US web/domain hosting provider godaddy has announced the acquisition of of Silicon Valley payment startup Poynt announced for $365 million. The innovator of the smart POS concept with app stores on POS payment terminals is going to become a purely online provider comparatively cheaply, both by Silicon Valley standards and in the context of high payment multiples. Has the Smart POS concept with app stores on payment terminals failed?
Poynt was founded in 2013 by Osama Bedier, a former high-ranking manager at PayPal and Google. At PayPal, he managed a career from developer to vice president under the board of directors and was responsible for the new PayPal developer platform and mobile strategy, among other things, in the late 2000s. He then moved to Google, where he built Google Wallet (now Google Pay) – Google’s first major attempt at payments. After that, he founded Poynt. If Techcrunch is to be believed, Poynt has been in business since Foundation raised a total of $133 million, including from payment acquirer Elavon.
Poynt has set out to free POS payment terminals from the design “chic” of the 1970s and bring them into the 21st century. Why POS terminals still have to look like clunky calculating machines from the last millennium in 2020 remains the secret of the established manufacturers.
Poynt and various mPos providers like SumUp and Co. showed that it can be done differently. Besides a modern design, Poynt also thought of the payment terminal in a new context. Poynt is one of the first innovators of the smart POS and presented an app store for the POS terminal for the first time. For the first time, merchants, payment service providers and acquirers could easily and conveniently install additional applications on the terminal. Companies like Clover (acquired by First Data) or Aevi (spin-off of Wincor-Nixdorf, today Diebold-Nixorf) up to Enfore have adopted the concept. Back in 2016, we introduced ourselves to the concept here on the blog or in one of our Podcasts the question of where “smartness” is better served at the point of sale: at the checkout or in the terminal.
The Poynt deal surprises on several levels
1) Valuation: Poynt’s valuation is rather low given very high payment multiples and Silcon Valley valuations. This is a strong indicator that business KPIs were obviously not that rosy. Whether Poynt was valued based on high payment multiples and even much higher software-as-a-service multiples. Obviously the “smart” component of the smart POS concept didn’t hit as hard as hoped.
2) Exit to domain hoster: Of all things, a pure online player, a provider of domain hosting for SMEs, acquires Poynt as a POS player to increase its payment competence. Yes, a domain hoster can now offer brick-and-mortar payments to its SMB merchants in addition to online. But does it need an acquisition to do so? Why no cooperation and why for this rather low valuation? Why not an exit to a payment player? Did they not offer “enough”?
3) Elavon as a strategic investor of Poynt, with the best experience in the POS payment business, even sold its share. If Poynt’s POS business were relevant for the retail industry, Elavon would certainly not have sold, but rather taken over.
What does this mean for the industry? Has Smart POS failed?
We had already in 2016 in the podcast on the topic We have discussed this issue for a long time and asked ourselves where additional “smartness” in payment is better located: in the payment terminal (Aevi, Poynt) or the checkout (Clover, Enfore). Interestingly, now, at the end of 2020, the question should rather be: Is there a need for smartness in POS payments at all?
What stands out about all the players is that they all promised more than they delivered. Poynt and Aevi were very vocal when it came to app store concepts in terminals. You heard less and less from both players in the last few years. Aevi, for example, slipped from what used to be a profitable business unit of the Wincor Nixdorf Group (net income and retained earnings for the 2015/2016 short fiscal year were both €2.5 million) into the red and failed to recover from it until 2019. The 2019 net loss is € -3.1 million and the accumulated deficit of all losses since 2016 is now € -31 million. Aevi is also not a growth story when it comes to revenue. When, at the beginning of 2017, Nelson Holzner, a Fintech expert as CEO founder type was hired, they still had a PR pride of €80 million in revenues and called themselves “one of the largest FinTech companies in Europe”.
And gone is the fantasy
The 2019 revenue is only €29 million, which is a small growth since 2018 when the company had €25.5 million in revenue. The Enfore/numberfour AG comparison, which also announced a lot on our podcast in early 2019Unfortunately, this is not possible as the company has not published any balance sheets in the German Commercial Register since 2016.
The “mixed” figures of Aevi, the missing figures of Enforce and the “modest” exit of Poynt to a domain hoster from outside the industry and not to the strategic investor Elavon shows one thing above all: The fantasy from the Smart POS segment has escaped. Was the issue simply tackled too early? Did solutions seek a problem of commerce and simply not find it? Who knows… It remains interesting to see how Poynt will develop with the new owner and how the other Smart POS providers will develop further.