DST Systems invests in Kansas City startup CouponCloud

A Kansas City tech startup company has received an investment from DST Systems Inc., a move expected to benefit the operations of both companies.

DST Systems invested an undisclosed amount of money in CouponCloud, which completed the SparkLabKC business accelerator program last year.

CouponCloud is developing a cloud-based system for the redemption and processing of consumer coupons commonly used at groceries and discount retailers. It already offers product makers a platform for creating coupons.

At the store, CouponCloud’s software would work as a store clerk scanned a coupon. It would validate the manufacturer’s coupon, collect information on the product bought and confirm the discount, authorize redemption of the coupon by the retailer and transfer funds from the coupon issuer to the retailer.

“And we need all of this to happen in a subsecond environment,” CouponCloud chief executive Matthew Simrell said. “You’re not going to scan your coupon and have it say ‘processing, processing.’”

Coupon issuers, Simrell said, would pay his company 6 cents on each coupon, which he said is less than the current system costs.

Large retailers now bundle paper coupons from multiple stores and ship them to clearinghouses. There the coupons are sorted, validated and counted by hand, then shipped to the manufacturers that issued them. Manufacturers, perhaps facing a pallet of coupons and a request to remit $2 million to a retailer, do their own work to validate the coupons again before sending payments to the retailers.

CouponCloud also can work with digital coupons — for example, those that consumers present to store clerks on their cellphones.

The enormous paper handling of traditional coupons presents a “glaring opportunity for improvement,” Simrell said.

CouponCloud has been funded by friends and family so far, and the company is seeking additional investment. But Simrell said DST’s backing cleared a big hurdle.

“They say the first money is the hardest, and they’re right,” he said.

Simrell met DST officials during his work developing CouponCloud at SparkLabKC. He said DST officials became interested because of similarities to some of their systems.

“Processing high-volume transactions is an important part of both businesses, and we believe that DST and CouponCloud may be able to advise each other on strategies to extend and enhance both companies’ technological and processing capabilities,” Nick Doyle, DST’s director of business development, said in the companies’ announcement.

DST is a data processing company that has a history of investing in other companies. It was an original investor in Leawood-based Euronet Worldwide Systems, an electronic payment systems company that later became publicly traded. DST sold its stake back to Euronet for $41 million in 2012.

This story was originally published February 4, 2015 at 11:02 AM with the headline "DST Systems invests in Kansas City startup CouponCloud."