Last week marked an important milestone for Marqeta, Inc., an exciting payments startup which announced new funding and a strategic partnership with Visa. Marqeta holds particular importance to our firm because it was our very first investment, but it also embodies the type of partnership we strive to create with entrepreneurs. So, I wanted to take advantage of the moment to reflect on Marqeta and why they are so important to us.
What is Marqeta?
For those of you who aren’t payments experts, here is a quick intro to how retail payments work and why Marqeta matters:
Payment Networks: In the retail payments eco-system, there are several card networks (aka AmEx, Discover, MasterCard & Visa), and the majority of cards issued for these networks are on “Four Party Schemes”, where there is 1) a Consumer (spends via card), 2) a Merchant (accepts the card), 3) a Merchant Acquiring Bank (enabling merchants to accept payments) and 4) an Issuing Bank (enabling Customers to spend money at merchants via cards). The banks are especially important because they control access to the networks.
Merchant Acceptance: Since most Acquiring Banks don’t build their own technology, they frequently rely on large-scale payments company (e.g. First Data, Vantiv) to process transactions on their behalf — these are called “Merchant Processors”. In recent years, startups like Braintree, Stripe and Square have made it easier for digital and micro-merchants to accept credit cards. These startups have built software and cloud services to abstract away the complexity of legacy processing systems, but even they typically still require the involvement of traditional Merchant Processors.
Card Issuance: On the Issuing Bank side, innovation has been much harder because new card issuers or “Program Managers” need to persuade a bank to “Sponsor” them. Because of the compliance required of Issuing Bank Sponsors, finding a willing Sponsor is no trivial matter. Once a Program Manager finds such a Sponsor, they still need to undergo a lengthy build process with whatever processing platform is being employed by the Sponsor Bank (these are called “Issuer Processors”). These too are primarily legacy core systems from companies like FIS, Jack Henry, TSYS and others.
Enter Marqeta: Marqeta identified this challenge in their founding days, as they looked at novel card program concepts and investigated why so few of them existed. They then created the Marqeta platform — a cloud-architected Issuer Processor and Program Management platform, accessible via API and offering services and capabilities never before available from legacy processors. As a result, most of today’s innovative card programs are being built on the Marqeta platform — examples include card programs for fast-growing companies like Affirm, DoorDash, Instacart, Kabbage and Square. More recently, Marqeta has also attracted traditional financial institutions which are interested in delivering new, customer-centric products faster and more efficiently than is possible with traditional processing platforms. It is this growing momentum with both traditional and emerging players that seems to have caught Visa’s attention.
Our Marqeta Partnership
I originally met Marqeta at an Under-The-Radar event in San Francisco in November 2012. Back then, Commerce Ventures did not even formally exist beyond a concept and a slide deck. I was quickly excited by the vision that Jason Gardner (Founder & CEO) and Omri Dahan (CRO) articulated for enabling the next-generation of commerce applications on top of a newly-built payments platform. While the paths of few startups are perfectly straight lines, Marqeta has succeeded by becoming that platform they originally envisioned.
How We Partner: What has made our partnership special has been the way in which we collaborate. We (Commerce Ventures) are one of Marqeta’s smallest investors, so we do not regularly attend board meetings. Instead, our relationship thrives through a variety of regular conversations: sometimes in person, sometimes on the phone; sometimes about strategy, sometimes about execution; sometimes at events, sometimes one-on-one; always driven by purpose, never out of obligation. I’ve spoken at their off-sites and attended a few strategy planning sessions. They have spoken at our Summit and our annual meetings. I’ve asked for advice about how we can be a better investor and partner. They have asked for advice on how to improve their odds of succeeding in various efforts they’re pursuing. In truth, I think we have become the type of partner you can only be when you’re not trying, just doing.
Beyond Partnership: Beyond our work relationship, I’ve become good friends with the team at Marqeta, attending each other’s important life celebrations and connecting at a human level in a way only possible when you trust someone implicitly. I don’t expect every one of my portfolio CEOs to become a best friend, but I refuse to believe that I can’t be close friends with our entrepreneurs.
To me, Marqeta represents not only our very first investment, but also the prototype of how we want to partner with our portfolio companies and their leaders. So now is as good a time as any to say congratulations to the whole Marqeta team for the distance they’ve traveled thus far, as well as a very hearty thanks for helping us learn what is possible in a true VC-startup partnership!!