Openbucks, a startup creating a gift card-based payment network (and a former TechCrunch Disrupt finalist), is announcing today it has closed $4.8 million in Series A funding, in a round led by Yahoo co-founder Jerry Yang. Also participating were Terry Semel, Greycroft Partners, BV Capital, Clearstone Ventures, Morado Ventures, Novel TMT Ventures, Inspiration Ventures, CrunchFund, SV Angel and TiE Angels. (Whew!).
Since its initial debut, founder and CEO Marc Rochman says Openbucks has grown to “tens of thousands of users” and has seen “hundreds of thousands” of transactions on its network.
For a little background on the company, the big idea here is to help bring the unbanked, under-banked, or privacy-sensitive crowd into the online shopping space by allowing them to pay for goods and services using retailers' gift cards. The targeted demographic not only includes the teenage crowd, who typically don't have bank accounts, but also anyone else without a credit card. Rochman compares the overall concept to a program which Walmart introduced in April – it began allowing customers to shop online and then pay cash in the store for the item they reserved. By doing so, it was able to activate new shoppers, who never would have bought online before. The Openbucks system works much the same way.
“Our big vision is to introduce different products that enable consumers – whether they are with limited capacity to make online payments because they are unbanked like teenagers, for instance, or people worried about sharing their financial information online,” explains Rochman, ” – to enable those people to go to retailers…to pay offline and buy online.” For now, that means buying the gift cards, but in the future, Openbucks may offer different methods for payments, he says.
Currently, Openbucks supports gift cards from Subway, CVS Pharmacy, Burger King, Shell (next week), Circle-K and CITGO, which can be used to pay for purchases online. To date, the main focus has been on buying virtual goods in online games (around 500 are supported), but Rochman says that's about to change. Openbucks is now preparing to expand into other verticals, he says. It has been working on integration with payment gateways like First Data and Ceridian Stored Value and soon, it will even allow its users to pay for things like their utility bills using their gift cards.
Based in Santa Clara and L.A., the startup is a team of ten now, by expects to hire five or six more engineers and business development folks by year-end. The other main use for the new funding will be bringing more merchants online with the system.