When George Bousis founded his gift card startup Raise in 2013, the CEO didn’t anticipate that he would work with the Secret Service. “We saw the really ugly side of gift cards that not a lot of people talk about,” he told Fortune .
Chinese organized crime rings, for example, have stolen or altered gift card numbers to drain hundreds of millions of dollars from Americans, reported ProPublica in April. And Maryland recently passed a bill in June to counter fraud that mandates secure packaging for gift cards.
Bousis believes blockchain technology can help retailers tamp down on gift card fraud, as well as simplify a decades-old payments system. And he’s investing what he said will eventually amount to more than $100 million to build what he calls “Smart Cards.”
To fund Raise’s crypto expansion, Bousis announced that his company had netted $63 million in a strategic round, Fortune can exclusively report. Haun Ventures led the fundraise. Other investors include Paper Ventures, Selini Capital, GSR as well as Raj Gokal, the cofounder of the blockchain Solana.
Bousis declined to say at what valuation his company raised. He did say it wasn’t less than his startup’s Series D valuation, which put his company at $675 million, according to PitchBook. The raise was a mix of primary and secondary share sales as well as token warrants (basically, when a crypto startup promises VCs a tranche of a yet-to-be-released cryptocurrency).
Raise also installed a new board. There are former crypto executives Marco Santori, the former chief legal officer at crypto exchange Kraken, and Bjorn Wagner, former CEO of Parity Technologies, the firm behind the blockchain Polkadot. And Raise also appointed George Ruan, cofounder and former CEO of Honey, as well as Matt Maloney, founder and former CEO of GrubHub.
“It's really betting the house on what we think is really the future,” Bousis said. “And we think the time is now.”
The CEO didn’t drum up $63 million for a crypto bet because his gift card company was cash poor. More than a decade old, the business is making a profit, he said. (He declined to say how much.)
In 2013, Bousis, two years after earning an undergraduate business degree, noticed that gift cards were flooding the market but consumers had no place to sell them. So, he launched an exchange where users can trade discounted cards for Fortune 500 brands like Airbnb , Walmart , and Instacart . Raise has facilitated more than $5 billion in gift card purchases and sales on its platform since.
The gift card industry, like many payments infrastructures, is a jumble of overlapping companies. There are money processors, card manufacturers and distributors, issuing banks, and compliance companies.
When his startup first launched, Bousis thought blockchains, or decentralized databases that no one controls, could eliminate the middlemen. “I was exploring tokenizing gift cards in 2014 really early on,” he said.
He realized it was impossible to issue blockchain-based gift cards in the 2010s, but he kept tabs on the crypto industry. In 2022, he decided that the technology had improved to the point where he was ready to make the leap.
Over the next two-and-a-half years, his company invested about $25 million from its own profits and balance sheet into building out a blockchain platform, he said.
Consumers buy gift cards from participating retailers, and the money is deposited with Raise, which then uses stablecoins, or cryptocurrency pegged to the U.S. dollar, to put that money in escrow for a retailer. Once a customer uses the gift card, Raise sends money from the escrow account to the retailer by ACH or stablecoin. The current payments process is subject to changing regulation, Bousis said.
He argued that this system, which he will eventually decentralize through a nonprofit and a cryptocurrency, is cheaper than the current payments infrastructure for gift cards. And with records issued on a permanent database no one controls, it’s more secure and fraud-proof, he claims. Raise will only issue digital, not physical, gift cards for the time being.
Retailers are interested, Bousis said. While he wouldn’t disclose which ones, he did say he was working with Fortune 500 companies and the “biggest brands.”
“This has been a decade in the making,” he added.
ICYMI: Fortune ’s Jeremy Kahn published a deep-dive Tuesday looking at how OpenAI has quietly changed how it builds its flagship GPT models. After years of preaching a bigger-is-better approach that calls for pre-training AI models with ever more data (the G in GPT stands. for "pre-trained"), OpenAI has had to revise its playbook in order to get GPT-5 out the door. It may seem like an academic distinction, but it's an admission that a key advantage of OpenAI's (on which investors have bet nearly $20 billion) is no longer producing a big enough performance boost. Read the full story here.
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Ben Weiss
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