Jason Del Rey

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Pressure Is on Stealth Payments Startup Clinkle as It Raises $25 Million From Big-Name Investors

If you want to set expectations for your startup sky-high and create hype at a Color-like level, have your PR firm write email passages such as this: “[I]t’s been confirmed that this is indeed the largest seed funding in Silicon Valley history.” (Their emphasis, not mine.)

And that’s exactly what’s happening with Clinkle, a stealth mobile payments startup, run by 22-year-old Lucas Duplan, that is announcing a $25 million seed round today.

The round includes investments from Andreessen Horowitz, Accel Partners, Intel, Intuit, Peter Thiel and VMware co-founders Diane Greene and Mendel Rosenblum, among others.

Duplan has been working on the startup for two years, funding it with help from friends and family, and growing the staff to nearly 50 by hiring many of his former Stanford classmates, he said in an interview. He wouldn’t disclose when he started accepting money from angel investors and VC firms.

What he would say is that Clinkle is entering the now-crowded field of mobile payments, and is building a product and an adoption strategy that he believes will make it possible for people to shop just about anywhere without their wallets — and just a smartphone. And give them good reasons to do so.

“I don’t think consumers or merchants are going to switch for marginal gains. If your main value proposition is just the fact that you can pay on your phone, I don’t think you have enough for people to switch,” Duplan said. “What we’ve done is create a system of incentives for consumers and merchants that’s orders of magnitude better than the status quo.”

Duplan refused to talk in detail about that system until it launches sometime in the next year. But it’s obvious that a key here is to give consumers a big-enough incentive to change a routine that’s not all that difficult right now.

Part of the incentive may come in the way of perks or deals. And part of it is building the trust that shoppers will be able to use Clinkle at any store or restaurant they visit on a given day.

“I’m a big believer that credit cards are pretty good … so, from a mobile payment perspective, if it only works at a couple of stores, and I can’t use it at most stores, it won’t really take off,” Duplan said.

Clinkle’s answer is to launch first on college campuses — the Facebook approach — since most students shop and frequent perhaps a couple dozen businesses, limiting the number of merchants that Clinkle needs to get onboard to drive usage in that demographic. (With this strategy, it seems likely that Clinkle would time its launch to the start of a college semester, perhaps as early as the fall.) Clinkle also hopes to support payments between individuals.

Participating merchants don’t need any additional hardware other than a smartphone or tablet, as Clinkle is all about software. Duplan said incentives for merchants to adopt Clinkle may be things like lower transaction fees, as well as services they currently don’t have access to.

But Clinkle will also have to get consumers to download an app — a challenge that startups underestimate time and time again. The app currently has a waiting list of 22,000-plus, according to a graphic that’s displayed after downloading the app.

“The consumer side is a lot more interesting, because it’s a lot more of an art,” Duplan said. “Sure, people are driven by things like cash back, but that’s not the only thing they’re driven by. Our approach has to do with social, and it’s going to be really fun.”

“Social and fun” seems a simplistic approach to driving mass adoption in the mobile payment space, but Andreessen Horowitz partner Margit Wennmachers is confident that Clinkle will solve the consumer side of the equation.

“We’ve seen a bunch of these companies, and they’re all about merchants, merchants, merchants, but we’re always [asking], ‘What about consumers?’” she said. “One of the reasons we did this deal is that (Duplan) has thought extensively about the consumer proposition, and … he knows that the bar is high.”

So there you have it. A huge seed round for a product that isn’t in market. Few tangible details of what will allow Clinkle to rise above the noisy fragmentation that currently dominates the mobile-wallet industry. But, at a minimum, a founder who knows Silicon Valley loves a good stealth startup story.

Now for the hard part: Launching.

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