Why is e-commerce attractive for PE?
Why would a PE want to invest into an ecommerce company? What is attractive? Consider it a nice ecommece shop?
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Traditional PE hates e-commerce because it's generally asset light and too new for them to hire experienced executives. Considered unstable as well.
In my experience, consumer PE funds actually love e-commerce because: - High recurring revenue, especially if you have a loyal / stable customer base and sell a differentiated product - Predictable growth engine where you can measure your ROI on digital marketing initiatives - Typically good margins if you're doing direct to consumer, have a strong brand, and have some scale with transportation / production costs - Industry tailwinds since consumers are moving towards e-commerce and away from physical retail
Look at how how few PE firms will touch eCommerce deals. You'll note DTC/DNVB/eCommerce is not on their criteria list at all.
Usually wrong. Only applies to the cream of the crop.
Not really predictable. At all. Just helped a co doing ~$75MM recover from a pretty big search issue + ad blowout. Happens all the time and never baked into analysis by PE guys.
Maybe. More of a DTC thing than an eCommerce/retail thing.
Yup
I don’t think this is fair lot of money made in e-commerce take a look at aea, tsg, cortec just to name a few funds who have invested in things as broad as pet food/goods to car parts.
On top of that a ton of consumer theses are around e-commerce channel shift.
Not sure why asset light is bad?? If there’s no defensibility/enterprise that’s bad but ppl lend on cash flows too.......
It's not something most PE is comfortable with. SaaS JUST became somewhat acceptable recently.
Just going off my conversations with other LMM PE firms + lenders...
Less assets = less collateral = less tangible value to liquidate in downside & less securitization against taking out a loan
This is all just false entire industries in pe are based off leveraging asset light businesses. And they get leveraged to the hilt take a look at best in class distributors or insurance brokers (6.5-7x run rate ebitda 1/2L packages)
E-commerce as a BU, never touch a only e-commerce Company. That is for California VC’s.
There are a lot of new e-commerce businesses appearing around the world and trust me, some of them really need a lot of work to be done. I have seen some sites of these businesses that look as ugly as they can come, and some of them don't even have customers service. I think they really need your help. They need some organizing, and I think WordPress is the perfect solution for these businesses.
Shopify not wordpress.
Ecommerce sales are expected to account for over 18 percent of global retail sales by 2022. 1 Yet, in the United States, half of the small businesses lack websites, making it difficult for customers to shop with them and, as a result, lose out to competitors that use dedicated eCommerce platforms to create a smooth shopping experience.
Fortunately, not all eCommerce websites compete in the same market arena. Each sector has its own top players, who are overseen and operated by industry specialists.
This thread is garbage lol KKR paid like 20x for 1800 contacts. Everybody loves DTC when there's true loyalty and brand differentiation. Price gets quite tough in those situations
Thx
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