EXHIBIT 4.38

                       INVESTMENT AND MARKETING AGREEMENT

         THIS  INVESTMENT  AND MARKETING  AGREEMENT  (this  "Agreement")  by and
between  First  Data  Merchant  Services  Corporation,   a  Florida  corporation
("FDMS"), and ValueStar Corporation,  a Colorado Corporation  ("ValueStar"),  is
made this 16th day of January, 2001 (the "Effective Date").

         WHEREAS,  ValueStar  through its wholly  owned  subsidiary,  ValueStar,
Inc.,  a  California  corporation  ("Subsidiary"),  provides a  merchant  rating
service,  a  merchant  benefits  service  and  a  cardholder   benefits  service
(collectively, the "ValueStar System" or "ValueStar Benefits");

         WHEREAS,   FDMS  is  in  the  business  of  providing  certain  payment
processing services for credit and debit card transactions for merchants;

         WHEREAS,  pursuant to a Strategic  Development,  Marketing And Services
Agreement   dated   September  29,  2000  by  and  between  FDMS  and  ValueStar
("Development  Agreement"),  FDMS  is in  the  process  of  enhancing  a  system
proprietary to FDMS that will allow FDMS to match credit card numbers registered
with ValueStar with  transactions  at merchants  registered with ValueStar which
are paid for with registered credit card numbers (the "FDMS System");

         WHEREAS,  FDMS is making an  investment  in  ValueStar  in the  current
financing  round of Series CC Convertible  Preferred  Stock ("Series CC Stock");
and

         WHEREAS, ValueStar recognizes FDMS as a strategic investor important to
the marketing and operation of the ValueStar System.

         NOW, THEREFORE,  in consideration of the foregoing,  FDMS and ValueStar
hereby agree as follows:

1. Investment.  FDMS has agreed to purchase 44,445 shares of Series CC Stock and
warrants  (the  "Warrants")  to  purchase  1,333,350  shares of Common  Stock of
ValueStar for an aggregate  purchase price of $2,000,000 (the "Purchase  Price")
pursuant to the Series CC Preferred Stock and Warrant  Purchase  Agreement dated
January 16, 2001 by and between ValueStar and the purchasers  named therein (the
"Securities Purchase Agreement"). ValueStar and FDMS agree that, with respect to
FDMS's  obligations  to pay the  Purchase  Price  pursuant to Section 2.2 of the
Securities  Purchase  Agreement,  (i)  $500,000 of the  Purchase  Price shall be
payable in cash, by wire transfer to  ValueStar's  account  concurrent  with the
closing  of the  Securities  Purchase  Agreement;  and  (ii)  $1,500,000  of the
Purchase Price shall be payable by means of a  nonrefundable  credit in favor of
ValueStar,   which  amount  shall  be  credited  against  the  costs,  fees  and
commissions  which  otherwise  would be payable by ValueStar to FDMS pursuant to
Sections 4, 6, 8, 10 and Exhibit E of the Development Agreement.  The securities
purchased  by FDMS as  described  in this  Section 1 shall be  delivered  at the
Initial Closing (as defined in the Securities  Purchase  Agreement) and shall be
fully-paid and  nonassessable.  The parties  further agree that,  solely for tax
purposes,the  cash  portion of the  Purchase  Price  shall be  allocable  to the
purchase of the shares of Series CC  Preferred  Stock,  and the credit under the
Development Agreement described in (ii) above shall be allocable to the purchase
of the Warrants.

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2.  Investment  Option.  Pursuant  to  Section  2.3 of the  Securities  Purchase
Agreement, ValueStar is authorized to issue and sell additional shares of Series
CC Stock, up to a maximum  aggregate total of 500,000 shares  (including  shares
issued  at  the  Initial   Closing  (as  defined  in  the  Securities   Purchase
Agreement)). ValueStar hereby agrees to reserve, and grants FDMS or an Affiliate
(as defined in the  Development  Agreement)  designated by FDMS, the option (the
"Option") to  purchase,  for cash up to 177,778  additional  shares of Series CC
Stock and related warrants on the same terms as are set forth in Section 1 above
and the Securities Purchase Agreement up and to the date of March 31, 2001. This
Option may be exercised only one time and in a minimum of $1,000,000.

3. Marketing Exclusivity. Except for Union Bank, for a period of six months from
the  date of this  Agreement,  ValueStar  and its  Subsidiary  shall  not sign a
marketing  agreement  with a merchant bank which is not an FDMS Bank (as defined
in the Development Agreement). Except for First National Bank of Omaha and MBNA,
for a period of six months from the date of this  Agreement,  ValueStar  and its
Subsidiary  shall not sign a marketing  agreement  with an issuing bank which is
not an FDMS Bank or FDR Issuer  (as  defined in the  Strategic  Development  and
Marketing  Agreement dated November 1, 2000 between First Data  Resources,  Inc.
and ValueStar).

4. Director  Appointment.  So long as FDMS and/or its Affiliate own at least 50%
of the  securities  described in Section 1 hereof and purchased  pursuant to the
Securities  Purchase  Agreement  (assuming the exercise of Warrants and adjusted
for stock splits,  combinations,  dividends  and the like),  FDMS shall have the
right, but not the obligation, to designate a nominee,  reasonably acceptable to
the Board of  Directors of  ValueStar,  to be elected as a director of ValueStar
and shall  promptly  notify  ValueStar  of such  designee.  Upon receipt of such
notice,  ValueStar  shall cause FDMS's  nominee to be placed on the slate at the
next annual or special  meeting of  stockholders of the Company for the election
of directors (and each annual or special meeting  thereafter for the election of
directors pursuant to this clause) and shall use its reasonable efforts to cause
such nominee to be elected at such meeting of  stockholders.  If FDMS elects not
to designate a nominee for director,  or if FDMS's nominee is not elected to the
Board of Directors,  FDMS, so long as it is entitled to nominate a nominee for a
directorship  may designate one individual  (the "FDMS  Observer") to attend all
meetings of ValueStar's  Board of Directors  (and any  committees  thereof) in a
non-voting observer capacity. The FDMS Observer shall be entitled to receive all
reports,  presentations  and materials as if such FDMS Observer were a member of
the Company's Board of Directors.  Expenses of attending  meetings shall be paid
by FDMS except  that any FDMS  nominated  director  shall be entitled to receive
directors  fees  and  expense   reimbursement  payable  to  other  directors  of
ValueStar.  Notwithstanding  the  foregoing,  (a)  in the  event  the  Board  of
Directors  intends  to  discuss  or vote  upon any  matter  that is  subject  to
attorney-client  privilege,  or otherwise  involves  confidential or proprietary
information of ValueStar,  the FDMS Observer may be excluded from the portion of
the meeting at which such matter is  discussed  by the vote of a majority of the
directors  present,  and (b) in the event FDMS or any of its  Affiliates  or its
representatives  becomes a direct  competitor of ValueStar,  the Chairman of the
Board of Directors or a majority of the  directors  present may exclude the FDMS
Observer from the meetings of the Board of Directors.

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5. Press Release. Neither party shall make a press release or other statement to
the general public regarding this Agreement or the parties' relationship without
first obtaining the prior written approval of such release or statement from the
other party unless  required by law.  Notwithstanding  the foregoing,  it is the
parties' intent to issue a mutually  agreed-upon press release within 10 days of
the Effective Date to disclose the material provisions of FDMS's investment.

6.  Relationship  of  the  Parties.   The  parties  are  acting  as  independent
contractors and not as partners or in the capacity of any type of joint venture.

7. Entire Agreement.  This Agreement,  the Development Agreement, the Securities
Purchase  Agreement and the exhibits  thereto  constitute  the entire  agreement
between  the  parties  hereto  and  there  are no  representations,  warranties,
covenants or obligations  except as set forth herein or therein.  This Agreement
supersedes all prior or contemporaneous agreements, understandings, negotiations
and  discussions,  written  or oral,  of the  parties  hereto,  relating  to any
transaction  contemplated  by  this  Agreement.  Nothing  in this  Agreement  is
intended or shall be  construed  to confer upon or to give any person other than
the parties hereto any rights or remedies under or by reason of this Agreement.

8. Assignment. Neither party shall assign any interest in this Agreement without
the prior  written  consent  of an  authorized  executive  officer of the other,
provided  that FDMS may assign this  Agreement  to an Affiliate  (not  including
Alliances (as defined in the Development  Agreement))  without ValueStar's prior
consent[,  and ValueStar may assign or otherwise transfer this Agreement without
the  consent  of  FDMS  or any  other  party  hereto  pursuant  to any  sale  of
substantially  all of its assets or pursuant to any  merger,  reorganization  or
exchange of shares which might otherwise be deemed an assignment.]

9. Governing Law. The rights and obligations of the parties under this Agreement
shall be governed by law of the State of New York without regard to that state's
choice of law provisions.

10.  Waiver.  Any  failure of either  party to  enforce,  at any time or for any
period of time, any of the  provisions of this Agreement  shall not be construed
as a waiver of the right of that party to enforce  such  provisions  unless said
waiver is in writing, and signed by an authorized executive officer.

11. Term. This Agreement shall commence on the Effective Date and continue until
all obligations  provided  hereunder have been performed by the parties or until
September 30, 2005 whichever is earlier.

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12.  Notices.  Any notice required or permitted to be given under this Agreement
shall be sent in  writing,  by prepaid,  certified,  return  receipt  requested,
first-class  air mail to the respective  party at the address below,  or to such
other address as each party may hereafter specify in writing to the other.

         If to ValueStar:     Chief Executive Officer
                              360 22nd Street
                              Oakland, CA 94612

         with a copy to:      Mr. Don Reinke
                              Bay Venture Counsel
                              1999 Harrison Street, Suite 1300
                              Oakland, CA 94111
         If to FDMS:

         with a copy to:      General Counsel
                              First Data Merchant Services Corporation
                              12500 East Belford Avenue, Suite M16-S
                              Englewood, CO 80112
                              Fax:  (720) 332-0033

     All such notices shall be deemed to have been given upon receipt.

13.  Severability  of  Provisions.  Each  provision of this  Agreement  shall be
considered  severable and if for any reason any  provision or provisions  herein
are  determined  to be invalid or contrary to any  existing or future law,  such
invalidity  shall not impair the  operation  of this  Agreement  or affect those
portions of this Agreement, which are valid.

14.  Enumerations and Headings.  The enumerations and headings contained in this
Agreement are for convenience of reference only and are not intended to have any
substantive significance in interpreting this Agreement.

15.  Sales Tax Matters.

         a. Payment of Taxes.  ValueStar shall, in addition to the other amounts
payable under the  Development  Agreement,  pay all taxes , federal,  state,  or
otherwise, or duties, imposts, fees or charges,  however designated (hereinafter
`taxes'), which are levied or imposed by any governmental authority by reason of
the sale or license of any services , communication equipment, software or other
goods and products  provided  pursuant to this  Agreements  except for franchise
taxes and income  taxes  payable by FDMS on amounts  earned by FDMS and property
taxes payable by FDMS on property owned by FDMS. Without limiting the foregoing,
ValueStar  shall promptly pay to FDMS an amount equal to any items actually paid
or required to be collected or paid by FDMS.

         b. Calculation of Taxes.  ValueStar hereby authorizes FDMS to calculate
the total  amount of taxes due by  ValueStar  from the monies due FDMS and remit
the amount of taxes to the appropriate  taxing authority on behalf of ValueStar.
FDMS's  remittance of the taxes on behalf of ValueStar shall be computed by FDMS
on the  information  available  to  FDMS.  In the  event  of the  under  or over

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calculation  of any taxes,  ValueStar  shall be  responsible  for any additional
monies due including any  penalties or interest and for  collecting  any refunds
due to ValueStar from the appropriate taxing authority.

         c. Tax  Information.  Prior to FDMS making the tax remittance on behalf
of ValueStar  provided in paragraph  a. above,  ValueStar  agrees to supply FDMS
with any and all current information necessary for FDMS to compute and remit the
taxes,  including any tax exempt  certificate,  ant tax exempt claim letter,  or
evidence satisfactory to FDMS authenticating the exemption.

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         IN WITNESS WHEREOF,  and intending to be legally bound, the undersigned
parties have duly executed this Agreement on the Effective Date.

FIRST DATA MERCHANT SERVICES CORPORATION


By:    /s/ Pamela H. Patsley
       ---------------------
Name:  Pamela H. Patsley
       ---------------------
Title: President
       ---------------------


VALUESTAR CORPORATION


By:    /s/ Jim Stein
       ---------------------
Name:  Jim Stein
       ---------------------
Title: CEO
       ---------------------