[HN Gopher] OpenStore Raises $75M to Acquire More Shopify Sellers
___________________________________________________________________
OpenStore Raises $75M to Acquire More Shopify Sellers
Author : jbredeche
Score : 40 points
Date : 2021-11-18 13:56 UTC (9 hours ago)
(HTM) web link (www.forbes.com)
(TXT) w3m dump (www.forbes.com)
| afsafsaf wrote:
| Isn't this just a PE shop that has a quicker / semi-automated due
| diligence process?
| mountainb wrote:
| Yes, that's what they are.
| 0des wrote:
| I have reservations about machines doing due diligence,
| especially in an expedited fashion.
| moneywoes wrote:
| It makes me question what they're hiring so many engineers
| for.
| jgalt212 wrote:
| There like Zillow, but instead of buying homes, they're
| buying small businesses and given the valuation differences
| for small vs large business (as said above), it seems like
| this would be _hard_ to screw up.
| Closi wrote:
| I assume there's lots of stuff they need engineers for - I
| imagine managing loads of Spotify stores simultaneously has
| some strange requirements around inventory management,
| ordering stock from suppliers, returns, providing customer
| support e.t.c.
| afsafsaf wrote:
| Well the valuation process is somewhat automated (they
| basically need to pull in transactional and user data from
| shopify into some financial model) which does require
| engineers.
| schnebbau wrote:
| What is open about OpenStore?
| whitepoplar wrote:
| Same founder as Opendoor
| rory wrote:
| 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).
| gruez wrote:
| >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).
|
| sounds like OpenAI?
| rory wrote:
| That use is less arbitrary, and perhaps more cynical.
| [deleted]
| boringg wrote:
| 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.
| melony wrote:
| 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.
| jeltz wrote:
| Personally I hate all of them. Companies like these are just
| harmful to the market in my experience.
| tmp_anon_22 wrote:
| "Nobody has complained about similar companies yet" is not a
| foundation to build on.
| [deleted]
| cm2012 wrote:
| I'm skeptical. Long tail Shopify businesses are kept alive with
| hustle and spit since they don't have enduring brands. With the
| founder gone, most will plummet in value.
| antisthenes wrote:
| Openstore just has to keep the facade going long enough to
| exit. Perhaps even quick enough to ride the pandemic demand
| train.
| echelon wrote:
| 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 machines
| and automatons that take over have the energy and soul to let
| these once small sellers thrive? Do they understand the diverse
| customer interests?
|
| I want to see what happens when Keith Rabois buys ZeeDog custom
| dog leashes, Heirloom Snacks, and random adult clothing stores.
| It'll be a challenge for his company to understand the logistics
| of each business and their customer needs.
|
| Things need ownership to not suck, and this seems to be a step
| backwards.
|
| "Shark Tank for Shopify" would be a better bet. Let the owner
| keep doing what they do. Take a small percentage and help them
| grow. Succeed as they do. The original owners will have more
| drive and passion to make it happen.
| shmatt wrote:
| 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
| xivzgrev wrote:
| 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.
| thatguy0900 wrote:
| 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.
| gruez wrote:
| >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?
| echelon wrote:
| > 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.
| thatguy0900 wrote:
| 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.
| jeltz wrote:
| > 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.
| skrtskrt wrote:
| "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.
| kache_ wrote:
| wait, there are custom embroidered naruto vest stores? link?
| echelon wrote:
| I'll do you one better. Here's one for dogs:
|
| https://hachicorp.myshopify.com/products/kakashi-vest-dog-
| co...
|
| (Come on, Keith Rabois. Buy this company!)
| kache_ wrote:
| hachicorp? where have I heard that? lol
| sharemywin wrote:
| I could see this happening to alot of small businesses.
|
| Since public platform companies are selling at upto 30 times
| revenue. There's a Huge difference 3-5 times profit and 30 times
| revenue. as long as you show growth not sure the market can
| differentiate.
| jrochkind1 wrote:
| 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?
| staticautomatic wrote:
| Same thing happens with Amazon sellers.
| ab_testing wrote:
| 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.
| afsafsaf wrote:
| 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.
| ericcholis wrote:
| I'd imagine that targeting Shopify makes the process much
| easier for evaluation and migration.
| mountainb wrote:
| 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.
| mountainb wrote:
| These aggregators are bad news and they will blow up.
| moneywoes wrote:
| Rising rates could adversely impact their business model. It
| sounds like they're a finance company masquerading as a tech
| company
| impalallama wrote:
| Don't much care for any company that has "Open" in their name
| when their entire business model seems to be buying and
| consolidating other businesses under one umbrella.
___________________________________________________________________
(page generated 2021-11-18 23:04 UTC)