Gift cards today are a $100 billion business annually, and as they continue to grow as a key way for companies to incentivise people in our too-often unengaged digital world, a startup that is helping corral the long tail of retailers, and match that up to the wave of businesses that want to offer the cards — a model that it’s dubbed “rewards as a service” — has raised a substantial round of funding.
Tango Card — which brings together some 500 companies’ gift cards so that they can easily be used by companies like Microsoft, Chevron and Marketo to help build out their own schemes for gifting those cards to their employees, customers, or other businesses to in turn offer them to customers — has raised $35 million to expand its business. The round comes from a single investor, FTV Capital, a growth equity firm that has a long track record in taking stakes in e-commerce companies (its portfolio formerly included WePay, which was recently sold to JP Morgan).
David Leeds, the founder and CEO of Tango Card, said that Tango is not disclosing its valuation with this round except to note that it is “absolutely an up round”. The company has had an average of 1200 percent revenue growth over the last five years, he said, and it is “nearing profitability”. Tango had only raised $9.5 million previously with other investors including Eric Schmidt’s Innovation Endeavors, Allegro, Floodgate and others.
The space that Tango Card is working in is akin to what Stripe is doing in payments. All the hard work is behind the scenes and taps into something that companies want or need to do but often find difficult, costly or time consuming to sort out themselves. Tango irons out the work in the backend and presents an easy way of integrating it at the front end by way of an API.
In the case of gift cards, a lot of businesses have started to offer these as incentives to employees as a form of spot bonus either for work they have done, or to encourage them to engage with a new health or other initiative that is being run; or gift cards are awarded to customers when they engage in surveys and other interactions that they might not normally opt into.
There is a problem for the companies doling out the gift cards, however: browsing a wider list of gift card options, and then selecting the ones that you might want to use in a campaign or service, and then actually having all that work automatically in the campaigns to award those cards, is not that straightforward. Tango Card’s solution is a platform to make the process of doing all this faster and easier, by way of an API.
Customers can either link into the platform to offer a single or range of cards (with the card recipient able to choose which card himself or herself), and then when a gift card is awarded, that, too, is processed by Tango Card as well.
Leeds said that Tango Card currently has around 2,000 enterprises using the platform each day. And that, in turn, works out to “tens of thousands” of customers drawing down those gift cards.
You might wonder (as I sometimes do) just why gift cards have become so ubiquitous in the world as a replacement for straight-up cash. On a person-to-person level they seem to lack a lot of the fun of giving a present, but from a B2C or B2B2C standpoint, Leeds said that there is a key factor — impact — that has played into this trend.
“When people get a gift card and use it to buy something, they are more likely to tell people what they did with that gift card,” he said. “When you get cash into your bank account, you’re not likely to tell someone you got $30.”
That means that for retailers, they become like a form of free and viral advertising. For those giving out the cards, it might also mean a more memorable use of what might otherwise feel like a small or random amount of money. ($10 doesn’t feel like much but a $10 gift card suddenly feels like a little present.)
For companies that have been long players in the rewards scheme, gift cards also are a safer satisfaction bet, given that the older practice of giving actual merchandise has waned, with people wanting to have more choice. “You can actually get what you want, rather than get what you do not want,” said Leeds.
“The B2B rewards and incentives space is massive and growing, and the gifting/incentive space continues its move from physical to digital delivery,” said Chris Winship, FTV Capital partner, in a statement.
“Tango Card provides an industry leading solution that capitalizes on this shift to digital, enabling its enterprise clients to efficiently use rewards and incentives for numerous use cases and to achieve business goals such as driving employee engagement and retention, improving employee culture and wellness, and incentivizing customer activities. We have been incredibly impressed with David and his team for their focused commitment to superior solutions for customers and end recipients.”