NextCard Gets $38M Boost, Repositions

Share this article:
Internet financial services concern NextCard Inc. landed $38 million in equity financing from a syndicate of new institutional investors. The San Francisco-based company plans to use the funds to increase its online advertising and capitalize itself as a bank.


The equity boost comes from new investors including Moore Capital Management, Kleiner Perkins Caufield & Byers, Sequoia Capital and Highland Capital Partners as well as current investors Brentwood Venture Capital, Trinity Ventures, St. Paul Venture Capital and Forrest Binkley & Brown.


NextCard, previously known as Internet Access Financial Corp., already has become one of the top 20 advertisers online since launching its marquee product, the NextCard Internet Visa, in December 1997. The company now spends some $500,000 a month for 4 million daily advertising images, and its direct-marketed NextCard has received half a million applications.


NextCard plans to increase promotion of its Internet Visa, a credit card targeted specifically to Internet users that features online credit approval, interactive choices of terms and card design and an online safe-shopping guarantee. Less than half of the new funds will go toward advertising, but advertising expenditures may double, said Richard Goebel, NextCard's director of business development.


NextCard also plans to use part of the money to capitalize itself as a bank, a process the company hopes to complete by the first quarter of 1999. According to financial services analyst Gary Craft from Bank Boston Robertson Stephens, NextCard's direct approach could vault the company beyond many established banking institutions.


"Their strategy is to view themselves not as just a credit card asset originator, though that is a highly profitable business to be in, but rather to use their techniques and tools and the marketing skills to become almost a complete bank," Craft said. Such a move would include going after many of the asset classes that traditional banks are involved in, especially deposit gathering, a very inexpensive form of funding. Currently, privately held NextCard markets itself through a partnership with Heritage Bank of Commerce, San Jose, CA.


NextCard estimates that it holds about 20 percent of the market for online credit card applications.


"What we found is that one of the killer aps in the last twelve months was credit card applications," said Cyber Dialogue CEO Mark Esiri. "And it's really being driven by NextCard and First USA," he said, referring to the Bank One Corp. credit card subsidiary. "They're by far the leaders."


The new NextCard investors all have a history of putting money into big technology and Internet names, including the likes of American Online Inc., Yahoo! Inc., Amazon.com Inc., CheckFree Holdings Corp., Sun Microsystems Inc. and 3Com Corp. NextCard formally closed its new financing Nov. 6.
Share this article:
You must be a registered member of Direct Marketing News to post a comment.
close

Next Article in Opinions

Sign up to our newsletters

Follow us on Twitter @dmnews

Latest Jobs:

More in Opinions

When Marketing and Sales Collide: Answers

When Marketing and Sales Collide: Answers

The head of marketing operations is doing just as much selling as marketing, sans the commission her sales colleagues earn. How should she handle it? See how our readers would ...

App of the Week: RescueTime

App of the Week: RescueTime

RescueTime aims to help users become more focused and productive.

Defending Direct: Answers

Defending Direct: Answers

Miranda Bell knows her program will pay off but CEO Dasha Atwala says to nix it. What should she do?