Many of the e-commerce package companies, also known as aggregators, have slowed down this year after 2021. However, some young companies in this space are still growing.
One of them is OpenStore, founded in 2021 as a way for Shopify entrepreneurs to sell their businesses within days with cash delivery and a less stressful experience. Over the past 18 months, OpenStore has acquired dozens of businesses representing tens of millions in revenue.
The company’s early success may be down to the makeup of its founders: OpenStore is led by some heavy hitters, including Founders Fund general partner Keith Rabois and Jack Abraham, co-founder and managing partner of Atomic, who started the company with Matt Lanter and Jeremy Wood.
“We’ve been disciplined by following the same principles that I’ve been working with for the past 23 years,” Rabois told TechCrunch.
Continued growth
Despite layoffs at collectors and even cuts to their procurement departments this year, OpenStore has “grown significantly, increasing the number of brands and tripling the size of the team,” Rabois said. The company now has more than 100 employees.
In addition, as funding for aggregators has slowed to a comparative decline — $9 billion in funding went to aggregators in September 2021, compared to $2 billion in the same period in 2022, according to the Financial Times — the Miami-based company is among the recipients. Among those recent investment dollars. After all, OpenStore closed on $32 million in a round led by Lux Capital at a valuation of $970 million. The company’s valuation is a 25 percent increase from the $75 million in funding the company announced last November 2021.
The new round brings OpenStore’s total equity funding to more than $150 million, from investors that include Atomic, Founders Fund, General Catalyst and Khosla Ventures.
“The round was already booked,” said Rabois. “We have a fair amount of capital on the balance sheet and we wanted to raise it next year, but Lux contacted me. I respect them and their style and was willing to work with them.
The “sweet spot” for OpenStore purchases is U.S.-based brands with a gross merchandise volume of $1 million to $10 million, Rabois said.
Josh Wolff, co-founder and managing director of Lux Capital, said in an email that the firm “believes the OpenStore model is the future of online retail” and that “Supply’s focus on speeding up merchants’ liquidity means that OpenStore is especially valuable and useful in difficult economic times.”
The company is accelerating its acquisitions and will use some of the new equity to continue growing the group and acquire brands, he said. Brand acquisitions include clothing brands Jack Archer, Barn Chic Boutique, Yogaste and Werva.
OpenStore’s long-term goal, according to the company, is to “bring the spontaneous experience back online” through a new way of shopping that connects merchants with customers through information, data and capital.
Many of these efforts are led by former DoorDash engineer David Zhu, who joined OpenStore in May as head of engineering. It will continue to develop the company’s technology by automating the process of acquiring merchants on Shopify and accelerating the operational efficiency of those who manage these online stores through OpenStore. The company said.
Challenging times
Generally, aggregators buy companies from marketplaces like Amazon and Shopify with the goal of growing them using technology and logistics expertise. Inflows into these types of companies have been driven in part by Trasio’s pace to reach its peak in 2020.
This year, funding seems to have dried up.
There are countless reasons why this is so. Talison Hollywood, director of specialist M&A at London-based Hahnbeck, brokers deals with collectors, told TechCrunch: “It’s not that any particular collector or brand owner is struggling, it’s just that online retail in general has been very difficult. year.”
He added: “For most of these brands, the slowdown or reversal of growth compared to the peak of Covid, combined with additional costs, particularly in shipping but also in click advertising and other factors, has resulted in difficult business conditions.” “Almost all brand owners feel that way.”
Hollywood went on to say that the collectibles sector is fragmented, with a small percentage of brands, particularly younger ones, still growing well and with good margins.
In the year He agreed that the overall market in 2022 will be “much quieter than 2021,” but that’s for buyers and sellers. On the buyer’s side, the FT reports last year that dealers were sometimes buying at 6x to 7x adjusted earnings before interest, tax, depreciation and amortization, meaning acquisition capital has yet to go away.
That was good for sellers, but as the e-commerce market slowed, so did their businesses. They had to manage logistical issues with products that had been sitting in the middle of the ocean or on ships for the past year. All that combination is keeping sellers waiting for business to pick up again, Hollywood said.
The business continues to say that “valuations are softening a bit, but they haven’t collapsed,” and that capital continues to flow, citing Cap Hill Brands’ $100 million Series B investment earlier this month as a sign that investors still believe it. The collector model.
Meanwhile, Rabois is looking at reviews. He believes OpenStore has “nothing in common with other aggregator companies,” which he calls “arbitrage businesses on Amazon.” Instead, he said, while companies that gather from Amazon may not be able to make many improvements, there is room for growth with Shopify.
The company continues to buy “multiple companies per week,” and is being “careful about valuation” and disciplined in pricing, Rabois said.
“Last year it was a hot market, but now we are very strict about valuation and business value and we are offering favorable offers,” he said.
