It’s not surprising that the Internet blew up last week on TechCrunch, Business Insider, and all over social media when Highnote announced it had emerged from stealth with $54M in funding. Amy Cheetham and I have been just as excited about Highnote since we first invested. We’re glad to finally share what we think makes it so special as they work to fundamentally transform the landscape of embedded finance experiences by building the world’s most modern virtual card issuance platform.
At Costanoa, we love to back founders with unique insights into big and important markets, typically because they’ve experienced the problem firsthand or have built previously in the space. The team at Highnote, led by CEO John MacIlwaine and CTO Kin Kee, fit this profile exactly.
Having worked together at both Braintree and Lending Club, John and Kin clearly knew what was broken with card issuance and were the right team to fix it. Kin’s incredible skills as an engineering leader and architect complement John’s demonstrated business judgment and leadership, skills he honed as CTO of Braintree and prior leadership roles at Lending Club, Green Dot, Visa, and Morgan Stanley. Fun fact: John’s also the first founder we’ve ever worked with who has a homoglyph in his name.
The virtual card market is large ($188B) and growing quickly (22% CAGR) as physical credit and debit cards are being replaced by virtual cards in our digital wallets that we use with a flash of our phones or watches. Bill payment platforms like BillGO use them to deliver real-time payment. Food delivery companies use them to enable drivers to pay a restaurant or store upon pickup. And insurance companies use them to deliver claims payments.
Yet, as John explained in our first meeting, the current virtual card systems still have too many shortcomings. Most are built on legacy platforms, are too brittle and inflexible to deploy, take too long to set up, and impose frustrating constraints on the customers they are trying to serve. While some modernization has occurred in both card issuing and acquiring platforms over the past 10-15 years, these more limited approaches don’t address the full market need.
That’s where Highnote comes in. Unlike legacy systems, the Highnote platform is “built for purpose,” creating a next-generation end-to-end process that streamlines core capabilities that customers need. The platform that Kin and his team built is truly groundbreaking, giving customers a truly great user experience and extraordinary control over each transaction.
With these capabilities, we expect Highnote to have a major impact on the industry. As virtual cards increasingly replace plastic ones, businesses can issue virtual cards instantly, launch new capabilities and use cases, and enable entirely new business models. Neo (digital-only) banks can provide immediate access to new ways to make payments. Earned Wage Access providers like GoDo and AtoB can give workers immediate access to the cash they’ve earned for the hours they’ve worked. And both brick-and-mortar and e-commerce retailers can enhance their loyalty programs and engagement through both virtual and branded physical cards.
The best teams operate with ferocity, and we’ve been amazed by the speed at which Highnote executes. In less than a year, they’ve built a platform, hired an extraordinary team, been approved by MasterCard, signed on with two sponsor banks, added a half dozen initial clients and gotten the system live and operational. The same is true on fundraising. We co-led the Seed round with Oak HC/FT late last year and Matt Streisfeld from Oak saw enough to step up and lead the Series A just six months months later.
John frequently quotes Jeff Bezos’ “It’s always day one” at Highnote. Even with everything the team has achieved in its first year, they’re clearly just getting started.