CashStar, the Portland-based tech company that was a pioneer in the digital gift card space, has been acquired by Calif.-based Blackhawk Network for $175 million.

The all-cash deal means CashStar will be folded into a global player in the digital gift card and payment industries. Blackhawk is publicly traded (NASDAQ:HAWK) and has roughly 3,500 employees. It posted $1.9 billion in annual operating revenues in 2016.

CashStar was founded in 2007 by David Stone (now CEO of local startup Forager) and Steven Boal, who founded Calif.-based, to provide digital gift card solutions to retailers. Its clients have included a who’s who in the retail and food-service industries, from Starbucks to Best Buy to Banana Republic to Office Depot.

The acquisition is not expected to affect CashStar’s local operations, according to CEO Ben Kaplan. It currently has two offices in Portland (one in the Old Port and another on Congress Street near the Maine College of Art) and another in Waltham, Mass. It has 175 employees, 155 of which are based in Portland. Kaplan said the two businesses are complimentary (more on that later) and there’s not much overlap among the workforces that would need to be settled during a consolidation.

He stressed that the acquisition is good news for CashStar’s investors, employees, and the Maine startup community.

“This is a great proof point and a great reflection on the tech community in Maine,” Kaplan said. “It’s important to note the value of what they’re acquiring is based in Maine. The intellectual property, the engineers, the client teams…all of it is in Maine, and staying in Maine and we’re excited about that.”

CashStar’s financial details revealed

In the wake of the acquisition news, Blackhawk made a presentation to its investors that gives us the first look under CashStar’s hood since it revealed 2013 revenue of $15.8 million as a requirement of inclusion on the Inc. 5,000 list in 2014.

According to the investor presentation (screen cap below), CashStar anticipates GAAP revenue of $44 million in 2017, which represents an approximately 178% increase since the 2013 revenue (I believe the ’13 number was GAAP, but can’t be sure). CashStar’s 2016 GAAP revenue was $33.7 million, according to the deck.

Screenshot of Blackhawk’s investor presentation showing CashStar’s GAAP Revenue and Adjusted Operating Revenue from 2014 through estimates for 2018.


The presentation also revealed non-GAAP adjusted operating revenue of $26.2 million in 2016 and an estimated $34 million this year. CashStar’s compounded annual growth rate for its non-GAAP adjusted operating revenue was 32% between 2014 and 2017, according to the presentation.

CashStar had raised a total of $50 million in venture capital, with its latest round being a $15 million Series D in August 2015.

CashStar’s path to acquisition

CashStar had not been shopping itself around when Blackhawk entered the picture, according to Kaplan, who became CEO in 2013 after founding CEO David Stone resigned following a “mutual decision” with the company’s board.

Kaplan said CashStar was on track to pursue an initial public offering within the next couple years and was actively pursuing capital-raising opportunities when Blackhawk approached the company. The board determined an acquisition was a superior option to entering the public markets for a number of reasons, including the chance for CashStar to leverage Blackhawk’s international presence to expand globally without making the major investments it was facing.

Kaplan said the sale was not a result of pressure from early investors looking to exit.

“Not at all. I’d say our investors—early ones and late ones—have been completely aligned and very patient relative to the path CashStar was taking and that path, prior to engaging with Blackhawk, was to invest in growth and continue to expand in product breadth, solutions, and geographic markets,” Kaplan said. “The Blackhawk opportunity certainly represented an inflection point for the board, myself included, to examine and evaluate the different paths we had in front of us. We ultimately decided an acquisition at this time made both financial sense and strategic sense for the company, our clients, and our employees.”

Complimentry platforms

While Blackhawk is deep into the gift card space (it actually got its start in 2001 as a subsidiary of Safeway Inc. that sold third-party gift cards in its grocery stores), that’s a fundamentally different business than the one CashStar is in.

CashStar provides an online platform for retailers and restaurants to sell digital gift cards directly to its own customers (known in industry lingo as “first-party” gift cards). According to Blackhawk’s investor deck, first-party gift cards are a $108 billion market, compared to only $21 billion for third-party gift cards (think of those Best Buy or Apple gift cards you’d buy in the checkout line of the grocery store).

Blackhawk has made several acquisitions in the last few years of companies working on digital payments and digital rewards programs, but CashStar is its first foray into first-party digital gift cards. As a result, CashStar will remain untouched to continue growing that segment of the business, said Kaplan, who will become group president of the CashStar line of business.

He said being acquired had a number of benefits, including that CashStar is now free from making the significant investments it would have needed to follow through on its strategy to expand its geographic reach

“We want to grow and expand internationally? Well, Blackhawk is a global company with teams and technology around the world,” Kaplan said. Leveraging that scale and international breadth allows us to pursue new market opportunities without the need to invest millions and millions of dollars that would have been required.


Local context

CashStar’s acquisition follows several successful exits in Maine’s startup ecosystem. By my count, it is the second largest acquisition in the last several years.

“It’s good news for Portland and all of the blood, sweat, and tears us entrepreneurs have experienced and sacrificed,” David Stone, CashStar’s founding CEO, told MSI after the acquisition news broke.

The largest acquisition is still that of Portland-based Putney (now known as Dechra), a pet pharmaceutical company which was acquired in March 2016 for $200 million. Other relatively recent acquisitions include that of Portland-based Kepware Technologies, which was acquired for $118 million in December 2015, and Portland-based Certify, which was acquired in June 2017 for $100 million. The financial details of Garmin’s acquisition of Yarmouth-based DeLorme in February 2016 were never disclosed.

Such a string of successful exits can only send positive signals to out-of-state investors that Maine startups are not as risky as some pre-conceived notions may suggest.