Raise has received $60 million in new funding from investors including PayPal, the Chicago-based company announced Tuesday. It’s a batch of money the company is using to shift from an online marketplace for unwanted gift cards to a mobile payments platform working directly with retailers.
“We want to expand on the opportunity around using Raise as a mobile wallet to pay for everything anywhere you go, saving money on everyday purchases,” said founder and CEO George Bousis ⇒.
The investment comes on the heels of a new mobile wallet app launched in May 2017 to allow shoppers more ways to manage their cards and provide location-based notifications to remind them that they have a card for a nearby retailer. It also lets shoppers hold gift cards in their online cart for five minutes to prevent other customers from taking the card, a function similar to online ticket sales.
For retailers, the new platform gives them a way to drive loyalty, attract new customers and retain them “in a very simple offering that scales well,” said Bousis. Instead of competing with rival gift card exchanges like CardPool and CardCash, Raise now hopes to compete with the likes of Apple, Google Wallet and bank cards.
Chicago tech leader Mark Tebbe ⇒, who’s joining Raise’s board along with the round but is not an investor, said he thinks the expanding focus on retailers will pay off.
“To have this virtual currency, I can be in a situation where the store that I’m shopping at not only gets my cash, they get insight about me that they never had before,” Tebbe said. “Right now, we believe we have strong first-mover advantage.”
While 60 percent of all transactions on the Raise platform today are still people selling cards to get cash, Bousis said retail customers now account for 40 percent of Raise’s revenue, and he expects that to be its larger business in the future. Retail accounted for “lower single digits” just a year ago, he said. The company has active partnerships with more than 350 retail brands including Hotels.com, Subway, Overstock.com, Toys R Us and Dell, all of whom sell cards and credits directly to consumers through Raise.
Raise drew scrutiny in the past as customers complained of fraudulent cards being sold on the site. Bousis said last year the company was working to reduce fraud.
The funding announcement comes as the overall prepaid card business is consolidating, and branded retail cards are evolving from plastic to electronic currencies “that play a role in marketing and loyalty programs, mobile payments and cost management,” according to Mercator Advisory Group, which advises the payments and banking industries.
Online payment competition between PayPal, Apple, Square and others is heating up and rumors swirl about PayPal launching its own near field communications-based mobile wallet app. Bousis wouldn’t provide details about how much PayPal invested or how the two companies will work together.
Accel, a California-based venture capital firm, led the round with returning investors New Enterprise Associates and Bessemer Venture Partners, also based in California. It brings Raise’s total funding to $147 million.
Accel partner Sameer Gandhi is also joining Raise’s board as part of the round. Gandhi led Accel's early investment in mobile payment service Venmo, which was acquired by Chicago-based payment processor Braintree. PayPal acquired Braintree for $800 million in 2013.
Bousis said Raise has generated more than $1 billion in gross transactions to date by more than 2 million users. The latest capital infusion will go towards hiring top talent in both Chicago and New York, customer acquisition, building the Raise brand, and continued investment in both product and technology. The company plans to invest in marketing and advertising moving forward, something it hasn’t done much of in the past, he said.
Kate MacArthur is a freelance writer.