With Shopify Inc. shares soaring as businesses shift online for the pandemic, everyone wants a piece of the retail platform’s growth – and Victoria-based WeCommerce has found a fresh way to tap into it.
Shopify has spent the last decade and a half expanding the services it offers merchants, growing from an e-commerce platform to include shipping services, cash advances and warehousing services. Key to its growth is an ecosystem and app store that allows independent developers to add their own services for merchants, ranging from design themes to loyalty and referral programs.
That ecosystem drew in US$1.7-billion in revenue last year, Shopify says. And WeCommerce has been quietly buying up pieces of it – with $25-million earmarked so far for the cause.
The holding company buys and invests in companies in Shopify’s orbit. Founded by Andrew Wilkinson and Chris Sparling, managing partners of the Victoria venture fund Tiny Capital, the idea for WeCommerce began last year when Tiny reacquired the design firm Pixel Union, which offers merchants a suite of store themes, apps and services.
Backed by a handful of high-net-worth investors – including Uber’s first employee Ryan Graves and American hedge-fund mogul Bill Ackman – the holding company has begun to build out a portfolio, starting with Oklahoma City’s Rehash, an agency that consults with larger Shopify merchants.
The research firm eMarketer projects e-commerce to reach US$6.2-trillion, or 20.6 per cent of all retail sales, by 2023 – up from US$3.5-trillion and 13.7 per cent in 2019. The pandemic has accelerated the rush to online sales for businesses of all sizes. Shopify “is the best e-commerce platform to rise with that tide,” Mr. Sparling said in an interview.
He and Mr. Wilkinson worked together at Mr. Wilkinson’s design firm, Metalab, when the firm first formed PixelUnion in 2009, doing designs for Tumblr and WordPress blogs and, eventually, Shopify stores. They sold a majority stake to a private-equity firm a few years later, only to buy it back last year.
Over the course of the past decade, meanwhile, Shopify rose from buzzy upstart to the most valuable company on the Toronto Stock Exchange at times in recent weeks, prompting developers and designers to build countless apps, themes and services for merchants on the platform. Its app store alone has grown from five apps to just under 4,000 since 2009.
The value of Shopify-affiliated businesses has gradually begun to crystallize: In January, 2019, the Winnipeg-based app maker Bold Commerce raised a $22-million venture round. The Israeli marketing platform Yotpo has raised more than US$100-million.
The growing investment in the ecosystem “is a great signal for us, in terms of how much opportunity people are perceiving on our platform,” says Brandon Chu, Shopify’s vice-president of product, who oversees the platform and partnerships.
Interest in the ecosystem itself is also a boost for Shopify’s overall business, Mr. Chu added. “We get to grow our product, and have it work for so many more customers than we could by ourselves.”
Evan Brown has joined WeCommerce as chief financial officer from Victoria solar-technology company Carmanah Technologies Corp., while Rhu Hashemi, a former startup banker and founder, will handle acquisitions. “Given all the success Shopify has had in the last decade, there’s a lot of other success stories in the app store,” Mr. Hashemi says.
WeCommerce says it hopes to emulate Warren Buffett’s Berkshire Hathaway Inc. conglomerate, keeping a small head office and letting the brands run themselves. “Management can stay and participate in the business, and each brand will continue to persist,” Mr. Sparling says. He adds that the company won’t act like a fund and has no timeline to deploy the capital it’s built up.
The holding company’s portfolio also includes theme provider Out of the Sandbox and app makers Yopify and SuppleApps, all of which are part of Pixel Union.
Syrus Partners managing partner Shane Parrish, a WeCommerce investor, said the WeCommerce model will allow smaller apps and Shopify-affiliated businesses to change ownership without being totally reconfigured.
“If you’re selling a business that makes $200,000 a year, you’re basically selling a job,” Mr. Parrish says. “That can be tough. If you exit to a pro company, it can take what you’ve done and build on it, instead of tearing it apart.”
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