Gravity Payments invests $500K in Joe Coffee to help startup enhance service and take on Square

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Dan Price, the high-profile co-founder and CEO of Seattle-based credit card processing and financial services company Gravity Payments, has been thinking about coffee shops and fairness since his days growing up in Idaho.

Back when Price’s band played at a local coffee shop, the shop owner had to charge the band a 3 percent processing fee when fans would pay at the door with a credit card. Price remembers thinking it was unfair that the owner was being charged just to get her money. That helped spark his interest in the credit card industry.

Sixteen years into Gravity, Price is again focused on independent coffee shops and solutions aimed at helping them avoid the burden of fees imposed by big banks and companies such as Square, the financial services and mobile payment company that caters to many shops.

PREVIOUSLY: Seattle’s Joe Coffee is uniting indie coffee shops through tech to take on Starbucks

“A company like Square goes after all the coffee shops and crowds out any competition,” Price said, noting Square’s decision last fall to change the U.S. rate for so-called tapped, dipped, and swiped transactions from 2.75 percent to 2.6 percent plus 10 cents. “Our core mission is sticking up for everyday people against wealth and power and people that are taking advantage of them.”

To that end, Price and Gravity are investing in and teaming with Joe Coffee, the Seattle startup that is using technology to help independent coffee shops level the playing field against giant chains such as Starbucks.

Gravity chipped in $500,000 in a new funding round for Joe Coffee, joining Flying Fish Ventures and a host of Seattle-area angel investors. The round totaled more than $1 million. The 6-year-old company, founded by Nick Martin, Brenden Martin and Lenny Urbanski, has raised $2.1 million to date.

“We’re so excited about this company we want to do whatever we need to support their growth,” said Price, who made headlines for instituting a $70,000 minimum salary at his company and has become an outspoken advocate on income inequality and related issues.

Joe Coffee has built a mobile order and rewards app that has attracted more than 500 indie coffee shop partners. Now, to further motivate coffee lovers to use its platform, it wants to bring its loyalty solution to in-person transactions, replacing legacy programs at shops such as buy-10-get-one-free coffee punch cards. The goal is to replicate the very sticky loyalty experience that Starbucks has with email, push notifications, deals and so on that span order-ahead and in-person transactions.

With this move, Nick Martin said Joe Coffee will also be unveiling an in-person payment solution meant to solve that pain point for shop owners as well.

“A lot of folks that we talk to were really aggressively asking us for an alternative solution when Square increased pricing, and that was a big impetus for us to talk to Gravity,” Martin said, adding that anecdotally he believes 70 to 90 percent of indie coffee shops rely on Square.

Again citing a coffee connection in Idaho, Price said his best friend owns a shop in Boise and the Square increase has the potential to wipe out his profits. With 10 cents added to a $5 coffee transaction, that’s another 2 percent, so in that $5 transaction, shops are paying 4.6 percent just to get their money. As Eater put it, the scenarios involve the consumer either seeing a price hike on their favorite beverage or that customer’s favorite cafe struggling to stay afloat.

In a FAQ on its pricing update, Square said its goal from the start has been to build tools that help sellers of all sizes start, run, and grow their business.

“Square periodically revisits both product and processing price levels to account for the changing cost to build our products and serve our customers at the highest level possible,” the company said. “The updated pricing structure takes into account the full cost of operating our business and all market forces. As the Square ecosystem and payments industry evolve, we must review our business and adjust accordingly. We are committed to keeping all costs to our sellers as low as possible.”

Price said he believes the people at Square and bank networks and “monopolistic” tech companies know it’s not right. That it shouldn’t be that way. And Gravity is partnering with those who want to solve the issue for small businesses.

“It’s not just about money. It’s about having the technology to compete for keeping customers and getting new customers. And so that’s what’s exciting about Joe,” Price said. “They’re really dealing with both of those problems at the same time.”

Joe Coffee, which has 10 employees now, will work closely with Gravity on go-to market efforts, tech support and understanding what makes a great merchant experience.

A beta version of its new technology will roll out in May, with about 12 partners on board so far. The startup will launch the changes aggressively in June.

“In this time when digital has transformed our purchase behavior and our relationships with retail businesses around us … this is a partnership that we see as sort of a game changer for us,” Martin said.

Source: Geek Wire

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