Alex Adelman thinks your next e-tail purchase should earn you bitcoin.
Adelman, the co-founder and CEO of bitcoin rewards start-up Lolli, wants to reinvent the way consumers receive cash-back on their purchases by letting users get bitcoin as they shop online with partner brands like Nike and Sephora.
And Adelman has convinced some big names of his vision: On March 24, the company announced a $5 million pre-Series A funding round led by Alexis Ohanian’s Seven Seven Six venture capital fund, with Serena Williams’ Serena Ventures and a few famous YouTubers, including Cody Ko and Casey Neistat. With those funds, Lolli has raised over $10 million to date, Adelman tells CNBC Make It.
“I believe in everything about bitcoin,” Adelman says. “We want to make it as simple as possible for people to get bitcoin for their everyday purchases.”
Bullish on bitcoin
Adelman, 32, is no newbie to the online retail space.
In his first start-up, Cosmic, Adelman and his co-founder, Matt Senter, created e-commerce technology that let consumers buy products from multiple retailers in one transaction. The company was acquired by PopSugar in 2015 and then by Rakuten in 2017. (Both acquisitions were for undisclosed amounts, but Cosmic was valued at about $16 million in 2015, according to PitchBook.)
Adelman stayed on as Cosmic’s CEO through both sales, and as a bitcoin bull for years, he tried to bring the cryptocurrency to his merchant partners there. But they were hesitant. “It was just not the right time,” Adelman says.
But with so much relevant experience and connections in the e-commerce and rewards space, creating Lolli felt like the natural next step.
“I just kept coming back to this idea of cash-back for bitcoin as a way to teach people about bitcoin, distribute bitcoin to more people and ultimately make it more accessible to everyone,” Adelman says.
“I felt like this is sort of my calling.”
In 2018, Adelman left Cosmic, and with Senter, launched Lolli.
Lolli co-founders Alex Adelman, CEO, and Matt Senter, CTO.
Courtesy of Aubrey Strobel
Like getting a lollipop at the bank
Lolli’s business model is a spin-off of a traditional cash-back platform, where users can earn “bitcoin-back” rewards – or “Sats-back,” in reference to fractional shares of bitcoin called satoshis – as they shop online on the websites of Lolli’s merchant partners, using the start-up’s browser extension.
The bitcoin rewards are the “feel-good” reward after transacting, like getting a lollipop at the bank, Adelman says. (Though most fintech experts see bitcoin as volatile and speculative, Adelman sees bitcoin as “the global bank of the future,” so he named the company after his fond childhood memory of “the lollipops the bank gave out,” he says.)
Lolli funds “bitcoin-back” rewards by charging each of its partner merchants a “sliding-scale percentage” in dollars when its users shop on partner websites, Adelman says. (This is also how Lolli makes money, though Adelman declined to disclose revenue numbers.) Lolli then converts that money to bitcoin to pass along to users.
The company offers up to 30% “bitcoin-back” rewards, but on average, offers 7%. For instance, Adidas and Groupon offers up to 9% bitcoin-back. In 2019, Adelman said the average Lolli user earns around $26 in bitcoin.
Lolli is still small in the wider cash-back space: Since its launch in 2018, the North Carolina-headquartered company has had over 250,000 users, with a surge within the past six months due to the recent buzz around bitcoin. (That’s compared to 1.4 billion users with a more conventional cash-back company like Rakuten.)
To date, Lolli has provided its users with over $3 million in bitcoin rewards, according to Adelman.
It also has over 1,000 merchant partners.
Adelman leveraged his experience working with “almost every retailer in North America” while running Cosmic when recruiting companies to serve as Lolli’s first merchant partners, landing big-name partnerships with huge companies, like Macy’s, Bloomingdale’s and Groupon before launching the company.
As the platform has gained traction, even more merchants were willing to partner, including Microsoft and eBay, while others, like Amazon, haven’t signed on just yet.
“We are working closely with the decision makers at Amazon,” Lolli tweeted in 2019. “They are impressed with our early traction but want to see how big the market is.” Amazon did not immediately respond to CNBC Make It’s request for comment.
For the bitcoin curious
“As retailers see the value of utilizing bitcoin, consumers will also follow suit,” investor Ohanian tells CNBC Make It of Lolli.
“I have been monitoring this [crypto] trend closely for the last few years and I see this as a turning point in the industry [for bitcoin], and expect even more momentum in the months and years to come.”
And Lolli’s growth has already spawned competitors. Other cryptocurrency rewards applications, like Fold, BitcoinRewards, CoinRebates and Pei, have come to market, though Lolli has remained one of the most dominant in terms of funding, partners and users.
Lolli’s user base is also a unique demographic, Adelman says, as about half is completely new to bitcoin, which aligns with his vision for the company.
While he is a “big believer” in bitcoin, Adelman acknowledges that “bitcoin is scary to a lot of people.”
For instance, there are some common concerns with bitcoin – some worry it’stoo risky, volatileor speculative to buy. Others think it’s more susceptible to fraud, while some say it’ll be banned by the government. Many lately have urged against cryptocurrency citing its carbon footprint. Adelman, however, disagrees with each of these criticisms.
Adelman and his team tried to make Lolli user friendly enough that users don’t have to understand bitcoin to use the platform, he says.
For example, new-to-bitcoin users who do not have their own crypto wallet (which is typically needed to buy, sell and hold digital coins) can keep the bitcoin they earn in a wallet on Lolli’s site. Once a user has a balance of at least $15 in their Lolli wallet, they can transfer it to their bank account for a fee of 25 cents or transfer it to a bitcoin wallet for free.
More than anything, Adelman hopes that after using Lolli, people who are unfamiliar with bitcoin will feel inclined to learn about it.
“I’m really bullish on things that are going to connect the world through commerce, and bitcoin is one of the greatest things I’ve ever seen to be able to do that,” Adelman says.
“I think being in the U.S., it’s difficult to understand bitcoin,” he says, because most Americans may be thinking, “‘Oh, we have the dollar and everybody knows one dollar is one dollar.'”
“But if you zoom out just a little bit, and you think about what a better world looks like, it most likely involves being more connected with our neighbors, more connected with the people in different countries that aren’t all too different than us,” Adelman says. And “bitcoin connects the entire world.”
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