Thought Leaders in Mobile and Social: David Stone, CEO of CashStar (Part 2)

Sramana Mitra: So, you’ve been following the payments industry and the digital loyalty industry quite closely.

David Stone: Right, and it’s that intersection that is my sweet spot: the digital consumer, how people pay and build loyalty, and how they give gifts and reward, and the confluence of those circles. And let me just say – for what it’s worth – that I’ve been recognized as a Top 5 entrepreneur in prepaid and as a mass high-tech luminary, which is a big deal since it’s New England. There are a lot of high techs in New England.

SM: What does CashStar do?

DS: CashStar is a digital gifting and incentive company. Our mission is to change the way that consumers and business executives give gifts or offer incentives. That’s from a physical product to a digital one. Looking at it from the consumer or business side of the world, what we want to do is allow a consumer or business executive to gift or send an incentive from any device, anywhere, any time, in any amount, and have it arrive instantly with the best experience possible.

SM: Does this apply to certain kinds of products? Where do you see the applicability or major adoption of this kind of gift giving?

DS: The core of the market is gift cards. It’s kind of step one. That market is a $100 billion market in the United States. It is the most used, most given gift bar none in the United States. Digital gift giving is emerging, and emerging very rapidly. We started the company in 2008 – I worked on the concept in my attic in 2007, but launched in 2008. When I started the company, only about 5% of retailers offered a digital or e-card online. Most of the retailers in the U.S. had only plastic cards. Now, let me tell you about my “aha moment.”

Before starting this company, I was doing a lot of consulting around the world for various payment companies, various clients: Intel Capital and others. I traveled all the time, and I’ve got kids. So, I always had to contend with the guilt of not making a kid’s birthday or an event and buying some unfulfilling, last-minute gift in an airport shop or sending something through the mail. And I said to myself, “There’s got to be a better way.” And I began looking at gift cards and realized that a) they weren’t very personal and b) they weren’t convenient. If you were going to buy them online or in a store, you had to ship them somewhere. That takes time, it’s expensive, and it’s not very convenient. So, I saw this opportunity to change the way consumers gift, and that was my “aha moment.”

SM: How much business are you doing through CashStar right now? And, if you could, explain a little bit of the business model and we’ll dive more into the trends discussion.

DS: Our solution allows retailers to give e-gifts or e-gift cards three ways: on the Web – if you go to BestBuy or Williams Sonoma or 250 other retail brands or restaurant brands, you’ll have the option of sending a traditional plastic card or sending an e-gift. Our solution also offers several of our retailers the option of allowing their consumers to buy the e-gift through their mobile devices or to deliver the card as a Facebook post.

Thus far, we are almost a white label for our retailers.

SM: Your selling technology to the retailers, and they pay you as a technology purchase deal, yes?

DS: Our model is twofold. We provide a managed service or transformational services we like to say. And we typically get a transaction fee each time a sale is made, and we also get a software as a service fee, generally speaking, to host and manage the entire experience.

SM: What are the numbers along those lines, the SaaS fee as well as the transaction fees?

DS: Because we’re a venture, private equity-backed firm, we don’t generally share those numbers. I can give you some trend information.

SM: Yes, trend is fine.

DS: For us, obviously, it’s  a new market, but it’s emerging fast. We’re seeing exponential growth in all three channels.

This segment is part 2 in the series : Thought Leaders in Mobile and Social: David Stone, CEO of CashStar
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