PayPal Mafia’s Keith Rabois bought 40 Shopify merchants last year through his startup, OpenStore. He doesn’t slow down despite recent problems with collector space.

  • Keith Rabois’ latest venture, OpenStore, has acquired 40 brands in less than a year since launch.
  • OpenStore competes in a complex and unstable e-commerce roll-up market.
  • Rabois’ believes in relying on automation to avoid other people’s traps in space.

OpenStore, a retail startup co-founded by venture capitalist and Founders Fund founder Keith Rabois, acquired 40 brands in less than a year of launch. Rabois plans to maintain its fast pace of acquisitions despite turmoil in the aggregator space.

This year, the Miami startup started spending after raising $30 million and $75 million, respectively, in Series A and Series B funding rounds. “Our number one goal is to acquire 10x more brands,” said Rabois, who is known for his early investments in DoorDash, Affirm and Stripe. Rabois has also had early executive-level roles at PayPal and is a member of the so-called PayPal Mafia.

OpenStore is in a crowded and volatile e-commerce roll-up marketplace with at least 100 startups, where fast-paced transactions are common. These rollups, or aggregators, compete to buy the most successful brands on Amazon and Shopify and improve their marketing, packaging, and positioning to increase profitability. However, the sector has recently been facing headwinds.

Boston-based Thrasio, the largest in its segment, has acquired more than 200 global sellers selling on Amazon since its launch in 2018. It posted $1.2 billion in revenue last year, but as Insider previously reported, the company is laying off and replacing employees. CEOs move from “supergrowth” to an era of focus and improvement.

If Rabois’ plans come true, OpenStore could outperform Thrasio while avoiding some pitfalls.

‘I had an offer within 24 hours’

In Rabois’ view, the key differentiator for OpenStore is its focus on automation. In the OpenStore process, potential sellers upload Shopify store details and financial information to the OpenStore website for analysis by bots. OpenStore evaluates a brand’s customer loyalty, unit economics, and profitability. Then, OpenStore’s algorithm delivers offers in a matter of days. Eventually, we plan to move all those merchants to one platform.

Rabois calls its acquisitions “fundamentally different” from Thrasio or other Amazon aggregators because of the essential differences between Amazon and Shopify.

Rabois previously told Insider, “Amazon owns the experience and runs the store, from processing to customer acquisition to checkout. Companies that integrate these businesses don’t have much room for improvement. Basically, it’s more of a financial readiness.” .” he said. “We have acquired a Shopify merchant with a lot of room to optimize and improve our operations.”

Rabois said the company is targeting sellers with less than $10 million in sales and is looking at its cost structure, which typically includes revenue and customer acquisition costs.

There are signs that founders are launching retail brands with the goal of getting out early. The former founders of three direct-to-consumer (D2C) brands that sold their businesses to OpenStore did so less than three years ago. At one point, an online store with only three months’ worth of sales was sold. All three entrepreneurs, they said, were drawn to OpenStore by their promise of fast turnaround on deals.

Miguel Pakuse headshot

Miguel Pacuse.

Courtesy of Miguel Facussé

Miguel Facussé started menswear brand Jack Archer last spring to address the “pain points” she saw in men’s clothing. “I went to Reddit and started looking for people complaining about clothes,” he said. Jack Archer, for example, offers trousers designed specifically for travel comfort, including underwear.

“The beautiful thing about selling online is that it’s incredibly easy to test hypotheses,” said Facussé. “By keeping our inventory up and running ads on Facebook and Instagram, we were able to test cost-per-acquisition before the product even existed.”

The company generated more than $1.2 million in sales in three months. Facussé sold the business to OpenStore for about $1 million in cash, which took a few days. He said that due to the small amount of sales data he has, the finish date could be longer.

In comparison, Brendan Brosnan, founder of yoga apparel brand Yogaste, received a succinct OpenStore offer promoted by Rabois. “They were true to their words.” He said. “We got the offer within 24 hours.” OpenStore acquired Yogaste for $250,000 in cash and $150,000 for brand-wide inventory. The company has accumulated over $3.59 million in sales in 26 months.

OpenStore also acquired Wearva, a clothing company that celebrates Mexican culture, generating $1.45 million in sales from August 2020 to April 2022. Founder Emanuel Estrada did not disclose the financial details of the transaction.

‘We can fully handle business acquisitions in one day’

The swift nature of the transaction is unprecedented.

In Thrasio’s heyday, the company’s management boasted that it had acquired several companies in a week. But its pace contrasts with the more cautious environment within the aggregator industry in recent years.

As the aggregator sector matures, some believe it’s in a rebalancing phase after a hot streak where seller valuations soared. This year’s Rollup took a more cautious approach to buyouts, including pausing some trades. Marketplace Pulse said.

Transactions that have occurred are focused on consolidation. In December, British company Olsam acquired US aggregator Flywheel Commerce. In April, Olsam acquired Marketfleet, an American collector focused on outdoor products. before it, berlin brand group It acquired Orange Brands last fall. In recent years moonshot brand It purchased assets from Product Labs, including scooter brand La Scoota and fitness brand WOD Nation.

In addition to Thrasio’s layoffs, Minneapolis Amazon aggregator Suma Brands laid off a significant portion of its staff in March. The layoffs came just months after it secured $150 million in new funding to grow its acquisitions and trading team.

Still, Rabois plans to speed up the transaction. “We can absolutely handle a business takeover in one day,” he said. “I would like to reach an hour in the end, but that is definitely a challenge.”

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