lee and Terrence Yang all took part in the funding round, along with FundersClub and StrongVC, Purse.io said, adding that the money will be used to build bitcoin apps and improve the user experience.
“Our mission is to build awesome use cases that will drive mainstream bitcoin adoption. To do that, we also need to bridge the gap between ‘one-click shopping’ and shopping with bitcoin,” said company co-founder Andrew Lee.
John Nahm, co-founder and managing director of StrongVC, told CoinDesk:
“This is our second bitcoin investment … The co-founders are hardcore, super-sharp believers in bitcoin and are on a mission to innovatively solve one of the biggest challenges of bitcoin, which is consumption/usage.”
Meeting twin needs
Purse.io is a peer-to-peer marketplace that matches customers wishing to purchase bitcoin using their credit cards or gift cards and with bitcoin holders who want to spend their cryptocurrency with retail giant Amazon.
As a simple example of how it works, say Alice wants to spend $50-worth of bitcoin on Amazon. She makes a wishlist for her item and posts it on the Purse marketplace, placing the correct amount of bitcoin in escrow.
Bob wants to buy $50 of bitcoin, so he accepts the order, and pays with credit/debit card or gift card. When the items arrive with Alice, she notifies the website and the bitcoin is released from escrow to Bob.
The service ultimately won the admiration of users, and its new investors.
Bitcoin Foundation board member and BTC China CEO Bobby Lee told CoinDesk that he has become an “avid user” of the service, one that also sees the potential in the Purse.io business model.
“From early on, I had envisioned that people would one day be able to buy anything with bitcoin because as long as it had a market price, an intermediary party could always come in to accept the bitcoin on behalf of the seller, including someone like Amazon.com,” Lee said.
Discounts on the rise
Discounts for shoppers are based on the premium that bitcoin buyers are prepared to pay for the service and are set by the Amazon shopper when the order is placed on the marketplace.
Notably, Purse.io has released data indicating that, over the seven months since the firm launched, it has seen the average discount rate for bitcoin shoppers increase to around 20% – figures that exceed even the company’s initial expectations.
“We hypothesized that the market would equilibrate at 5-8% discounts. We never expected to uncover 20% discount rates when we first started.”
While great for customers, the firm also views the discounts as an incentive for mainstream users who may not yet be interested in digital currencies.
Purse says its business model creates a new bitcoin use case, giving more people access to bitcoin using their credit cards, while at the same time opening up Amazon to holder of the digital currency.
Roger Ver, who also confirmed to CoinDesk that he was involved in the funding round, said:
“I recently became a huge fan of the company after becoming one of their users … I think Purse.io could be one of the killer apps that drives bitcoin into the mainstream.”
Opportunity in gift cards
Purse.io also allows customers to use their Amazon gift cards to be redeemed, unofficially, through its marketplace. Since these cannot normally be redeemed outside Amazon, or transferred or sold through third parties, the company suggests many users are prepared to use them at a substantial discount.
The company claims there are an estimated $15bn in outstanding Amazon gift cards and credit balances that are locked to an individual’s account and can only be used on Amazon – potentially a great way for the company to generate revenue.
Additionally, a substantial portion of these credit balances are distributed internationally through affiliate advertising programmes, which creates additional opportunities, the company says.
Purse.io essentially provides Amazon gift card holders with a way to get get cold hard cash (after they exchange their BTC, of course).
Along with the funding announcement, the company has launched an invite-only premium programme, Purse VIP, which is aimed at Amazon Prime members.
VIP users are offered the best rates when they buy bitcoin on Purse.io’s platform, having exclusive access to sub-10% discounts for the first 24 hours after they are posted.
Andrew Lee said:
“To incentivize spenders to set lower discounts, we guarantee that their order will be fulfilled in less than 24 hours, or Purse will automatically purchase the order ourselves. So far, we haven’t bought any orders ourselves because they’re getting fulfilled even quicker. The average VIP order is fulfilled in under six hours and delivered in 2.5 days. This means merchandise is delivered as quickly as purchasing on Amazon directly with Prime.”
The service currently has more than 12,000 users and monthly transactions have passed the $120,000 mark, the company says. Purse.io is featured on the Blockchain wallet as a preferred merchant.
CoinDesk has reached out to the company’s new investors and will update this article if confirmation is received.