Deal Dead – Nate app

Pretend you’re a VC firm and let me pitch my idea to you:

• me – I’m going to build an app that lets you check out from any web site with one click vs going through the whole checkout process.
• VC – Isn’t that what Apple Pay, Google Pay, Shop Pay is for?
• me – Yea, but this’ll work on sites that don’t accept those payment methods…
• VC – What happens when all the sites adopt it?
• me ……………

• VC – So how does this work?
• me – Basically, you’re on a retailer’s site and you ‘share’ the link to our app and then the app places the order so you don’t have to deal with all that
• VC – How does the money flow
• me – Well you add your bank account to our app and then when you make the purchase, we’ll deduct it from your bank
• VC – Doesn’t this negate any credit card protections?
• me ……………

• VC – Okay how do we make money?
• me – Well, I’ll charge the customer $1 per order and if there are any returns, we’ll keep it in our account until they use it down, so there’ll be some ‘breakage’ for us
• VC – We’re going to need a shit ton of orders to turn a profit here since we have management overhead and such. But once again, why pay $1 when you can use Apple Pay?
• me …………..

• VC – Anyway, so how does the app place the order?
• me – Well, eventually, we’ll have the AI place the order in the backend, but for the time being, we’ll have people overseas place the orders manually
• VC – Using what payment method?
• me – Well, we’ll use virtual credit card numbers to place the orders.
• VC – But don’t some sites not take virtual credit card numbers?
• me ……………
• VC – Even if they accept virtual credit card numbers, won’t the vendor cancel the orders because the orders are placed from an international IP address?
• me ……………

• VC – How are you going to acquire customers?
• me – Well, we’ll just use word of mouth and we’ll give them $50 on sign up and then $20 after their first 2 orders
• VC – So you want to give away $90 initially to acquire customers, but what if they don’t ever use the app after that because they a) don’t want to pay $1, b) can use Apple Pay and c) NONE OF THEIR ORDERS GO THROUGH DUE TO THE VIRTUAL CC AND INTERNATIONAL IPs?
• me ………………..
• VC – You know what, here’s $38 MILLION dollars

So that’s what happened. The app sort of started in the summer to fall timeframe. Folks would sign up, get the $50, buy stuff with it, get the extra $40, buy more stuff and let’s face it, stop using it. Eventually though, some vendors would cancel the order due to the vcc/ip problems. That’s when people realized that Nate would still give you the $40 even though the vendor cancelled. So now people were buying $90 items instead of $50 items. Early on, you could order VGC from Walmart, but eventually the Nate reps caught on and stopped ordering them. Around XMAS time, Nate stopped giving the extra $20’s and I think as of this writing, the signup bonus is down to $20.

The thing is that like I said, currently, the orders are placed manually from people overseas and retailers don’t like that since it’s a high fraud risk. Hell, using a vcc is a high fraud risk. So even if you fired up the app today to try to use it, you won’t be able to get any orders to ship because the retailers would cancel all the orders. I don’t see how this app recovers. Bye bye $38M.