It's a Happy Day for Happy Returns as PayPal Acquires Another LA Startup

PayPal Inc. has gobbled up another Southern California startup.

After acquiring Honey, a modern twist on coupons, in 2019, PayPal announced Thursday it has purchased Santa Monica-based Happy Returns. Terms of the deal were not disclosed.

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The company allows online shoppers to return items at one of 2,600 physical stores like Paper Source and Cost Plus Market in 1,200 metro areas instead of the more cumbersome process of having to pack up and mail items back to a retailer. That allows independent retailers to have a shot at competing against the likes of Amazon and Walmart.

"Today, the box-free, in-person return process we pioneered is now table stakes in ecommerce," co-founders David Sobie and Mark Geller wrote in a blog post announcing the deal. "Hundreds of brand partners use our returns software and reverse logistics services, and our momentum is accelerating, enabling us to bring delightful returns experiences to a growing population of online shoppers."

PayPal first made a strategic investment in Happy Returns in 2019 and the company plans to further integrate Happy Returns as part of its transition from a payments platform to what it calls a "digital commerce enablement engine."

While Honey helps users before they make a purchase, Happy Returns comes in after they buy something. Ecommerce sales shot up during the pandemic, as did item returns. Online sales often frustrate retailers because the return rate is much higher than in-store purchases.

The 2019 B Round valued Happy Returns at $55 million, according to Pitchbook data.

The exit is a coup for Upfront Ventures, which led Happy Returns' 2015 seed round at a $6 million post-money valuation.

"In the nearly seven years since they started the business, venture and tech deal dynamics have gone through an incredible evolution, and return logistics software was not a slam-dunk sale in the early years," Upfront partner Greg Bettinelli wrote in a blog post. "It's a true testament to David and Mark's skill and resilience that they continued to build Happy Returns feature by feature, logo by logo, always keeping an eye toward operational and cash efficiency without sacrificing customer experience. They made returns a thing."