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OpenStore Raises $75M to Acquire More Shopify Sellers

forbes.com

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Re: OpenStore Raises $75M to Acquire More Shopify Sellers

#11

Post by echelon »

gruez wrote: post #9
thatguy0900 wrote: post #6

Earlier quoted context omitted.

I wonder if they're just betting on unicorns. Sure, 95% of these stores might die but if the last 5% become powerhouse brands it could be worth it.

>but if the last 5% become powerhouse brands it could be worth it. wouldn't they switch off the platform as soon as they get big enough?

> wouldn't they switch off the platform as soon as they get big enough?

OpenStore is buying the business outright. That's what makes this venture seem crazy to me.

Maybe they'll get lucky and buy a bunch of Scrub Daddy equivalents, but I still think that the founder's personality and what they bring to the table is the determining factor in success for these breakout successes.

Re: OpenStore Raises $75M to Acquire More Shopify Sellers

#13

Post by thatguy0900 »

gruez wrote: post #9
thatguy0900 wrote: post #6

Earlier quoted context omitted.

I wonder if they're just betting on unicorns. Sure, 95% of these stores might die but if the last 5% become powerhouse brands it could be worth it.

>but if the last 5% become powerhouse brands it could be worth it. wouldn't they switch off the platform as soon as they get big enough?

Well if the platform owns enough of them they could just try to be a big destination site. But you're right, they probably would need to leave to be huge brands.

Re: OpenStore Raises $75M to Acquire More Shopify Sellers

#14

Post by xivzgrev »

echelon wrote: post #2

When a merchant sells their long-tail business, can these folks run it just as well? I'm incredibly skeptical of that claim. Long tail screams boutique, special interest. Holy water blessed dog cushions, handmade driftwood furniture, custom embroidered Naruto vests, sex toys, and other random things. Can the venture equivalent of private equity really run these businesses and not drive them into the ground? Do the ma…

I doubt they’re going after so niche products. Article says they’re pursuing economies of scale so it has to be things that fit together.

A small company could also be an emerging “niche” in a large space. Like keto snacks were a few years ago. First you could not find, then you could but they were crap / not actually keto, now there are many actual keto snacks, and soon there will be more / cheaper / more prevalent in brick & mortar.

So just taking that as an example, if you rolled up a few keto snack brands, there’s probably economies of scale across both the audience (to personalize ads and up sell products) and supply (it’s not a big world there’s only so many manufacturers at other end)

So I think that’s a good idea. But I do think this is a sign of the times - high profile leader raises a lot of money with no proof it works. He must feel like he can prove it out and cash out before…whatever this market is…tanks.

Re: OpenStore Raises $75M to Acquire More Shopify Sellers

#15

Post by skrtskrt »

echelon wrote: post #2

When a merchant sells their long-tail business, can these folks run it just as well? I'm incredibly skeptical of that claim. Long tail screams boutique, special interest. Holy water blessed dog cushions, handmade driftwood furniture, custom embroidered Naruto vests, sex toys, and other random things. Can the venture equivalent of private equity really run these businesses and not drive them into the ground? Do the ma…

“Shark Tank for Shopify” already exists, there is plenty of consumer goods VC.

These aggregators are similar to a spray-and-pray VC model, but generally with the ability to do whatever with the company (shut it down, sell it off, merge it with others). Note that in consumer VC, the exit multiples of early stage investing the best companies are not like 100,000x like in tech, they are like 50x max. Also the exit is selling to Unilever and Johnson and Johnson, not ringing the opening bell on Wall Street.

However, consumer goods companies don’t crash and burn a giant pile of cash the way crashing tech startups do, and individual consumer goods companies are pretty uncorrelated with each other. Unless two companies both make the exact same snack or beverage, they can both win, and often do. So a VC basket of decent consumer goods companies is very, very diversified, has lower risk and cash burn, but also lower multiples.

Aggregators kind of make me roll my eyes, it’s just raw, stupid capitalism, not sexy, inventive, or imaginative at all. But lots of these people start a decent company with a decent product, but don’t want to run it until they die or hyperscale it until they get bought by unilever.

Re: OpenStore Raises $75M to Acquire More Shopify Sellers

#17

Post by shmatt »

echelon wrote: post #2

When a merchant sells their long-tail business, can these folks run it just as well? I'm incredibly skeptical of that claim. Long tail screams boutique, special interest. Holy water blessed dog cushions, handmade driftwood furniture, custom embroidered Naruto vests, sex toys, and other random things. Can the venture equivalent of private equity really run these businesses and not drive them into the ground? Do the ma…

The missing link here is - some businesses that suck make tons of money

Yes, they don't like the comparison to Thrasio but its a great example. Buy a bunch of meh-quality glorified dropshippers and make $$$$

I'm sure their end game is creating a big marketplace. Half the search results on Amazon and other big retailers are marketplace results anyways. And the result product is usually mediocre. But people like mediocre, I guess

Am I betting the Tesla HR manager selling steaks on Shopify was giving customers top quality at top customer service? No, not really

Re: OpenStore Raises $75M to Acquire More Shopify Sellers

#18

Post by boringg »

Seriously this sounds like a isht business. End result is squeezing all the merchants into one giant crappy company - all profit rolls up to OpenStore.

This also kills off any creators willingness to bring newer products to the market on a continual basis as they no longer own the store. I guess alternatively what you end up is with a bunch of people who make stores quickly off a new product and sell to OpenStore, rinse and repeat.

Re: OpenStore Raises $75M to Acquire More Shopify Sellers

#19

Post by jrochkind1 »

Wait, so they buy Shopify sellers, and move them off Shopify onto their own platform? Do I understand this right?

Or do they leave them on shopify?

What an odd business model. To focus only on businesses using the shopify platform.

I wonder how Shopify views this?

Re: OpenStore Raises $75M to Acquire More Shopify Sellers

#20

Post by staticautomatic »

jrochkind1 wrote: post #19

Wait, so they buy Shopify sellers, and move them off Shopify onto their own platform? Do I understand this right? Or do they leave them on shopify? What an odd business model. To focus only on businesses using the shopify platform. I wonder how Shopify views this?

Same thing happens with Amazon sellers.
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