PayPal acquires Chicago startup, Modest

After its spin off from eBay in July, US online payments processor PayPal today that it was purchasing Modest, a Chicago startup that built mobile e-commerce applications for small businesses by helping merchants create mobile apps for their stores.

PayPal did not disclose the terms of the agreement, which would see the 20 Modest employees become part of its Braintree subsidiary in Chicago.

''E-commerce is a tried and true way to make money on the internet and yet it's so untapped in various aspects of our lives,'' said Harper Reed, Modest cofounder and CEO.

He pointed to the lack of buy buttons on most sites as an example, ''We want to create commerce where commerce doesn't yet exist. Think of it like putting a buy button where a buy button belongs, but where they haven't gone yet.''

Prior to the acquisition, Modest had raised an undisclosed amount from backers including Google executive chairman Eric Schmidt, Greylock Partners and tech venture 500 Startups.

One of the reasons that led PayPal to buy Modest's business was its bet on buy buttons, which allowed people buy items directly from apps without moving to another web page.

Modest allows businesses to embed buy buttons within their own apps, and other areas, including emails. Many social networks, including Facebook, Pinterest, and Twitter were embedding buy buttons on their sites that woud allow people to buy items they saw on their networks.

Modest's technology would also gain PayPal additional commerce expertise beyond just payments, including shipping and inventory management.

In the months leading up to its split with eBay PayPal made two significant acquisitions, with the first, the $280 million it laid out for payments technology startup Paydiant, while the second which came last month, took the  form of an $890 million all-cash deal for international money transfer company Xoom (See: PayPal to buy digital money transfer provider Xoom Corp for $890 mn).