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Xoom Corp. GC Keeps the Money Moving
Online money transfer company Xoom Corp. is coming off one of the hottest market debuts of the year.
The San Francisco-based company has had several years of rapid growth as it taps into the worldwide remittance market. Revenue jumped from $50 million to $80 million between 2011 and 2012. It is still not profitable, as it continues to reinvest the revenue in its business, but the company's losses remain stable.
According to figures in Xoom's prospectus, the international consumer money transfer market is expected to grow to $685 billion by 2015, up from $513 billion in 2011. Xoom's transfers nearly doubled to $3.2 billion in 2012.
Investors include Silicon Valley mainstays Sequoia Capital and New Enterprise Associates, and it has raised at least $58.2 million in venture financing, according to securities filings. A month after its $100 million IPO, shares are up 50 percent.
THE QUICK BIO
Christopher Ferro, Xoom's general counsel, originally went to law school to "do the whole Perry Mason thing."
After graduating from Stanford with a history degree, the New York City native went to Georgetown University Law Center. He joined what was then Rosenman & Colin doing general commercial litigation right out of law school.
In 1999 Ferro went to the New York firm Davis & Gilbert for two years where he focused on intellectual property litigation. (Xoom advertises heavily, including on posters at corner stores and commercials during soccer games, with Davis & Gilbert handling the legal work.)
Ferro's original plan was to do a turn as a federal prosecutor to get trial experience before settling full time into private practice.
While at Davis, though, he began an existential re-evaluation of his career path: Maybe he didn't want to be a litigator; maybe he didn't want "work his tail off for nine years just to possibly make partner." Maybe he liked the idea of only having one client.
Ferro settled on going in house, but as a young lawyer with no transactional experience, he was at a disadvantage. He started thinking about younger companies that needed someone to manage litigation.
In 2001, right after the dot-com crash, Ferro joined PayPal as the company's second attorney on a referral from a fellow Stanford alum. He came aboard six months before its IPO and a year before it was acquired by eBay Inc. "I left this stable New York firm job for an in-house dot-com position in the Bay Area. People in New York thought I was insane," he said.
By the time he left in 2008, Ferro was part of a legal department that had grown to around 100 attorneys and he oversaw the litigation, regulatory, intellectual property and risk teams for the entire PayPal subsidiary.
"PayPal staffed up pretty quickly after I was hired. When we went public, and I worry about this for Xoom, it was a situation of 'Hey, they've got money,' and there were lots of lawsuits," Ferro said.
He was happiest and most engaged at PayPal in the startup days. And when he began mulling over his next move he contacted Roelof Botha, who was the chief financial officer at PayPal during part of Ferro's tenure at the company and a partner at Sequoia Capital since 2003.
Ferro went over a list of Sequoia's portfolio companies for possible moves and was intrigued by Xoom in part because of its similar focus. "I am not wed to payments, but I am certainly more valuable as a payments GC."
As it happened, Xoom's head lawyer, Laurence Wilson, was on his way to review site Yelp Inc. and Ferro moved in. Getting in so early on with a company on an IPO trajectory definitely factored in, he said.
INSIDE AND OUTSIDE COUNSEL
Xoom currently has just one attorney other than Ferro. Stephanie Hu came aboard in September 2011 after five years at Pillsbury Winthrop Shaw Pittman and handles most of the transactional work, including commercial contracts and IT purchases. She also has securities experience and was especially helpful on the IPO, Ferro said.
There are no immediate plans to expand the legal department, but Ferro said that the next hires will likely handle Securities and Exchange Commission reporting and intellectual property. "Hopefully we won't need a litigator."
Goodwin Procter partner Anthony McCusker takes the lead on most of the outside corporate work. McCusker has been attending the company's board meetings for the past four years and took Xoom with him when he left Gunderson Dettmer Stough Villeneuve Franklin & Hachigian in 2010.
Deborah Thoren-Peden, in the Los Angeles office of Pillsbury, handles the company's regulatory work. Thoren-Peden's other clients include Moneygram International Inc. and The Western Union Co., and she focuses on issues including electronic payments, money laundering and the Office of Foreign Assets Control, a division of the U.S. Treasury Department that ensures companies do not violate economic sanctions that the U.S. has against other countries.
Morgan, Lewis & Bockius currently handles Xoom's trademark work, but Ferro said he is switching to Goodwin.
The company's sole outstanding lawsuit is a trademark infringement case it filed in the Northern District of California in February 2011 against Motorola Mobility over its Xoom-branded tablet. Both Morgan Lewis and Goodwin are currently listed on the docket, but Ferro said that will change shortly.
Court-ordered mediation wasn't successful, but settlement talks are ongoing, Ferro said. A trial would not make much sense given that Motorola Mobility, now a part of Google Inc., no longer markets tablets under the Xoom brand.
FOLLOWING THE MONEY
Money laundering is arguably one of Xoom's biggest risks. The company guards against that by refusing to accept cash. There are no storefronts and all users must have bank accounts. There is a $2,999 limit for any one transfer and the more a person uses the service, the greater level of compliance and security checks they are subject to. "The more you send through Xoom, the more we ask of you," Ferro said, including pay stubs and proof that where a person says they are sending money is truthful.
However, he added that it is a balancing act. "We are constantly walking a fine line between low friction for our customers and the efforts to restrict money laundering."
Compliance processes were in place before Ferro joined Xoom, but his experience at PayPal has proved valuable. That company was the first to solve the fraud problem with online money transfers, he said.
Within the U.S., Xoom is licensed as a money transfer agent in 46 state jurisdictions. The only other country that currently requires licensing is India. It primarily relies on financial institutions in the receiving countries for compliance with those laws.
As it continues to grow, the regulatory burden will only increase. To date, all of the money transfers it handles originate stateside, but there are plans to expand into Canada and Western Europe and elsewhere wherever there are large numbers of migrant workers sending money home.
Places such as Dubai have become major centers for migrant workers from around the region, but the complexity of Middle East origination will take a back seat to areas with more established regulatory frameworks, Ferro said.
Ferro said that his two girls, ages 2 and 4, have taken up most of his spare time and he hopes to take them on trips as they get older. "We can get the girls on skis now." He also took his daughters to New York when on his trip for Xoom's bell-ringing ceremony on the Nasdaq.
This article originally appeared in The Recorder.