Deserve Raises $50M For Its Credit Card Platform

This week Deserve raised $50 million from a number of investors including Goldman Sachs, adding a mountain of capital to its accounts. This publication, having covered the realm of fintech lately, was curious about the company and its new investment.

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So we caught up with Kalpesh Kapadia, a co-founder at Deserve and the company’s CEO. We were interested in finding out if Deserve is pursuing the same sort of product-creep that other fintech shops that we’ve covered lately are; no, as it turns out, but it’s doing something even more interesting.

Let’s explore, starting with the money.

50 Million Dollars

Before we dig into what makes Deserve interesting from product and operating perspectives, let’s talk about the round.

Deserve raised a $50 million Series C, led by Goldman Sachs. (We’ve covered other Goldman rounds here, and took a look at its investment cadence here.) A number of other investors took part in the round, including Sallie Mae, Pelion Venture Partners, Mission Holdings, Aspect Ventures, and Accel.

The Series C was therefore led by an institution best known for investment banking and participated in by a student loan behemoth along with several traditional venture shops. Quite the group.

Deserve has raised before, including Series A1 and A2 rounds worth $7.3 million and $19 million apiece according to Crunchbase data. The firm’s proximate round, a Series B worth $19 million, came together in August of 2018 according to the same information.

That history means that Deserve’s $50 million infusion was quite large in comparison to its preceding, received investments. Why was it so large? Because the company doesn’t want to raise again.

Platforms, Profits

During a phone call, Deserve’s Kapadia said that he raised a round large enough that his company won’t “have to go to the market again.” He’s shooting to get profitable with this new round, which was surprising; if you can raise $50 million from Goldman, you can probably raise another fifty. Why stop?

In response to the question, Kapadia noted that his firm isn’t incredibly capital intensive. He told Crunchbase News that he’s “disciplined,” and brought up recent market tumblings in support of his view. You might be surprised to hear it, but profitability still isn’t what startups tend to focus on. To hear Kapadia say clearly that he doesn’t want to raise again was, therefore, notable.

What will he do with all the new money? Continue building his credit card platform, unsurprisingly. When asked if he expects Deserve to expand into other financial products, he demurred. The company intends to stick to credit cards. Why? Because the industry is changing in his view, and Deserve, reading between the lines, thinks itself well-positioned to do well as its market evolves.

The company, which provides some credit cards of its own but is more focused on providing the ability for other groups to offer cards, has a particular view about where the credit market is going. Deserve expects credit cards to become increasingly virtual and mobile, for example, themes that already fit into its product offering.

The startup expects other forms of change in its home market. There are 600 million credit cards in the United States it said, (its CEO told Crunchbase News that he has a few dozen of them to his name) noting that it anticipates the makeup of the card landscape to change. Store-specific cards are falling out of favor (who really wants a J. Crew credit card?) while themed cards are coming into vogue, in the company’s view. As its product helps groups offer cards focused on, say, grooming, or hotels, or food, it’s already in the middle of where it expects its market to move.

I expected Deserve to jump on the phone, brag about its new funding round and expected growth while detailing an eventual move into cash accounts and debit cards like other fintech players. Proves what I know.

Update: Deserve’s funding history was updated in this post after publication.

Illustration: Li-Anne Dias.