[HN Gopher] Launch HN: Moonshot Brands (YC W21) - We buy and gro...
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Launch HN: Moonshot Brands (YC W21) - We buy and grow e-commerce
companies
We are Allan, CJ and Jesus, co-founders of Moonshot Brands
(https://www.moonshotbrands.com/). We offer e-commerce founders a
simple way to sell their companies, which we then grow. The story
behind this began several years ago when CJ and I were trying to
sell our e-commerce companies. The process was the most stressful
experience of our lives. Drawn-out negotiations. Terrible payment
terms. The buyers wanted us gone. We lived with a fear that the
businesses we worked so hard to build would be sucked dry and spit
out as a shell. We have sold 5 companies and experienced this pain
before. Unlike technology businesses where a large group of buyers
exists, e-commerce has an anemic acquirer base. We started Moonshot
Brands to fill this gap and make getting acquired approachable. We
work with both direct-to-consumer brands and those that sell on
online marketplaces. Our timeline is fast: we provide a valuation
within 48 hours and close in 45 days. We don't restructure
companies. Since founders who have achieved product-market fit are
onto something, we want them to join and build with us. We bring
the experience and resources to help them grow. Unlike private
equity firms, we're not in it for short-term gains that leave
customers and employees on the hook. We invest long-term and make
money from sales growth on the e-commerce sites. Our goal is to
build the acquisitions company that we wish would have existed when
we sold our own businesses. The e-commerce sector is growing
rapidly, so the timing is right. We have $160M in funding and $15M
in revenue to date. If you know a founder of a profitable
e-commerce company looking to sell email allanf@moonshotbrands.com.
We pay finder's fees for successful intros. Also, we're hiring, if
you know of any great marketers, devs, or BD email or apply here
https://moonshotbrands.breezy.hr. We're excited to tell you about
this so if you have questions we'd love to hear from you!
Author : AllanFischMB
Score : 81 points
Date : 2021-05-14 13:52 UTC (9 hours ago)
| dubcanada wrote:
| Ya, owning several ecommerce sites there is nothing on this site
| that says if you would be even interested.
|
| I think some details on what you are looking for (even from a
| broad sense, like what category, do you allow single product
| dropshipping, shopify, custom application, etc).
|
| Also there is tons of ecommerce sites on websites like flippa and
| others, why not look there?
| cjisakow wrote:
| good point, here is basic criteria: Private label brands
| $3M-$30M in revenue 15%+ net margin Predominantly on Amazon but
| also open to Shopify/DTC brands that are profitable. Allan
| built HomeSav focused on home goods ("everything from couches
| to candles"), and we also like sporting goods, office, home
| improvement, etc... In terms of products staying away from fast
| fashion, electronics that can become obsolete. We don't do drop
| shipping, software etc... Looking globally
| pieter1976 wrote:
| Sounds a bit like Rocket Internet's business.
| cjisakow wrote:
| Which part of their business?
| jwtnb wrote:
| $160M in funding. Is that a typo?
| bambax wrote:
| "funding" can mean many things. It could be debt.
| kall wrote:
| Probably not, there are huge rounds of funding going into these
| companies in europe right now, like SellerX, Razor Group,
| Berlin Brands Group etc (and Thrasio in the US).
|
| Most if them are focused on amazon FBA which I honestly don't
| understand. This generic approach sounds better to me.
| tptacek wrote:
| It sounds high, but their business model involves them buying
| established revenue streams, right? Their use of funds is less
| speculative than a typical software company?
| 55555 wrote:
| Probably not. Lots of funding going into buying ecom brands and
| amazon brands and rolling them up.
| cjisakow wrote:
| Not a typo though we haven't announced it yet, whoops....
| ohashi wrote:
| Hey CJ :) Nice to see you guys publicly launching here and great
| to see more success coming from Affinity Lab alumni. Good luck!
| cjisakow wrote:
| Affinity Labs! So far ahead of their time...
| kamilszybalski wrote:
| Lots of exciting movement in this space. Since you've mentioned
| Canada, I'll throw a shoutout to my friends at Emerge commerce
| https://emerge-commerce.com and clearco https://clear.co
|
| The latter provides a new funding mechanism for e-commerce
| companies.
| AllanFischMB wrote:
| Kamil we agree with you there is a significant amount of
| positive activity in this market and those are great companies.
| What is a great outcome of this is that the entrepreneurs and
| e-commerce sellers and operators have more options. Moonshot is
| excited to provide great options for e-commerce company
| operators as we are we are cut from the same cloth. Moonshot is
| unique in that we are very excited to have the entrepreneurs
| join us and bring their companies to the next level while we
| also offering an option of a traditional acquisition, both
| great options.
| snug wrote:
| Do you have any success stories? I see nothing on the site
|
| Also your blog points to a couple of generic blog post.
| cjisakow wrote:
| We've been hyper focused on executing on finding great
| companies and now operating and growing them with the
| entrepreneurs, so embarrassingly haven't posted any content
| yet. BUT we just brought on an awesome content marketer and
| will begin telling our story. magnetoboards.com was among our
| first acquisitions if you are looking for a longboard!
| bsid wrote:
| Just want to preface by saying - this is not a comment on you but
| rather YC. You're trying to improve the VC process for consumer
| brands, and I'll take you at your word for that.
|
| I'm surpised, and a bit saddened, to see YC investing in a PE
| rollup kind of play. I'm probably reading too much into it, and
| maybe I had a misconception about YC was supposed to be, but to
| me, the brand was about innovation and scrappiness. YC founders
| use technology to move the world forward, usually through a
| better product. This brand conglomerate is way more blatantly of
| the form of "lets try to take a pile of money, and turn it into a
| bigger pile of money".. of course they need $160M in funding, it
| is a fund. That money will go chiefly to buy companies, not into
| massive scale.
|
| Not many entrepreneurs start out hoping to engage in raw
| capitalism, guided purely by returns. YC seemed like a place that
| catered to that dream of building something for yourself. Maybe
| that was never true, and I just had stars in my eyes. Maybe
| there's no longer those low hanging fruits and everything's
| become harder. But this seems almost of a betrayal of that
| original dream, only showing that YC is the same as everyone else
| in our capitalistic society.
| skeeter2020 wrote:
| Everything you state describes YC a decade ago, or even more
| recently but none of their current actions beyond empty words
| have demonstrated this sort of focus or commitment. I don't
| doubt that all the partners are genuine, honest and ambitious,
| but it's hard to see from inside the machine. YC is moving up
| market.
|
| The good news is it's never been easier to bootstrap the phase
| YC traditionally got you through, and there are a lot more
| resources and higher level of sophistication from other
| providers. This is thanks to YC in a large part, but their role
| and focus has changed.
| eganist wrote:
| The referral feature isn't clear to me - would someone refer the
| contact info of the target business, or one's own contact info
| for further conversation? I'm assuming the latter.
|
| And congratulations!
| cjisakow wrote:
| Thanks we are moving fast and building things that don't scale!
| its just a form right now, and then I email you a referral
| agreement that say's we will pay you if we close the
| transaction. I'll go in and update the text on the form to make
| it all more clear.
| WORMS_EAT_WORMS wrote:
| Congrats all! Mind elaborating a bit more on how this is
| different than selling to some PE bros though?
|
| Also, for anyone reading this, if you're a high income individual
| or have come into a windfall from RSUs/Stonk/inheritance/coin
| there's marketplaces and plenty of access to brokers if you want
| to buy your own shop.
|
| Lot of sellers under $1MM ARR will sell their company at like
| 2-3x (!) which if you can just maintain or improve just slight, a
| couple years becomes pure cash vehicle. I know a few folks who
| navigate this space and make great money buying very small and
| profitable businesses too low-profile for PE to care for.
| o___ wrote:
| > windfall from RSUs/Stonk/inheritance/coin there's
| marketplaces
|
| Do you recommend any specific marketplaces?
| cjisakow wrote:
| We are both entrepreneurs ourselves, and have lived through
| working with PE shops that might gordon gecko style fire
| everyone and flip. Its not our model, our ideal seller stays
| and grows within Moonshot, where we can both create more value.
| That being said there are sellers ready to cash out, and for
| them we have a platform so we can operate and grow the
| business.
|
| On your point on brokers, we get our leads a variety of ways,
| including by building great relationships with brokers.
|
| And your last point for sure the higher the ARR the higher the
| multiple generally (at extreme someone like Proctor and Gamble
| trades 20x-40x). What we find from our experience is that there
| are folks that are asset rich (meaning the company is ebitda
| positive) but cash poor because all the money goes back into
| inventory/product launches etc... Moonshot is flexible and can
| help them take money off the table, and then get upside in the
| future.
| WORMS_EAT_WORMS wrote:
| Thanks for response. Super interesting and cool. Wish you all
| the best!
| cjisakow wrote:
| oh i also see you know a lot of folks who buy companies, if
| they grow them to $3M+ and are looking to take money off the
| table send them our way! We pay referral fees for successful
| deals https://www.moonshotbrands.com/leads
| mtnGoat wrote:
| One of the problems with acquiring e-commerce business is that
| most of them are not very well ran. Most do not even know their
| COGS or margins, thus making them horrible acquiring targets
| because you don't know what you are buying. Might work at scale
| though. Good luck with the venture though, good idea.
| cjisakow wrote:
| We are looking at companies that are doing at least a few
| million dollars in sales. The sellers are super impressive in
| my opinion, its hard to get there! So yes sometimes they don't
| have the best records, but we are looking at companies with a
| relatively few number of skus so if we need to go back to the
| bank records and invoices to recreate cost structure we can. So
| far most sellers we work with are great entrepreneurs that
| either don't have the resources, capital or experience to take
| the brand to another level.
| boplicity wrote:
| Simple but important question: What is e-commerce?
| cjisakow wrote:
| if a tree falls in the woods..
|
| but seriously how we are defining it for our business is
| private label sellers of physical goods. So you own a brand
| that sells on Amazon or DTC, and your products have your brand
| on it. The supply chain varies from folks who own their own
| manufacturing to others who source from suppliers and never
| touch their product it just straight to amazon FBA. But not
| drop shippers, not software, not online marketplaces.
| austinpena wrote:
| You should partner with adleaks. They love this stuff.
| cjisakow wrote:
| cool, will have to check it out, do you know them? feel free to
| intro or i can find them.
| austinpena wrote:
| I'd just head to their partners page on their website.
| ultimatewhip wrote:
| What does your valuation process look like? Are the prospective
| buyers uploading csv dumps from their ecommerce store e.g.
| shopify, woocommerce, etc.. Or are you integrating into these
| stores to pull the info you need?
| cjisakow wrote:
| Yes and yes. We are building out integrations to automate,
| right now we are doing a mix of manual and automated
| processing. There are a bunch of different companies that have
| built pipes into the platforms and then there is clean up and
| analysis. One of the nice things about these busiensses is that
| they are not super complex and by doing a data dump from amazon
| and their DTC site you can get almost all you need on revenue
| side, then if they are spending on facebook/insta or google you
| need to pull that data in as well.
| cjisakow wrote:
| I'd add after we agree on terms we do a light weight due
| diligence process with accounting/law firms to confirm what
| we saw
| indominus123 wrote:
| How does Moonshot quickly and effectively perform due diligence
| on prospective acquisitions? Have you built any in house tools
| for such purposes?
|
| I ask because a good friends of mine who works in private equity
| was telling me about how ridiculous and inefficient he though the
| process was. Apparently it's a drawn out process of emailing
| Excel spreadsheets back and forth.
| [deleted]
| MattGaiser wrote:
| Is your goal to essentially become a conglomerate of niche
| e-commerce firms or do you eventually intend to resell the
| companies you acquire to others?
| cjisakow wrote:
| We plan to be long term holders, eventually taking the company
| public. We look at Constellation Software up in Canada (where
| Allan is based) as a great model. The entrepreneurs often stay
| with the company since they know the customer and product
| better than anyone. Then with shared resources, best practices,
| and talking to their peers they can grow their business.
| jxramos wrote:
| sort of reminds me of physicians or lawyers sharing a
| practice than going at it alone.
| motives wrote:
| Forgive me for my naivety, but whats the point of the
| founders staying when you're taking out almost all the
| potential upside for them by acquiring them? Surely if they
| believed in the ability for their company to succeed long
| term they'd stick by it without taking an acquisition early.
| If your advantage is capital and experience, why would they
| not just go for a debt based option like clearbanc and retain
| their potential upside?
| ghufran_syed wrote:
| Berkshire hathaway used to do a lot of this. Also, if the
| sellers want to retain upside, they can accept some portion
| of the purchase in stock from Moonshot
| cjisakow wrote:
| for sure Berkshire inspired Mark Leonard at Constellation
| which informs our approach
| cjisakow wrote:
| Clearbanc and others super useful to help short term cash
| flow, but its tough to get enough money out to take money
| off table (a lot of founders have a chance to take money
| off to go buy a house etc...). For example one of our
| portfolio company was started by 4 guys with $20K, and we
| just were able to pay them $4M, and then if they keep
| growing it they get more upside. One of the ways to grow is
| to increase the inventory and then increase the velocity of
| sales through new channels and increase in advertising.
| They didn't grow it in the past because they didn't want to
| make that investment but we have access to capital to make
| that investment.
| WORMS_EAT_WORMS wrote:
| Big, fat cash bonus...
|
| Equity in big, fat growing company...
|
| Help from shared pool of resources/experts taking a company
| from $5-20MM (easier) in sales to $100-300MM+ (harder) in
| sales much, much faster...
|
| Help widening margins on high revenue...
|
| Probably some sweet incentives if they do... Etc...
|
| It makes sense. This isn't particularly innovating, but I
| have a feeling everyone here will be cleaning house soon
| enough.
| boringg wrote:
| scrubbed my useless comment.
| jsonne wrote:
| Most of the bigger and better DTC marketing agencies I know are
| making the same move as your concept. Buying or starting internal
| brands as they can scale them better and more effectively than
| their clients can. Why are you different / better?
| AllanFischMB wrote:
| What makes us different than DTC marketing agencies starting or
| buying brands is that we are looking to grow our portfolio of
| companies not just through growth marketing strategies, but by
| providing a better customer experience overall. We're also
| looking to create a founder-friendly company; one that
| simplifies the acquisition process, is transparent about how we
| value companies, and that offers founders a seat at the table
| after an exit.
| cjisakow wrote:
| I'd also add that its hard to run an e-commerce business, you
| need to source products, manage supply chains, manage teams
| etc... We know this is going to be hard and went in eyes wide
| open this is not just about marketing or just about financial
| engineering. And we have experience running operationally
| intensive companies that utilize and develop technology.
| TheBill wrote:
| What are your thoughts on the acquisitions that Aterian ($AETR)
| has done in the last 6 months?
|
| Are you going to be approaching it via a similar acquisition
| financing mechanism? Buying at 2-3x SDE for a mix of cash and
| Moonshot stock issued at 10-20X Earnings?
| cjisakow wrote:
| Its probably too early to say how Aterian (mowhawk)
| acquisitions will work out. In terms of structure we are early
| enough that we are creating deal structures for each
| entrepreneur that makes sense for them. Some would prefer all
| cash, others would like to have more upside in the future. We
| want to meet the entrepreneur where they are and create a deal
| that aligns incentives. And we are not public so its a
| different conversation around including Moonshot equity in any
| deal
| [deleted]
| dalbasal wrote:
| Can you say something about what kind of companies you are
| looking for, how you value companies, etc?
|
| Contrived example: Say a company has $1m, $500k, 100k in sales,
| gross & profit respectively... is that enough information for a
| starting point? How do marketing mix, growth, sector and other
| such factors play in?
|
| Also, since it sounds like you are running these as going
| concerns, what happens if/when founders and key employees aren't
| included in the acquisition or move on? Is running companies
| directly an avenue, and if so, are they still run as independent
| units?
|
| Lastly, do you dabble in grey areas between outright acquisitions
| and partial ownership?
|
| Also interested in your terminal destination... but other
| comments have covered this.
| Brajeshwar wrote:
| Nice. This reminds me of Tiny - https://www.tinycapital.com
| cjisakow wrote:
| For sure, we are focused on ecommerce brands instead of
| services/software. I love how they think about partnering with
| founders. And we share a Canada connection.
| ph0rque wrote:
| What's your valuation algorithm? 2-5x EBITDA or gross profit?
| cjisakow wrote:
| yes focus on EBITDA. In some cases there is a metric called SDE
| which is seller discretionary earnings that has some additional
| add backs.
| 55555 wrote:
| What's the actual business model here? Y Combinator shouldn't be
| backing a tiny PE fund, so this can't be that. What's the angle?
| There must be some financial engineering in the buyout or some
| unique plan for post-sale.
| mbesto wrote:
| > Y Combinator shouldn't be backing a tiny PE fund, so this
| can't be that.
|
| Why not? YC backs a lot of things that don't necessarily look
| like a classic "software company".
| skeeter2020 wrote:
| "Selling your eCommerce business is broken. We're disrupting
| this space with AI-informed ML that doesn't suck. We're
| building Uber for SaaS companies, where we're Uber and the
| owners are drivers."
|
| There, now it's YC compatible.
| cjisakow wrote:
| Not sure i ever want to be the uber of anything, but you are
| spot on that there is a ton of data, that we can use machine
| learning to both better identify acquisitions and grow
| brands. And yes for many founders the process is broken
| admn2 wrote:
| Not saying you're wrong, but where do you see that they are
| backed by YC? This reminds me of Thrasio and all the similar
| companies that have had success with buying Amazon businesses.
| I assume they have quantities of scale with in-house devs,
| operators, etc., which gives them a built in advantage.
|
| Edit: nevermind, I see now that they are in fact YC-backed.
| Don't think I've ever seen YC back another "fund"
| cjisakow wrote:
| Participating in YC was hugely valuable for our team, we had
| great mentorship, access to an amazing network of founders
| who have provided advice as we launched Moonshot, and of
| course investors. I don't know what their criteria is for
| accepting us, but I think the fact we were multiple time
| founders that had built operational and technology company
| and that there is a big opportunity to apply technology to
| every step of acquire, operate and grow in our model. We also
| love the idea of building something like Startup School for
| ecommerce entrepreneurs. One day we hope that ecommerce
| entrepreneurs want to be a part of Moonshot the same way we
| wanted to be part of YC. Finally as we build tools for
| ourselves we could potentially make those available to the
| millions of ecom sellers out there.
| indominus123 wrote:
| Did you raise $160m prior to joining YC? If so, that 7%
| must have been worth quite a bit.
| skeeter2020 wrote:
| This shouldn't be surprising; YC is no longer a tight group
| of like-minded nerds sitting around a table, despite what
| image they still try to market. It is a giant machine that is
| growing in both scale and breadth. Where the signaling value
| used to be very valuable to a particular segment of the
| population, it's now the same as getting an investment from a
| prominent traditional VC. Still has value but in a much more
| general sense.
| callmeed wrote:
| First, they have "Private Equity" job openings, so that's
| definitely part of it.
|
| More specifically it will be about scaling the brands they buy
| and cross-selling when possible. A lot of e-commerce
| brands/founders hit a ceiling around $1-5M in revenue. At that
| point, you need more experienced operators to get to $10M or
| $100M. People who know how to optimize marketing, conversions,
| fulfillment, and who can move into new channels (eg get on
| shelves at Target or Costco). A lot of online store founders
| don't want to deal with that.
|
| Once they hit a certain number of brands under their umbrella,
| there will be cross-selling/marketing opportunities (assuming
| they're not just buying Amazon FBA drop ship brands). They can
| combine email lists and will eventually have good data to power
| product recommendations.
|
| I'm guessing here, but the long-term play is eventually put all
| brands under a single online store-in other words, a new
| amazon.
| trashhagcute wrote:
| You mention taking companies public. I actually used to do
| consumer PE for a family fund with a buy and hold / long term
| growth strategy like yours. We advised founders, grew cpg
| companies, took them public. I really never saw a CPG company go
| public without expanding into brick & mortar at some point - do
| you think this has changed? Are you planning to help your brands
| enter b&m retail if it makes sense down the road? It was often a
| big reason CPG companies wanted PE backing, frankly. Also, lmk if
| by ecomm you really meant ecomm retailers in which case this is
| irrelevant.. seems like you meant dtc cpg.
| cjisakow wrote:
| would be awesome to talk and hear more about your experience.
| we absolutely are looking at omni-channel, something that is
| different from some of the early players in the space. We are
| starting with ecommerce because these founders have developed
| product market fit and are doing it profitably. As a platform
| we can help them get on other marketplaces (e.g. walmart,
| target, international amazon) and then into physical retail.
| The sale cycle there is longer as you know, but having a top
| rated product on amazon is already catching the attention of
| brick and mortar buyers.
| trashhagcute wrote:
| Thanks for the response. That makes a ton of sense. Best of
| luck to you- I totally agree that the consumer vc space needs
| improvement. I don't know why YC decided to get into probably
| the most risky space that exists in the investing world!? but
| happy for you that they did, and perhaps it speaks to your
| experience which is very impressive.
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