Gift Card Marketplace Sees More Investment

Gift card marketplace Raise.com has pulled in $18.1 million from Bessemer Venture Partners, according to a report from Gigaom.

The story points out that the deal includes BVP partner Jeremy Levine joining the board, which the report finds more interesting than the deal itself.

“Levine is the man who makes unsexy bets that no one else understands and then profits handsomely from them. He was one of the first to put his weight behind then-scrappy-scrapbooking-startup Pinterest, leading its Series A in 2011. Before raising that round, the product was dismissed by others as not having a mass market value or technical co-founders,” the story said. “Now, four years later with Pinterest holding a $5 billion valuation and potent traffic referral power, Levine is the one laughing.”

The gift card marketplace has been around for many years and it is arguably one of the best examples of Internet efficiency, on paper at least. It allows people who have been given gift cards that they’re not especially fond of—perhaps for a chain that doesn’t have any local stores and charges high delivery rates—and trading them for one they want. Pricing varies, but the rationale is that a consumer holding a $75 gift card that they probably won’t ever use would gladly exchange it for a $65 gift card that they will immediately use. Most sites take cuts from both the buyer and seller.

Then there is the huge data potential, both from an individual CRM as well as an aggregated perspective. Retailers would love to know how many of their gift trades are being traded away and how much people are paying for them. If the site can provide names of people both selling and buying, all the better.

At Raise.com, the seller takes the price hit (offering a $100 for $90) and the buy gets the discount, the story said.

“In many ways it is easy to dismiss it as being this trivial use case,” Levine told Gigaom. “But the market for gift cards is ten to 100 times the events industry. Over $100 billion in gift cards are issued every year.”