Music fans who like to download songs might want to pay heed to what Waltham, Mass.-based Peppercoin is up to. The online payment service provider announced last week the company’s $4.3 million Series A round and the addition of a new CEO.
POD Holding, a private equity firm based in Boston and Stockholm, Sweden, put in over half of the $4.3 million round. The rest of the funding came from Peppercoin’s seed investors, who put $1.65 million into the company earlier this year. The previous investors included individuals and a hedge fund.
Peppercoin plans to use the investment to take advantage of music downloading. With increased attention over illegal music downloading – brought on by the Recording Industry Association of America slapping lawsuits against everyone from 12-year-old girls to aging grandparents – Peppercoin claims that it can help consumers obtain songs cheaply. To that end, it has established relationships with companies like MusicRebellion.com.
Both the company’s management and lead investor express confidence that the company will succeed despite being in a crowded micro-payment space with well-established competitors, such as PayPal and SafeDoor, as well as major credit card companies. Other sectors have developed systems on their own. For example, Vodaphone led the way for telecom companies when it launched its own micro-payment service in late 2001.
The problem, according to Peppercoin executives, is that most online systems are not cost-effective when it comes to micro-payments.
“We’ve seen a lot of companies in the 90s and we see some today that are trying to solve the problem related to micro-payments,” Johan Pontin, POD Holding managing director. “We have looked at a lot of those companies, and no one has as much of a competitive position as Peppercoin. I believe in micro-payment as an evolving industry and I wish everybody in this space luck.”
Company executives insist that the opportunity for them to expand is wide open and point to their ability to raise their Series A in a matter of two or three months as evidence of that. Peppercoin has 12 employees and expects to double in staff size by September 2004. Most new staff will be in product development and marketing.
Newly named CEO Robert Kiburz, who was formerly Lucent Technologies vice president and general manager of billing and customer care, says that the commercial release of the company’s service is scheduled for later this year. And he says that Peppercoin will have a host of announcements of new company partnerships by the second quarter of 2004.
Pontin and Peter Lawrence, another POD Holing managing director, have both joined the company’s board of directors. Before joining Peppercoin Kiburz was senior vice president of operations for Kenan Systems when it was acquired by Lucent four years ago. Kiburz takes the place of Solomon Perry, who remains with Peppercoin as vice president of strategy.
“In a world where the industry has to sue its customers for using peer-to-peer, we’re all waiting for legitimate models to download music,” says Perry. “We have launched a beta version of our payment service and the response has been strong.”
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