What’s a Little App Between Friends? Venmo Only Cares About You and the People You Split Lunch With

Mr. Kortina. (Twitter)

Betabeat visited our local pay-with-your-phone startup Venmo yesterday in the company’s overcrowded, underdecorated Chelsea office. It’s two floors above a spa and reminds us of a high school computer lab with the accompanying young people, T-shirts and computers, although the Macbooks were a bit nicer than the monstrous HP desktops we remember from class. We followed cofounder Andrew Kortina down two flights of stairs to a space Venmo has annexed on the second floor, scooted past an intern in Venmo’s bright blue shirt, and kicked a few employees out of a small conference room, where Mr. Kortina propped open the window with an umbrella. A DIY piece of art made out of nails and what appeared to be a piece of the ceiling spelled out “magic room.”

Venmo will probably outgrow its little office soon, although Mr. Kortina likes its proximity to both Penn Station and Whole Foods. Venmo is processing $10 million in transactions per month and growing 30 percent month-over-month. At that rate, give or take a few variables–Mr. Kortina is a data nerd–the company will do $250 million in transaction volume this year.

Perhaps that’s why Mr. Kortina seemed so laid back as Betabeat peppered him with questions about his competitors. But what about Dwolla? What about PayPal? What about Google Wallet? Mr. Kortina is tan and lean, eats kale salads and rides a bike, speaks evenly and takes unhurried pauses. He wishes Whole Foods would take Venmo, but in general, he is not worried about the competition.

People keep talking about how changing the way people pay for things is a “big opportunity,” he said. Journalists, he said, are approaching him more and more “just to talk about the whole payments thing” because the space is so hot. Venmo doesn’t want to mess with all that. “The reason we did it was because we thought cash and checkers were annoying so we want to solve a problem that we had,” he said.

The real reason Mr. Kortina isn’t worried about competition is because if you’ve ever used Venmo, you realize there is no real competition for Venmo. Here’s why:

Unlike the payments startups that are targeting vendors right away, Venmo only wants you to convince a friend or two to join the service. Mr. Kortina has crunched the numbers, and 90 percent of payments of each Venmo user’s payments are made to the same five to ten close friends. While PayPal is optimized for strangers on eBay, Venmo is optimized for people you already trust and even like. We’ll just excerpt from an old pre-Betabeat piece, “Cutesy Venmo Receipts Are Now a Thing,” a reference to those automated Venmo tweets we keep seeing about paying people for “friendship fee” and whatnot.

Friends and money, they don’t always mix. But they have to: Exchanging money with friends is impossible to avoid. Drinks, taxis, dinners and cable bills are just some of the things for which we become financially indebted to each other, sometimes for substantial amounts (thanks, expensive City).

Venmo fans around the city have repeatedly told The Observer how much they love and depend on the app, and it seems to be the social element that’s made Venmo sticky. You can’t say “fuck you, pay me” to a friend. With Venmo, you send a personal note with each charge and payment, which you can share on Twitter or Facebook. That note might say “fuck you, pay me,” but it’s okay, because now it’s on the internet and it’s social media and those things are fun.

“We actually will not let you make a payment without including a personal note,” Mr. Kortina said. “We hope that all of the complexity, emotion, and feeling involved in a social gesture start making monetary transactions more personal, more fun, and simply a better experience that feels more like getting a gift or a high five than exchanging money.”

Exchanging money with friends almost always indicates a share-able moment. You’re splitting lunch (one of Venmo’s top use cases), or you’re out to eat with a group, or you’re at a bachelor party and buying the groom drinks. With Venmo, users are sending each other money in amounts that signify dates: $11.04 for your November birthday or $19.79 for an anniversary. “There are other ways to send money for a utility bill, but they’re just not as fun,” Mr. Kortina said. Surprisingly, people seem to find Venmo attractive because it lets them capture the moment of settling up, rather than because it allows for more precise bill breakdowns. “The motivations for why people do this are weird,” he said.

It’s the sticky, social, “fun” element that keeps Venmo in a class of its own. Eventually, Venmo will target restaurants and other vendors. But for now, the company is happy just to have you going dutch on dinner or splitting the beer funds with your roommates.

And good news: Mr. Kortina was able to report that with the recent launch to the public and the switch to processing payments with bank accounts, Venmo is no longer losing money on credit card transactions. By Silicon Alley standards, that’s killing it. We say it’s time to murder out the computer lab.

What’s a Little App Between Friends? Venmo Only Cares About You and the People You Split Lunch With