FiveStars Raises $52.5M for Small Business Payments & Marketing

The current climate presents significant challenges for small businesses, and Fivestars CEO Victor Ho believes that many prominent digital platforms are not offering effective support.

Ho contends that these platforms – encompassing delivery services, customer review systems, and marketing solutions – operate under a similar core principle: acquiring a small business’s customer base and then imposing a fee for the business to re-engage with those same customers.

At first glance, Fivestars, a company developing software for small business payments and marketing, might appear comparable to these platforms.

However, Ho explains that the startup adopts a fundamentally different strategy. Fivestars does not aim to create an exclusive customer base that businesses must pay to access. Instead, businesses subscribe to the software, enabling them to build and maintain their own customer databases without incurring additional charges for direct communication.

He stated that this approach creates a stronger alignment of interests.

The Fivestars platform offers a dedicated payment solution, integrates with existing point-of-sale systems, provides marketing automation for personalized customer messaging, and connects businesses to a network of over 60 million shoppers, facilitating cross-promotional opportunities.

The company announced today that it has secured $52.5 million in new funding, a combination of Series D equity and debt financing, bringing the total funding raised to $145.5 million. Salt Partners led the round, with participation from Lightspeed Venture Partners, DCM Ventures, Menlo Ventures, and HarbourVest Partners.

Ho revealed that Fivestars finalized this funding round prior to the COVID-19 pandemic, but the team chose to postpone the announcement out of sensitivity to the difficulties faced by its customers.

During the pandemic, the company has experienced “unprecedented levels of activity,” with 1 million new shoppers joining the network each month. Simultaneously, Ho acknowledged that the pandemic prompted a strategic adjustment for Fivestars. While the initial intention for the funding was to expand its merchant portfolio and existing product offerings, the focus shifted towards enhancing the payments functionality and network, addressing the evolving needs of small businesses.

Ho also highlighted that the company has provided over $1 million in credits to customers and expanded access to its products at no cost during the pandemic.

He emphasized the remarkable resilience of small businesses, particularly those in the experience sector, stating, “People don’t typically choose Pizza Hut for a special date, and when traveling to Paris, they prefer local establishments over large chains.”

In the funding announcement, Natasha Teague, owner of Tropibowls, a health food store in Fort Lauderdale, praised the Fivestars platform.

“The ability to connect with our customers and share real-time updates has been invaluable,” Teague said in a statement. “Fivestars’ extensive network and payment technology greatly simplified our reopening process and proved essential as we adapted to new challenges presented by the pandemic.”