Old ideas keep getting new life, thanks to the proliferation of mobile phones. And a company called Raise, which runs an online marketplace for gift cards, is the latest startup to take advantage.
The Chicago-based company announced on Thursday a giant $56 million investment led by NEA, just two months after announcing a separate $18 million round of funding. CEO George Bousis told Re/code in an interview that the new investment values the two-year-old company at “just shy of a billion” dollars. He declined to provide an exact figure.
A billion-dollar valuation for a gift card company? To explain why that’s not batshit crazy, NEA General Partner Tony Florence said the sleepy gift card market has moved to digital in a big way only in the last few years. Moreover, Raise is seeing a ton of usage on mobile devices, with shoppers buying discounted digital gift cards on their phones while in the store to make an immediate purchase.
“We think mobile usage here is the killer app for the company,” he said.
Raise’s giant investment comes as other e-commerce startups such as Instacart are taking advantage of soaring mobile phone usage to breathe fresh life into old ideas such as grocery delivery.
Raise passed $10 million in monthly gross card sales several months ago and has been growing more than 10 percent a month since then. The company takes a 15 percent cut when someone sells a gift card or store credit on their site. That number may sound steep, but Raise’s numbers prove that people who have received gift cards as gifts or who don’t want store credit as a refund will bite the bullet.
“Either you’re stuck with a card you’re not going to use or you get cash,” Bousis said. “Cash is still king.”
Around 94 percent of the gift cards sold are passed on to the buyer in digital form with identification codes and a barcode for in-store scanning. That means Raise doesn’t have to store any inventory. It also means Raise only has to provide pre-paid postage to sellers in the rare cases where the physical card cannot be rendered in digital form.
Raise users can expect discounts on gift cards from stores like Gap, Nordstrom and Chipotle that range from 4 percent to 23 percent, according to a quick site search. Bousis said the company is working on partnerships with the retailers whose cards are sold on the site to tell them where else their customers are shopping. That, in turn, could lead to Raise offering marketing services, Bousis said.
With the new funds, Bousis said his company will start to put some real money behind advertising, which it hasn’t up to now. It will also continue to hire more talent on the technical side of the business, adding to its current staff of 120.
This article originally appeared on Recode.net.