Press Release: Fivestars Raises $26 Million in Series B Funding Led by Menlo Ventures

San Francisco, CA, September 25, 2014 – Fivestars, the fastest growing company in customer loyalty and marketing automation for small and medium businesses, today announced it has raised $26 million led by Menlo Ventures with participation from existing investors Lightspeed Venture Partners, DCM and Rogers Communications.

Customer loyalty is a $60B market today, with Fortune 500 companies like Starbucks and Macy’s comprising the vast majority of that spend. Meanwhile, small and medium businesses make up more than 90% of the businesses in America but have historically lacked the tools to run sophisticated loyalty and marketing automation programs.

Launched out of Y-Combinator three years ago, Fivestars has now raised a total of $45 million to democratize Fortune 500-level loyalty and marketing automation technology to the underserved small and medium business market.

The new round of funding will be used to accelerate hiring and to develop new technology to help local merchants connect with their customers and bring them back more often with rewards, customer relationship management tools, and marketing automation.

“Fivestars’ mission is to help local businesses turn every transaction into a relationship. This new round of funding brings us one step closer to making that vision a reality,” said Victor Ho, CEO and co-founder of Fivestars. “With our ground-breaking AutoPilot technology, we now automatically send over 2.5 million targeted rewards and announcements on behalf of merchants every month – all they have to do is sign up customers to the program, and we handle the rest.”

With participation from existing investors, this funding round substantiates the tremendous growth that Fivestars has seen and the massive opportunity still ahead in customer loyalty and marketing automation for small and medium businesses.

“20% of customers make up 80% of a small business’s revenue, and while merchants often focus on acquiring new customers with tools like Groupon or OpenTable, it’s much more cost-effective to retain an existing customer than to acquire a new one,” said Pravin Vazirani, Managing Director at Menlo Ventures. “Fivestars has already made significant progress tackling the retention problem and has the right team, technology, and infrastructure in place to scale. We are thrilled by the opportunity to help support their growth.”

Since launching three years ago, Fivestars has seen explosive growth in their business:

Revenue-run-rate has tripled since last year, and Fivestars now works with over 5,300 small and medium businesses across all 50 states and Canada.
Over four million customers have signed up for Fivestars and have redeemed over 2.6 million rewards at Fivestars businesses.
Every month, Fivestars sends out over 2.5 million targeted text, push and email messages automatically on behalf of merchants, driving over 1.8 million in-store visits to merchants.

With the new funding, Fivestars looks to dramatically increase hiring in Engineering, Sales and Operations functions to support exponential merchant growth. Qualified candidates can apply online at https://www.fivestars.com/careers.

To celebrate the new round of funding, merchants interested in signing up for Fivestars can get a special one-month free trial at https://go.fivestars.com/seriesb.

Download our free retail customer loyalty success guide to learn how to drive customers back 2x more.

About Fivestars

Fivestars’ mission is to help businesses and communities thrive by turning every transaction into a relationship. Over four million Fivestars users have been rewarded at over five thousand businesses they love in the Fivestars network. Local businesses everywhere now use Fivestars to connect with their customers automatically, getting them to come back more often and spend more when they do. Founded in 2011 and based in San Francisco, Fivestars has raised $45 million from top-tier investors including Menlo Ventures, Lightspeed, DCM, Rogers and Y-Combinator. For more information, visit www.fivestars.com.

About Menlo Ventures

Menlo Ventures provides capital for seed through growth technology companies in the consumer and enterprise sectors. Since 1976, the firm’s market-driven analysis has led to successful exits in innovative technology markets. Notable areas of investment include Mobile (Siri, Uber, Machine Zone, Roku), Social & Ecommerce (Fab, Tumblr, Lumosity, Poshmark), Cloud (Carbonite, EdgeCast, Dropcam, Vidyo), Storage & Big Data (3Par, Coraid, Tintri, Avere Systems), Digital Advertising (Flurry, YuMe, DataXu, Dstillery, eXelate) and Security (Cavium, IronPort, nCircle, BitSight). Menlo’s portfolio includes 70+ public companies and 100+ mergers and acquisitions. Menlo’s guiding philosophy is to Venture Right, working side-by-side with portfolio entrepreneurs as allies, serving ethically on boards as company builders with decades of market expertise, and opening access to a curated network of advisors. Menlo Ventures has $4 Billion under management and is currently investing Menlo Ventures XI, a $400M fund with $20M allocated to the Menlo Talent Fund for fast seed funding. For more information, visit www.menlovc.com.