The idea behind Leverage was simple and had some potential: it offered an advanced management system for gift cards, hugely popular worldwide especially this time of year, so you could register all of them and keep track of how much you have left or stored on each one. You were also able to buy gift cards, or swap them with others. The service also let you manage all of your loyalty reward programs, such as frequent-flyer or frequent-stay plans.
Leverage, which was founded in May 2005 and had raised $2 million in angel funding, planned to generate revenue by reselling gift cards (see our launch coverage for more). It turns out the business model wasn’t solid enough to keep the company afloat during tough times. It appears the entire staff has been laid off (right before the holidays, which is supposed to be a key period for this type of company) last week.
From the blog post by former web developer Colleen Robledo:
With VC funding freezing up and retail revenues down, the company can’t afford to keep any of us on payroll. The owners are hoping this is just a temporary lay-off, that they will get funded again after the holidays, and be able to hire us all back.
We’re putting Leverage in the deadpool, because that last part was just wishful thinking.
Update: We’ve confirmed that Leverage has laid off all of its employees (15 people), but it is still looking for options to salvage its business, including an attempt to raise more money. We received the statement below from the company, in which it tries to spin the layoffs as a “temporary measure.” The company remains in the deadpool for now.
Leverage’s response:
Leverage, Inc., confirms a staff layoff earlier this week. This painful but temporary measure was taken to help the company focus operations in a very difficult economy. With an increasing number of high-profile retail and manufacturing bankruptcies, companies big and small are being urged by the investment community to make difficult cost cuts.
This layoff was regrettable, but necessary, to ensure our ability to continue to provide the high level of service and support that our customers and partners have come to expect. We have extended everyone affected by the layoff an offer to work with us on a contract basis as needed since the holidays are a very busy time for the company. While the layoff does have an effect on the pace of our overall development, the site is alive and healthy, it has more features than ever, and new features will continue to roll out over the next weeks and months.
Leverage’s online gift card, loyalty, and promotional services continue to deliver industry-leading value, convenience and protection for consumers, and provide a unique marketing opportunity that maximizes ROI for our merchant partners. In addition, investors continue to view Leverage and its unique business model as strong and viable. We expect to receive our next round of funding in Q1 2009, at which time we anticipate an even more rapid expansion of our operations.
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That’s too bad. I’d never heard of this site/service before just now, but the business model seems pretty legitimate.
But, as J-Cal says, it’s all about execution. The “let’s provide a platform for swapping stuff and charge a tiny commission” model worked well for Lala, but I guess they’ve moved on, too.
I kind of like the idea of being able to trade the gift cards.
Check out plasticjungle.com
Giftah.com is the place for exchanging gift cards, they have a huge dedicated audience that is looking to buy and selling on the site is extremely easy. They also launched in a recession, so you won’t see them laying people off or bitching about hard times anytime soon.
Pretty idea but poor execution, can VC find some seasoned executives to run the business?
an old idea
nice one..
Did they decide to roll all of their capital into non-redeemable gift cards? Someone needs to really hit the gift card space, because it is certainly still up for grabs.
Wow, I started thinking about launching a gift card exchange yesterday! Pretty simple really:
1. People give/get gift cards
2. Lots of people never use them and they expire
3. People would sell their unwanted cards for money
I haven’t thought about this in-depth but isn’t hard to implement a shopping cart for this and the only real issue is card authenticity and ensuring a trusted exchange.
Is it purely a marketing problem?
Would be great to hear from someone at one of these companies. Reply here or email me (click the link in my name).
I wanted to respond to your question regarding the actual issue at hand for not just our company/service, but many of the startups and companies out there. In order to acquire customers in classic marketing pushes, companies usually have to pay a certain price for customer acquisition (of course you can always get people to sign up for your service through word of mouth, press, etc., but that, too, can take a lot of time and money). Since the #1 issue right now for many startups like ours is that investors are weathering the economic storm until after the beginning of the year, money has to be spent wisely in order to make sure that business may continue until capital can be raised.
As far as your idea to launch a gift card exchange (which is a good one - my company offers a gift card swap forum among our members), it’s much more difficult than most expect to provide a fraud-free environment where people trust that they aren’t going to be taken advantage of. Security and privacy practices are getting better and stronger as time goes on, but it can be much more complicated than expected to implement.
I hope I’ve answered your questions and please don’t hesitate to respond if you have any further questions!
I saw a lot of mentions about Plastic Jungle on the news and none on Leverage. You guys probably should’ve spent more money on hiring a good PR agent to target all those news outlets!
I think it’s more than a marketing problem because I signed up long ago and entered a few gift cards…then weeks went by and there was no action causing me to lose interest. It’s the chicken or the egg…like with any social network that requires interaction, you need critical mass for it to succeed and marketing will only go so far in keeping peoples interest levels piqued.
Agreed. Success here is based on attracting an audience, getting people to sign up, and keeping their interest. The first part of is all about effectively marketing the product.
Since not many people knew of Leverage then there was probably not much activity, causing those that did sign up to lose interest.
There were other issues. They were using retailers’ trademarks without permission and pinging the retailers’ websites to retrieve balances, creating a new layer of processor charges for those merchants, again without permission and also without benefit to the merchant. They may have been getting a deluge of “cease & desists”.
Then there was the interest they promised on unused card balances. They’d need a good level of activity to support that. The website is still up - check it out. http://www.leveragecard.com
well that would explain how the Greek VP hack into my computer…..bout the same time he got canned……time to go back with curly…..hahaha
Leverage, Inc., confirms a staff layoff earlier last week. This painful but temporary measure was taken to help the company focus operations in a very difficult economy. With an increasing number of high-profile retail and manufacturing bankruptcies, companies big and small are being urged by the investment community to make difficult cost cuts.
This layoff was regrettable, but necessary, to ensure our ability to continue to provide the high level of service and support that our customers and partners have come to expect. We have extended everyone affected by the layoff an offer to work with us on a contract basis as needed since the holidays are a very busy time for the company. While the layoff does have an effect on the pace of our overall development, the site is alive and healthy, it has more features than ever, and new features will continue to roll out over the next weeks and months.
Leverage’s online gift card, loyalty, and promotional services continue to deliver industry-leading value, convenience and protection for consumers, and provide a unique marketing opportunity that maximizes ROI for our merchant partners. In addition, investors continue to view Leverage and its unique business model as strong and viable. We expect to receive our next round of funding in Q1 2009, at which time we anticipate an even more rapid expansion of our operations.
Checkout http://www.giftcardrescue.com, which also allows you to sell or exchange unwanted gift cards. You can also find gift cards for up to 35% off.
Gift Card Rescue is robbery they take a huge percentage of the cards balance. Auction sites are a much better option. Ebay and Giftah is the only place intelligent people would trade their gift cards for cash. The forums and ‘rescue’ sites either take too much of the balance or are not secure.
You certainly have not used our services at GiftCardRescue.com. We pay between 60-80% cash with most cards getting 65% or 70% cash. Our pricing is based on the popularity of the card. So, popular cards like Walmart, Target, Gas Cards and the likes get 80% cash while most restaurant cards get 70% cash. We also pay the fastest in the industry since all our payments are done through paypal. We welcome you to try our services before you make sweeping judgements like that.