Waves of Amazon merchant aggregator startups, floating close to $15 billion in funding, have rushed, stockpiled and exited the e-commerce market in recent years. Now, a new tide and a new version of the model seems to be emerging. Today, a Berlin startup called Everstores, which finds, buys and nurtures Shopify-based direct-to-consumer businesses, says it has raised €18 million ($17.5 million at current exchange rates) in funding, money it will use to continue to invest in its operational and data science tools, and to purchase and consolidate the D2C brands.
It has quietly scooped up three businesses and, according to co-CEO Kristoffer Herskind (who co-founded the business with two others, Carlos Lopez as co-CEO, and CTO Kirill Martynov), some 100 million data points from around 500 Shopify-powered D2C brands. that have been registered as possible acquisition candidates.
Now armed with 8 million euros in capital and 10 million in debt, the plan is to increase that figure with a more public launch. Earlybird Venture Capital leads the capital part, while Viola Credit leads the debit part, which we understand is structured as an “accordion” that can expand up to 60 million euros. Pre-seed investor Picus Capital, the founding angels, and people from KKR and Goldman Sachs also participated in the funding. The company has now raised €20 million in total, including an earlier pre-seed round.
If the Everstores business model sounds a bit familiar, that’s because it’s not only similar to the aggregator model above, it’s almost identical to the most recent variation of the idea, which is also being implemented by OpenStore, a startup from US that launched in 2021, which itself announced a hefty funding tranche last week that catapulted its valuation to nearly $1bn.
The rapid growth of OpenStore speaks of competition, but also validation for others in the same field like Everstores. There are thousands of companies building Shopify-based storefronts, collectively approaching $200 billion in GMV annually (Shopify’s GMV last quarter was $46.9 million), and many of them have run up against the wall when it comes to climbing.
The argument here is that Everstores (or OpenStore, or others) can provide capital to owners of those D2C brands and apply economies of scale to all the different and potentially expensive aspects of running an e-commerce business: supply chains and logistics; big data analytics; personalization and other technology: to do what smaller individual stores would have found challenging, if not impossible, to do on their own.
Herskind’s reference to the amount of data his company has already amassed is notable for a couple of reasons. First, it speaks to the company’s core thesis of why this business model is better than yesterday’s aggregation game typified by Thrasio, SellerX and others, which is based on collecting Amazon-based business: the data. that one can get from Shopify businesses is by its nature much more complete and therefore better.
“It’s about the data,” he said in an interview. “In Shopify, merchants have information about their customers because they own the customers. At Amazon, you have product and order data, but you don’t really know who your customers are. That is the fundamental distinction. And without knowing who they are, knowing the true cost of acquiring customers is difficult. That also makes it difficult to assess these businesses and subsequently scale them.”
And he thinks there are other market-specific reasons why independent online businesses are better candidates for aggregation and consolidation than Amazon-based merchants.
For one thing, Amazon is already doing a great job in areas like supply chain management and logistics, leaving little room for improvement. “It would be difficult for us to do anything to improve operationally,” he said.
On the other hand, taking a number of Shopify-based businesses, many of them still use a mix of services to meet marketing, supply chain, inventory, and logistics needs. Herskind estimated that for B2C e-commerce companies, 20-30% of their costs are related to marketing in e-commerce and B2C, so there is an opportunity to create more efficiencies there.
The other interesting point to note about the Everstores data is how much it already has (100 million data points currently), even though it has only collected three businesses so far.
Herskind said that since opening his platform as a private beta, some 500 companies have logged in and registered their information to begin providing data to Everstores to be part of the latter’s evaluation of companies. This speaks to the demand among them to find a way out, but surprisingly how open these companies seem to be to the idea of sharing data on how they’re doing.
Herskind notes that even in cases (most of them, as it happens) where Everstores isn’t interested enough to go into an M&A process, he suggests keeping the data streams open so he can continue to assess the situation. .
This opens the door potentially also to the company creating other products using that, reminiscent of companies like Xeneta, which has also turned third-party data into a thriving business in the world of shipping prices.
However, it’s worth seeing if Shopify merchants are really itching to sell, or if that’s just a hangover from the previous incarnation of the cumulative games. Herskind said the market has gotten so hot for FBA-based merchants that companies that might initially have been seen as 2 or 3 times earnings (EBITDA), strong competition at the top of the market drove those multiples to sales 8 to 9 times profits. . Have aggregators learned their lesson from this, or will the same inflated pattern repeat itself? It is the question for both merchants and aggregators themselves.
“That [inflation] it also caused the business model to break down,” Herskind said.
One thing that the old and new incarnations of aggregators have a lot in common with is their insistence that they are bringing a lot of technology into their otherwise fairly obvious financial plays.
“We approach everything from first principles and with a fundamental belief that technology could deliver better results across the board. We’re excited to be working on the frontier of this space, and we’re bringing together the smartest data scientists and engineers to solve these open problems with us,” Martynov said in a statement.
“We believe that D2C is a fundamentally attractive opportunity where structural problems in space can be meaningfully resolved through data and software. Everstores’ technological platform allows both the identification of the brands with the greatest potential and the total capture of the value of this potential through its operating system. We are proud to support the founders of Everstores in their mission to unlock the D2C asset class at scale through their leading technology platform,” Tim Rehder, partner at Earlybird, said in a statement.