Next Big Thing in E-Commerce? Groupon Founders Fund Online Pawn Shop.
Groupon founders Eric Lefkofsky and Brad Keywell, who have famously extracted all sorts of money from the soon-to-IPO deals start-up and now run an investment group called Lightbank, are onto the next big thing in e-commerce: Pawn shops.
Lightbank recently led a $2.3 million Series B round for a company that has been renamed Pawngo.
Previously, Pawngo was one of the only Internet pawn shops around, and it was called Internet Pawn. The two big differences between Pawngo and Internet Pawn are: The new site is much less sketchy looking, and Pawngo will give you a valuation for your valuables online rather than making you send them in before hearing what they’re worth.
Internet Pawn launched in August 2009 and had written approximately 1,000 loans worth $1.4 million. Lightbank founder-in-residence Kevin Leland came across the company, helped hook up the deal, and has now joined as VP of marketing.
The Pawngo business model, as CEO Todd Hills explained it, is aimed at people who need between $1,500 and $15,000. They send in information about items they wish to pawn and Pawngo’s valuation lab in Denver returns an estimate within an hour. The items get shipped to Pawngo’s vault, and loans are built to last three to six months. Pawngo nets a “monthly option charge” to keep the item (it can’t call it interest because it’s not a bank) of three to six percent per month.
“On APR basis it’s a big number but these aren’t long-term loans,” said Hills, a veteran of the pawn industry.
“We don’t have experience with the inventory side but we do with data-driven marketing and user experience,” Leland said of Lightbank.
“There’s nothing shady about using something you already own to get cash quickly,” Leland added. “We’ll loan up to $100,000 in 24 hours, which is something no bank would ever do.”
Historically, 90 percent of Internet Pawn users returned to pick their assets up, but eventually if Pawngo is a big enough business it may set up an online storefront to sell unretrieved items, Hills and Leland said.
Pawngo has now raised a total of $4.5 million. Its core operations will remain in Denver, while marketing and customer service will come out of Chicago.