SaaS Roll-Ups in E-Commerce: Profiles of Some Key Players
E-commerce software is experiencing its “aggregator moment” in 2023, with acquirers raising hundreds of millions of dollars to compete for acquisitions. Just as the Amazon FBA aggregators sought to consolidate successful Amazon storefronts, today’s SaaS consolidators aim to bring together independent software tools under one umbrella. Shop Circle’s recent $120 million funding round is not only a testament to the company’s potential but an indication of the growing investor interest in SaaS roll-ups generally, and in e-commerce in particular.
While the idea of rolling up Amazon FBA businesses was new in 2020, the same cannot be said of software roll-ups in 2023 – this model has already been proven over several decades. Even some of the firms profiled in this article are 8-15 years old. However, the sector has accelerated over the last two years with substantial new investment into the space and new acquirers seemingly entering the market every month.
Within e-commerce software, the sector is evolving in interesting ways, as alumni from the earlier players form their own roll-ups and raise hundreds of millions of dollars in committed capital. There is a distinct Canadian connection in this sector, with many e-com software acquirers based in or having ties to Canada. The reason for this is not clear; perhaps Canadians are more likely to be inspired by the king of vertical market software roll-ups, Constellation Software; or perhaps they are more acutely aware of the potential of e-commerce software in the home nation of Shopify.
This post aims to provide a little insight into some of the major players shaping this narrative, as more founders look to sell their SaaS businesses to them.
London based Shop Circle, founded in 2021, by Luca Cartechini and Gian Maria Gramondi, aims to streamline the process for Shopify merchants by offering a curated selection of the “best-of-the-best” apps, cutting down the time merchants spend in search of the perfect tool. The co-founders met in college and shared a passion for the e-commerce industry. While Cartechini ventured into investment banking, Gramondi gained experience at Amazon as a category manager. Their combined expertise and vision led to the creation of Shop Circle, with the goal of becoming the “Microsoft for e-commerce merchants”.
Shop Circle has grown rapidly from the outset, acquiring over 50,000 merchants within its first year. This figure is now above 210,000 users of Shop Circle’s portfolio of 40+ apps, all of which were acquired. The firm’s software suite spans over 15 categories, demonstrating its strategy of offering a holistic solution to merchants.
Shop Circle has recently closed a $120 million Series A funding round with participation from 645 Ventures, 3VC, QED Investors, and NfX. With fresh funding in its arsenal, the firm is setting its sights beyond Shopify, aiming to cater to the broader e-commerce platform landscape.
In addition, Shop Circle has unveiled an AI-driven tech stack consultation program. The initiative is designed to refine a brand’s tech stack (presumably incorporating more Shop Circle tools), to provide cost efficiencies and an enhanced customer experience.
Relay Commerce
Relay Commerce is also making its mark as a prominent operator and acquirer of SaaS businesses.
Founded by experienced SaaS operators, including CEO Ricardo Hinds, the Relay Commerce team has both M&A and e-commerce in its DNA, with prior experience scaling companies including Back in Stock, LeadDyno, and PluginUseful.
Relay is focused on acquiring bootstrapped SaaS tools for e-commerce. Great bootstrapped businesses tend to be built with longevity in mind, emphasising stability, robust unit economics, and customer obsession, Hinds says. The firm recognises the importance of aligning its interests with founders and refers to its role as “growing the founder’s legacy”.
The company has already made several standout acquisitions including Fomo, SmartrMail, and Flockler. Relay’s intention is to build an integrated suite of software tools for e-commerce, through acquisition.
The recent announcement of a $27 million funding round which included Primary Venture Partners, Twelve Below, AlleyCorp, Max Ventures, and TriplePoint Capital, sets the stage for Relay Commerce to further enhance its portfolio of e-commerce SaaS tools.
SureSwift Capital
SureSwift Capital was an early entrant into the SaaS roll-up business and helped develop the model. Founded by Kevin McArdle in 2015, the company’s philosophy revolves around the “buy, grow, and hold” strategy across numerous verticals, including e-commerce. Although its first acquisitions were not in SaaS, the firm soon prioritised SaaS acquisitions and has grown rapidly ever since, completing more than 45 deals to date.
SureSwift now has a team of over 150 people and operates two investor-backed funds from its headquarters in Victoria, Canada. Notable acquisitions including Docparser, Mailparser and MeetEdgar, while in e-commerce SaaS its acquisitions include Back in Stock, Cross-Sell and Storemapper.
Sureswift’s success in SaaS acquisitions has set a precedent in the SaaS M&A landscape, inspiring many others to pursue this model, with some former SureSwift executives founding or joining other roll-ups and founder Kevin McArdle moving on in late 2022 to found another SaaS aggregator, Big Band Software. SureSwift is still highly acquisitive and will continue to be a major presence in this sector.
AppHub
Kris Eng, CEO (left) and Wilson Lee, Co-Founder (right)
AppHub was launched by co-founders Kris Eng, Arjun Batra, and Wilson Lee, with $60 million backing from Silversmith Capital Partners in 2021. As builders within the Shopify ecosystem, the founders realised there were multiple pain points that merchants experience on a daily basis. They decided to accelerate their ability to help merchants by using a buy-and-build strategy to build out a robust suite of apps around increasing revenue for merchants and decreasing their expenses. Today, a significant portion of AppHub's app portfolio caters to Shopify merchants, but solutions are also offered for those on BigCommerce, Magento, and WooCommerce.
In July 2023, AppHub announced a $95 million investment from PSG, a leading growth equity firm. A portion of this funding was used to acquire Boost, an AI-powered search and discovery tool that had previously facilitated over $16 billion in sales for more than 14,000 stores. This acquisition brought AppHub's app portfolio to over 25 distinct applications.
Today, over 150,000 merchants harness the power of AppHub's software, utilising apps like reviews.io, Address Validator, RichReturns, and more. Interestingly, AppHub carefully considers the “buy or build” decision on a case-by-case basis, deciding whether to acquire an existing app in a key area or develop a new solution from scratch. As CEO Kris Eng puts it, "We are entrepreneurs, but at the core, we are developers, too."
Staytuned
Staytuned Digital Co-Founders, Randy Jimenez (left) and Serge Kassardijan (right)
Another entrant focused on acquiring software surrounding the Shopify ecosystem is New York-based Staytuned. Founded by Randy Jimenez and Serge Kassardijan in 2019, Staytuned pivoted to the software roll-up model, noticing the rapid growth of e-commerce and the huge potential in owning the software that powers Shopify merchants’ growth. The leadership team at Staytuned has a track record of building, scaling, and selling e-commerce companies, illustrating their understanding of building successful brands. The company’s vision is to become “the Salesforce suite for e-commerce stores”.
To date, Staytuned has acquired over 29,000 users for its suite of 7 apps. This suite features notable apps like ADG and their most popular offering, Kiwi, which recommends clothing sizes using machine learning. Their current offerings only target Shopify merchants; however, they’ve stated that plans are underway to “soon expand to other platforms that merchants love”.
Staytuned recently secured a further $34 million in financing, including $9 million in equity from TenOneTen, Rembrandt VC and others, with a $25 million credit line from Tacora Capital, with the option to double this to $50 million in future. With this new funding, Staytuned intends to further expand its app portfolio, with Kassardijan noting they have a long list of potential apps to acquire
Pantastic
California-based Pantastic is another player in the SaaS roll-up space with a focus on the Shopify ecosystem. Founded in 2020 by CEO Scott Rafer alongside co-founders Michelle Kim and Tim Cole, Pantastic has been steadily expanding its portfolio. They have so far completed four acquisitions, with their most recent addition in July 2023 being Refersion, an affiliate marketing tool that stands out with its user base of over 60,000 brands.
Pantastic has set out its goal to help indie brands succeed with its suite of e-commerce tools. Over 68,000 merchants currently use Pantastic’s platform of apps, which include CartHook, Shoppe, Uporder, LimeSpot, and the notably popular Refersion. While LimeSpot was previously Pantastic’s most popular offering, with over 5,000 users for its product recommendation engine, the recent acquisition of Refersion has dramatically overshadowed it. Pantastic’s $18 million financing round in March 2022, led by B Capital Group and with participation from Commerce Ventures, facilitated the acquisitions of both Uporder and CartHook.
Pantastic software have more than $2 billion in sales attributable to them and have enabled a 10% average revenue increase for merchants, according to the company. Pantastic aims to continue expanding its product portfolio, through both strategic acquisitions and investing in product development.
Tiny
Tiny Co-Founders, Andrew Wilkinson (left) and Chris Sparling (right)
Based in Vancouver, Canada, Tiny has an interesting history, forming from the merger of two related companies: WeCommerce and Tiny Capital.
Tiny Capital’s journey began in 2006 when a 19-year-old Andrew Wilkinson established MetaLab, a design agency based in Victoria, British Columbia. The agency quickly gained traction amongst venture-backed startups, becoming one of the go-to design and prototyping agencies in Silicon Valley and generating profits for its owners in the mid-seven figures. Devoted fans of Warren Buffett, Wilkinson and his business partner Chris Sparling decided to use profits from the agency to invest into other companies, focusing on software. Thus, in 2007 Tiny Capital was born.
Tiny Capital’s ethos from the outset was to acquire and hold, rather than seeking to exit in a short timeframe like private equity. Talking about acquisition targets, Wilkinson refers to “New Zealand companies” – businesses that, much like New Zealand, might not be in the spotlight but are hidden gems characterised by steady and consistent growth.
At the time of the merger its diverse portfolio included 11 businesses it founded internally, 30 acquired or majority-owned businesses and 90+ minority investments.
WeCommerce was formed by Tiny Capital in 2019 as an acquisition vehicle for software catering to Shopify merchants, in the context of Shopify’s meteoric rise as the DTC juggernaut. Instead of investing only their own funds, WeCommerce would seek outside capital to make these investments, starting with celebrity hedge fund manager Bill Ackman.
WeCommerce quickly established its own identity, while retaining the buy & hold strategy. As Andrew Wilkinson aptly puts it, the company seeks businesses “to own for decades”. The company’s portfolio grew rapidly, with brands like Pixel Union, Out of the Sandbox, Yopify, and Supple finding a home under its umbrella. By the end of 2020 WeCommerce went public in a $60m IPO on the Toronto stock exchange.
Shortly afterwards, in April 2021, WeCommerce announced the acquisition of Stamped.io for $110m – a deal which included $85 million in cash and stock at closing. With a revenue target of $10m, the price of 11x revenue raised eyebrows across the industry. However, CEO Chris Sparling stated “We are extremely excited about Stamped’s growth potential in the years ahead”, indicating that the strategic value and potential synergies Stamped brings to the table could justify this premium in the long run.
WeCommerce’s journey as a publicly listed company, however, has seen its share of challenges. Since its trading commencement on the TSXV in December 2020 at $7 CAD a share, WeCommerce’s stock price experienced significant fluctuations. From a peak of $12.55 in January 2022, the share price declined by over 80 percent. WeCommerce initiated steps to streamline its operations. It had announced the completion of a vertical short form amalgamation with its subsidiaries, Fourtysix and Pixel Union Design, with the move aimed at simplifying the corporate structure of WeCommerce and reducing administrative costs. By April 2023, WeCommerce’s stock was trading at $1.96 CAD, setting the stage for what would become a pivotal moment in the company’s journey. In that month, a WeCommerce and Tiny Capital merged into a single entity, now called simply Tiny. The company has since continued its hunt for more acquisitions.
A defining feature of Tiny’s approach is its streamlined acquisition process. Tiny states that it can make an offer within 7 days and close a deal within a month of the offer, highlighting a streamlined software M&A process that appeals to sellers. This approach is rooted in Wilkinson and Sparling’s desire to be the kind of buyer they themselves would have wanted to engage with. As one of the only publicly-traded roll-ups specifically looking for small software companies in sectors including e-commerce, Tiny remains a formidable competitor in this sector.
Threecolts
2021 saw the formation of two new players specifically focused on rolling-up small software tools within the Amazon ecosystem. The first is Threecolts. This London-based firm, founded by ex-Amazon executive Yoda Yee, is building a comprehensive toolkit tailored for brands and retailers to manage their Amazon sales.
Threecolts has gained over 22,000 customers for its software, including a significant number of enterprise clients such as Samsung, Panasonic, and L’Oreal. The company recently announced $90 million in funding, encompassing a recently closed Series A, an undisclosed pre-A investment, and some debt with notable investors including Crossbeam Venture Partners, General Global Capital, Stratos, and CoVenture.
In less than two years, Threecolts has already made 14 acquisitions, while growing its employee count from 21 to over 150 within the past year.
Its suite of tools ranges from real-time listing and inventory alerts to intricate profit and sales analytics. With Threecolts’ tools, clients have collectively added $200 million in profits and a 200% increase in detail page conversions.
While Amazon software is currently Threecolts’ main focus, the firm has started showing interest in tools catering to other marketplaces such as Walmart and eBay. It even has an eBay seller feedback automation tool in the works.
Carbon6
Kazi Ahmed, Chief Product Officer, Justin Cobb, CEO, Naseem Saloojee, Chief Revenue Officer
Another acquirer focused on the Amazon software ecosystem and established in 2021 is Carbon6 Technologies. This Toronto-based venture is the brainchild of Justin Cobb, Kazi Ahmed, and Naseem Saloojee. CEO Justin Cobb’s background includes both building and acquiring software businesses, a notable example being moneyexpert.com, which he acquired in 2018.
With the e-commerce boom, platforms like Amazon and Shopify caught Cobb’s attention. Inspired by the vast potential of e-commerce, and aware of the potential in this space as demonstrated by Threecolts and others, Cobb and his co-founders started their next venture: Carbon6.
Carbon6 observed the challenges faced by smaller Amazon businesses, often grappling with the complexities of managing between 8 to 15 custom SaaS tools, so it saw the potential in acquiring and unifying these software tools. Its journey so far has been impressive, with 16 software tools acquired in a short span and a burgeoning user base of over 200,000 active users.
Bolstered by a recent $66 million Series A funding, with contributions from White Star Capital and MidCap Financial, Carbon6 is charting a course for further expansion. The company has identified Europe and Asia as promising regions for further acquisitions and also has plans to expand beyond the Amazon software ecosystem.
Conclusion
The market for vertical market SaaS (VMS) businesses, especially in the e-commerce software sector, is very strong at the moment. Serial acquirers such as the firms profiled above have a number of advantages, including:
The ability to cross-sell and bundle services to their SMB & enterprise customers
Scale efficiencies
Dedicated M&A teams
Good access to capital
The businesses they are acquiring are profitable, growing and with relatively low churn. The model makes a great deal of sense and we expect to see these “SaaS acquirers” continuing to be the most active acquirers of bootstrapped software companies in the e-commerce space for many years to come.
Note that there are many other acquirers of e-commerce SaaS businesses, including well-funded serial acquirers, who we have not profiled here. A good M&A advisory firm like Hahnbeck will be able to connect you to them.
Hahnbeck is a global M&A advisory boutique specialising in consumer brands and software. Headquartered in London but with a global team, Hahnbeck has an extensive network of connections in the e-commerce software space. If you are interested in selling your SaaS business, getting a SaaS business valuation calculation, market insight or just some advice, just email us and we will arrange a confidential discussion.