Dive Brief:
- SumUp will pay $317 million in cash and stock to purchase California payment rewards startup Fivestars in a bid to bring its services to small U.S. businesses, the British payments company said in a press release Thursday. The acquisition is London-based SumUp’s first in the U.S.
- With the transaction, privately held SumUp, whose 2,800 employees provide payments processing to some 3 million merchants in 34 countries, will join forces with the San Francisco-based Fivestars, which boasts 70 million consumer members and 12,000 mainly small- and mid-sized businesses in its network.
- "Now is the time to make sure our presence is as strong in the U.S. as it is in Europe and, by acquiring Fivestars, SumUp will deliver for U.S.-based merchants as it has in other international markets," SumUp co-founder Marc-Alexander Christ said in the release.
Dive Insight:
Fivestars, founded in 2011, followed in the footsteps of digital payment service providers like San Francisco-based peer Square, which pioneered an electronic payments industry catering to America’s small-business owners. The Fivestars network is two-sided in that consumers use the company's app to find local businesses and get rewards through purchases while the businesses use the service for payments, marketing and loyalty programs.
Fivestars CEO Victor Ho, a former Goldman Sachs investment banker and McKinsey consultant, co-founded the company with Matt Doka, Fivestars' chief technology officer. In its first decade, the company created a network that processes $3 billion in annual sales.
The COVID-19 pandemic, while shuttering some small businesses, helped accelerate the growth of online sales for others as e-commerce soared thanks to Americans shopping from home. The federal government’s Paycheck Protection Program (PPP), which distributed business grants in the form of forgivable loans, also helped shore up some small-business owners’ finances.
SumUp, founded in 2012 — a year after Fivestars — will use the foundation Fivestars has laid as a base for its expansion in the Americas. It has a U.S. presence, with an office in Boulder, Colorado, but it plans to invest in Fivestars to scale its operations "dramatically," Kayla Abbassi, a spokesperson for the companies, said by email.
The British company this year completed a major debt financing to fuel a widening of its “global ambitions,” including in the U.S. and South America, the press release said.
Ho and Fivestars’ San Francisco-based team will remain in their roles, according to the release. Fivestars has about 200 employees and all of them will remain with the company after the transaction, Abbassi said.
"We founded Fivestars to give small businesses the opportunity to thrive in the digital economy and over the years, we've achieved just that,” Ho said in the release. “Understanding that SumUp shares this mission, it was an easy decision to partner, and together, we look forward to supporting a retail market that champions small-business success."
The transaction will provide a payoff for Ho and his investors, including those at the venture firms Lightspeed, DCM, Menlo Ventures and HarbourVest, as well as the accelerator Y Combinator. The investors had placed $145.5 million with the company as of October 2020, according to a TechCrunch report.
Abbassi said the companies expect to close the deal "within the next couple weeks."
