Traditional gift card platforms enter Web3. How does Raise, which has raised a total of $220 million, enter the crypto consumption track?

Author: Weilin, PANews

On February 26, Fortune reported that Raise, a crypto gift card platform, announced that it had completed a $63 million strategic financing, led by Haun Ventures, with participation from Paper Ventures, Selini Capital, GSR, and Raj Gokal, co-founder of Solana, a blockchain. Although the company did not disclose the valuation of this round of financing, the amount of financing and the background of investors have attracted attention.

This round of financing brings Raise’s total financing to more than $220 million, with previous investments coming from Accel, Paypal and New Enterprise Associates (NEA).

From traditional gift card trading platforms to Web3

Raise was founded in 2013 by George Bousis, who had just graduated from college two years ago and noticed that the US market was flooded with gift cards, but consumers had nowhere to sell them. So he launched a platform that allows users to trade discounted gift cards for Fortune 500 brands like Airbnb, Walmart, and Instacart. Since then, Raise has facilitated more than $5 billion in gift card purchases and sales on its platform.

In his view, the gift card industry, like much of the payments infrastructure, is a tangled mess of overlapping companies, including money processors, card manufacturers and distributors, issuing banks and compliance firms.

However, as blockchain technology matured, Bousis realized that blockchain could bring deeper changes to the gift card industry - not only eliminating intermediaries and reducing transaction costs, but also improving transaction security and preventing gift card fraud.

Currently, Raise has three products: Raise App, API solutions and gift card trading market.

“I started exploring tokenizing gift cards very early in 2014,” he said. He realized issuing blockchain-based gift cards in the 2010s wasn’t going to happen, but he kept an eye on the crypto industry. By 2022, he thought the technology had matured enough to be ready for the change. Over the next two and a half years, he said, the company invested about $25 million, which came from the company’s profits and balance sheet, to build the blockchain platform.

George Bousis believes blockchain technology can simplify the decades-old payment system for gift cards, and he says he will eventually invest more than $100 million to build what he calls a “smart card.”

Collaborated with Polkadot Community Foundation to support crypto wallets

Unlike the habits in Asian countries, gift cards have almost become a "necessity" for American consumers during the holiday season every year. They often surpass popular products such as AirPods, PlayStation or popular vinyl albums to become the first choice for holiday gifts. According to market data, about 40% of consumers' total holiday spending is used to buy gift cards. The popularity of such gift cards is not only due to their convenience and flexibility, but also because they can meet the needs of both givers and receivers.

After consumers purchase gift cards, they typically redeem them within six months, with a redemption rate of over 70%. However, the use of gift cards declines over time. Research shows that after one year, less than 80% of gift cards are redeemed.

In Raise's crypto gift card process, consumers purchase gift cards from participating retailers and deposit funds into Raise, which then uses stablecoins to hold these funds in escrow for the retailer. Once the customer uses the gift card, Raise transfers the funds in the escrow account to the retailer via ACH (a U.S. electronic payment network) or stablecoins. Bousis said the current payment process is subject to changing regulations.

Bousis believes that this system (which will eventually be decentralized through a nonprofit organization and cryptocurrency) will be cheaper than the current gift card payment infrastructure. And, because records are stored in a permanent database that no one controls, it is expected to make the system more secure and fraud-proof. For now, Raise will only issue digital gift cards, not physical ones.

Currently, Raise has expanded into the blockchain payment industry through cooperation with the Polkadot Community Foundation (PCF), and plans to integrate into the DOT Wallet. In addition, the company has also added support for digital wallets such as MetaMask, Phantom, and Coinbase Wallet in August 2024 through cooperation with WalletConnect.

Bousis said there is a lot of interest from retailers, and while he wouldn’t name specific retailers, he said he’s working with Fortune 500 companies and “the biggest brands.”

Along with the announcement of the funding, Raise welcomed new board members. The board members include former crypto industry executives Marco Santori, who was the chief legal officer of crypto exchange Kraken, and Bjorn Wagner, who was the CEO of Parity Technologies (the company behind the Polkadot blockchain). In addition, Raise also appointed Honey co-founder and former CEO George Ruan, and GrubHub founder and former CEO Matt Maloney.

Bousis declined to disclose the company's valuation at the time of the financing. He said the financing valuation would not be lower than the startup's valuation in the D round of financing, which PitchBook data showed was $675 million at the time. The financing included primary and secondary equity sales and token subscription rights (crypto startups promise venture capital firms a portion of unreleased cryptocurrencies). He also said that the $63 million raised through crypto investments was not because Rasie was facing a shortage of funds. Raise's business, which has been in operation for more than ten years, is currently profitable. The payment process in the gift card industry may therefore usher in a change. In the future, with strong financing support and extensive retailer cooperation, Raise may be able to bring new growth catalysts to the Web3 consumer track.

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