Digital loyalty startup FiveStars expands to Canada

By Richard Nieva , written on May 29, 2013

From The News Desk

The road to possible world domination apparently runs through Canada. Toronto, to be precise.

At least that’s how digital loyalty startup FiveStars sees it. Today the Y-Combinator alum is announcing its first attempts at international expansion with a partnership with Rogers Communications, the Toronto-based telecom giant.

FiveStars is a loyalty program for small and medium-sized businesses that gives customers one consolidated plastic rewards card for several businesses, so they can get rid of individual stores’ rewards or punch cards. When swiped, the card gives employees standing at the point of sales terminals a swath of personal data like how much people spend or what they might buy.

Through the partnership, Rogers has created an identical version of FiveStars' Vicinity Rewards, branded with a “Powered by FiveStars” label. The Canadian company will drum up business from many of its existing clients, including small and medium-sized businesses that already use Rogers for its phone and Internet service. The deal, which has a three-to-five year exclusivity period, will put Vicinity in about 1,500 stores over the first year, and the business model will be based on revenue share, says FiveStars cofounder and CEO Victor Ho.

Considering this is the company’s first stab at international expansion, there are some lessons other startups could learn from FiveStars’ execution. Rogers approached FiveStars as it was looking to get a loyalty program off the ground, so there wasn’t so much of a tactical strategy in choosing the Great White North as the destination, but Ho says there are obvious reasons Canada is a good choice for a first swing at market expansion outside the US: it’s close by, the culture is similar to the United States and there is, for the most part, no language barrier.

Ho also warns against forgetting about the little things. There aren’t many cultural tweaks the company had to make to the product, as opposed to if it was expanding to Asia or Europe. But there were small tweaks that add up, like updating maps on store locators or – and this is important for companies thinking of licensing out their technology – making sure the different logos for FiveStars and Vicinity pop up at the right places when auto-synching the platform.

The digital loyalty-related industry is young, but there are already established players like Belly or LevelUP. So for a small startup FiveStars, attaching yourself to a big company and its resources can be the most effective way to grow. The next market decisions for FiveStars will be based not on where the country or city is located, Ho says, but whether or not there is a good potential partner. And the best partners are not too distracted with their own business issues and can take the time to work with a startup.

That way, Ho says, “you can be very opportunistic.”

[Image courtesy: Raúl Soriano Meseguer]