OpenStore Raises $75M to Acquire More Shopify Sellers

wait, there are custom embroidered naruto vest stores? link?

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.

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.

“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.

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

> When a merchant sells their long-tail business, can these folks run it just as well? I'm incredibly skeptical of that claim.

Based on my experience from another industry: no, they will run it worse but that does not matter since the difference in valuations between the seller and buyer is big enough.

The extreme examples helped me imagine customer service would by necessity tend towards the generic interactions, like you expect from csr sourced overseas. Seems like no customer would be the wiser, and expect their favorite store has gone mainstream/is a success. As long as they can get their blessed dog bed accessories, customers won’t care much either I suspect.

But the real issue for me is what about the products? Will products get better by further design and development?

Or are we talking about another niche entirely? Crap products catering to customers with more money than sense?

I don't understand the hate for this company. YC has funded multiple such aggregators (see Moonshot Brands) and I don't see any negative complaints about those.

Yes, that's what they are.

Openstore just has to keep the facade going long enough to exit. Perhaps even quick enough to ride the pandemic demand train.

Same thing happens with Amazon sellers.

They are probably focusing on shopify because they need to automatically ingest financial metrics for the valuation. Shopify has the transaction data so they can automatically value any company on the platform. They are probably starting with shopify since its the biggest ecommerce platfor.

I'd imagine that targeting Shopify makes the process much easier for evaluation and migration.

Most of these target Amazon sellers, but they also roll up other independent stores. The thesis in this case that Shopify store operators are analogous to Amazon store operators, so they can use the same roll-up model on Shopify people, which isn't actually the case for many important reasons.

They leave them on Shopify. Basically it is a way for owner operators to cash out if their Shopify stores have reached a certain level of revenue and the business is kinda automated.

I guess, by nature of being online, their stores are always open?

But really it's more likely to be a cynical use of an arbitrary word with positive associations (and a use that itself dilutes those positive associations).

Same founder as Opendoor

i think open is a verb here not a noun.