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If PayPal buys Braintree, Chicago’s tech scene would get a boost, execs say

Updated: October 25, 2013 6:27AM



Local tech leaders said Monday that a published report that eBay’s PayPal is near a deal to buy Chicago’s Braintree Payments Solutions, an online payments processor, offers renewed evidence that the city’s tech scene can produce major success stories.

The leaders cite Braintree’s rapid growth in one of technology’s hottest categories — processing payments people make from their smartphones, tablets and other mobile devices.

They even held out hope that daily deals pioneer and online marketplace Groupon, whose financial stumbles have made its viability uncertain, may turn around to join the honor roll.

The Wall Street Journal reported Monday that a deal for Braintree would give PayPal access to valuable mobile-payments data and fees because Braintree processes more than $4 billion a year in mobile payments. That’s a four-fold jump in the last 12 months. The mobile-payments market is forecast to skyrocket more than three-fold by 2017, to $1.3 trillion annually worldwide, according to Juniper Research.

Braintree, which charges merchants a 2.9 percent commission and a 30-cent transaction fee, reports total mobile and online credit-card and other payment processing volume of $12 billion.

A Braintree spokeswoman declined to comment about the reported deal, calling it a rumor.

Billionaire technology venture capitalist J.B. Pritzker, who runs Chicago venture capital firm New World Ventures, said, “If true, it’s a big win for the founders and management team of Braintree, which is dedicated to the tech community here.”

“It’s likely to yield a compound effect, with the founders and managers ending up spinning out new companies and investing in other startups in Chicago,” he said.

Mark Tebbe, founder of Lante Corp. and Answers.com, said Braintree can serve as a role model for Chicago’s tech entrepreneurs.

Tebbe, an adjunct professor of entrepreneurship at the University of Chicago’s Booth School of Business, said Braintree’s leaders have done a great job in building a credible service.

That contrasts with Groupon’s easily copied business model that attracted copycat rivals.

Of Groupon, Tebbe said, “Will it be a stellar performer? That’s still to be determined.”

Groupon’s stock has rebounded to $11.94 a share at the end of the trading day Monday, a whopping 163.6 percent increase from the $4.53 a share value on Feb. 28, just before the company fired founder and CEO Andrew Mason. It has yet to return to Groupon’s initial public offering price of $20 a share.

Matt Moog, founder and CEO of consumer products review company Viewpoints and business incubator Wavetable Labs, said Braintree’s attraction “is significant evidence” that a company that starts in Chicago can grow “in a very fast-growing and sophisticated area of the markets — mobile payments — and can leap ahead of virtually every other competitor in the space, to be (potentially) acquired by the largest players in the space.”

That’s important because Chicago tech leaders so frequently bemoan their lesser-star status compared with Silicon Valley, New York and even Boston.



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