eBay buys VC-backed Bill Me Later for $945m

Azure Capital Partners, Crosspoint Venture Partners, GRP Partners and others had invested roughly $270m in the online payment system since 2001.

Internet auction and shopping giant eBay has agreed to acquire online payment provider Bill Me Later for roughly $945 million, providing the company’s investors with a strategic exit in a difficult deal environment for venture capital firms.

eBay will pay approximately $820 million in cash and $125 million in outstanding options to purchase the Maryland-based company, which allows online retailers to offer transactional credit to consumers at point of sale.  

Bill Me Later had raised roughly $270 million in funding since new management took over the company in 2001 and steered it headlong into the online payment services space. Investors have included Crosspoint Venture Partners, Azure Capital Partners and GRP Partners. The deal is expected to close by the end of the year if it meets all regulatory requirements.

“[Bill Me Later] had something going that was just so valuable to customers and to merchants that it felt like it was likely to happen,” Mike Kwatinetz, a founding general partner with Azure and Bill Me Later board member, told PEO. “They were going to acquire a lot of customers and a lot of merchants.”

The deal comes as one of venture capital’s traditional exit options, the public markets, have  proven nearly inhospitable to new public floats. In the third quarter of 2008, there was only one venture-backed initial public offering in the US, according to joint study by Thompson Reuters and the National Venture Capital Association.

“You always have to take the current environment into account when considering an offer,” Kwatinetz said, adding that Bill Me Later “certainly had the metrics” to go public.

eBay plans to incorporate Bill Me Later within its PayPal unit, the leading online-oriented payment services provider on the web. PayPal president Scott Thompson will oversee both businesses, while Bill Me Later chief executive Gary Marino will stay on under Thompson’s direction.

Kwatinetz compares Bill Me Later to a simple online credit card, which upon point of  purchase asks the buyer for their date of birth and the last four digits of their social security number. Bill Me Later then conducts a credit check on the buyer in less than three seconds to determine whether they are worth the credit risk.

If the buyer meets Bill Me Later’s credit standards, Bill Me Later will pay the online merchant and then send a bill to the buyer, either electronically or via regular mail. Much like a credit card, Bill Me Later charges an interest rate on account balances not paid in full.