OneText, a startup that facilitates purchases via text message, has raised US$4.5 million in a seed funding round.

The funding comes from investors including Khosla Ventures, Coatue, Citi Ventures, Y Combinator, and Good Friends, along with individual investor Matt Bellamy.

Founded by former PayPal employees, OneText aims to simplify online checkout by enabling transactions through SMS.

The company markets itself as an alternative to traditional SMS marketing by using AI-driven two-way messaging and cart recovery features.

OneText intends to expand its network, enabling customers to use stored profiles across various brands with prefilled checkout data.

.source-ref{font-size:0.85em;color:#666;display:block;margin-top:1em;}a.ask-tia-citation-link:hover{color:#11628d !important;background:#e9f6f5 !important;border-color:#11628d !important;text-decoration:none !important;}@media only screen and (min-width:768px){a.ask-tia-citation-link{font-size:11px !important;}}

🔗 Source: TechCrunch

🧠 Food for thought

1️⃣ Text commerce taps into underutilized yet highly effective channel

SMS marketing consistently outperforms other digital channels, with open rates reaching an extraordinary 98% compared to email’s modest 20%, making it a powerful but underutilized commerce channel 1.

The economics are compelling: SMS marketing generates approximately $14.03 for every dollar spent, creating a substantially higher return on investment than many traditional marketing methods 2.

Consumers check their phones an average of 344 times daily, creating frequent opportunities for engagement that traditional e-commerce websites simply cannot match 2.

OneText’s approach differs from conventional SMS marketing companies by combining AI-powered conversations with human oversight, addressing the industry’s reputation for impersonal messaging and spammy links.

This strategy aligns with evolving consumer preferences, as 82% of Americans now use digital payments, indicating strong demand for convenient payment solutions 3.

2️⃣ Payments industry repeatedly reinvents checkout to reduce friction

The payments industry has continuously evolved to eliminate friction, from Visa’s introduction of credit card terminals in 1979 to mobile payments pioneered by Coca-Cola in 1997 through text-enabled vending machines 4.

Each major innovation cycle, such as physical terminals in the 1980s, payment gateways in the 1990s, and mobile payments in the 2000s, has focused on making transactions more seamless while maintaining security 5.

Despite this progress, a significant gap remains between consumer expectations and merchant capabilities: 75% of customers prefer paying for services online, yet 20% of small businesses still don’t accept digital payments 3.

OneText’s strategy of building around existing merchant infrastructure rather than replacing it addresses a key challenge that payment innovators frequently face, the difficulty of convincing merchants to swap out established payment flows.

This approach mirrors successful payment innovations throughout history that gained adoption by working within existing systems rather than requiring complete replacement of established infrastructure.

……