Toronto-based startup Drop, which operates an app giving consumers points for their transactions, has raised $21 million in venture funding. According to a TechCrunch report, the Series A fundraising round was led by Rick Yang, a partner at New Enterprise Associates (NEA).
Drop has been able to secure approximately $5 million in seed funding over the past year. Its loyalty program relies on banking application program interfaces (APIs) to read consumers' credit card transaction data and gives them points for making purchases with Drop's retailer partners. Points can then be used on personalized offers based on the consumer’s spending habits. For example, if a consumer hits Starbucks twice a day, the app will likely offer up a free drink. If he uses Uber often, he will likely receive deals from the ridesharing company.
“We always joke that Tinder allows you to find love, and we allow you to find money,” said Derrick Fung, CEO and co-founder of Drop, in an interview.
The company's app is currently listed in the top five of the lifestyle category in the U.S., according to data from AppAnnie. Drop claims to have hit 1 million users in late 2017, and its partners include Costco, Starbucks, Instacart, Forever 21, Lyft Casper and Adidas.
“We wanted to build something fun and that resonates with this young demographic,” Fung explained.
In a recent interview with PYMNTS, he noted that despite being designed and marketed as a way to reward frequent customers for their loyalty, it is typically difficult for users to actually receive and use those rewards — so difficult, in fact, that many stop participating in the programs at all. For companies that invested invaluable time and money in building these spurned loyalty programs, the whole thing is a bust.
“There’s going to come a time, and it’s going to come soon, [when] consumers drop out of loyalty programs entirely because there are too many to keep track of and actually get value from them,” Fung said.