Venmo Comes Of Age

Under parent company PayPal, the millennial-focused peer-to-peer payments app has gotten serious

- Ruth Reader

It started with a simple dare: All Mike Linshi had to do was buy a certain shirt from a store nearby and wear it.

The bet was offered up in the easy evening hours after a music and innovation festival in Brooklyn two years ago. There was just something so funny about the thought of Linshi in that particular shirt that Iqram Magdon-Ismail and Andrew Kortina, cofounders of the New York–based peer-to-peer payment app Venmo, bet their colleague $50,000 he wouldn’t wear it. The sum was set high “just to shock him a little bit,” Magdon-Ismail recalls. And anyway, they had the cash: Venmo had been acquired for $26 million three years earlier by the payment processor Braintree, which was then bought by PayPal for $800 million.

Of course the shirt was obtained and worn, and Magdon-Ismail and Kortina were good as their word. They transferred the money on the spot, with an extra $50,000 going to the Venmo engineer who raised their account limits to make it possible. The next day, after the haze of the previous night wore off, the money was returned.

This kind of story may waft around barstools in San Francisco, where young founders can be more flush with cash than with a sense of what to do with it. But to Venmo parent company PayPal, the incident was grounds for an investigation. Three months after the festival, Magdon-Ismail, the then-president of Venmo, was sitting in front of PayPal’s compliance team, trying to explain why he was exchanging tens of thousands of dollars with employees. PayPal eventually closed the case, but Venmo’s growing pains lingered.