🛒 Ecommerce as a New Asset Class?
It's not new to us online business folk, but for more traditional platforms and funds, ecommerce is becoming a new asset class. Plus how Flippa is building the investment bank for the 99%
Hey there 👋
The recent newsletters on HoldCos and Search Funds has led to the Discord (come join) being restructured. I’ve now grouped business assets together and created a new #acquisitions channel which has since become my favourite and is starting to take off:
I’ve also added three new alt asset classes to discuss, which you can see in the screenshot / CTA at the bottom of this email.
But as much as you try to separate out the world of business from other assets, forces bring them back together again:
The above tweet got my attention, as I’ve been thinking for some time whether you could sell a business through a smart contract, rather than the traditional escrow.com.
I reached out to Menace and we’re doing a Twitter Spaces on this topic next Tuesday at 6pm UK:
#acquisitions
I’m continuing to delve further into the ‘traditional’ business brokerage world, as I look to pick up my first ‘offline’ business (there are no good words to describe this!).
I just met with a local broker of one of the biggest business brokerages in the UK, to discuss potential opportunities for me. I’m open to any type of business that can be scaled by online marketing and run without me. But it needs to be on my terms of majority seller financing - for example, I’d rather open a coffee shop than pay the full listing price up front for one.
At Flippa, we now not only vet every higher value listing, but also have integrations to verify traffic and financials at the source, such as Stripe or Shopify.
Whereas the broker I saw doesn’t seem to verify anything - they recommend that you use an accounting firm or solicitor that can do due diligence (which is obviously expensive). And they charge sellers way more than a 5% success fee.
But it’s what us main street buyers have to work with, as I’m not a big enough fish to meet with a UK M&A Advisory firm.
The role of M&A advisors is to provide advice on acquisitions to either the buy-side or the sell-side companies. M&A advisors play a far more active role than brokerages and as such typically charge a retainer fee along with the success fee. They will advise on valuation, deal structure (negotiation), and transaction and play an active role to close the deal.
The thing is this is exactly what Flippa is doing in building the investment bank for the 99%.
Flippa Account Managers help prepare sellers for their exit and ensure that listings are optimized. Then the platform does the rest…
The new Flippa Deal Room is a place where sellers are matched with buyers that they can shortlist, communicate and negotiate with to get deals done.
And deal origination happens without the need to engage an advisor, or pay $10K plus to investment banking platforms and data rooms.
If only this existed for me in my search, where I’m navigating bad wordpress websites and clunky contact forms for more info.
#ecommerce
Shakil Prasla has been acquiring ecommerce businesses through his company SZ Ventures for a decade. He started with a loan from the Small Business Administration as discussed on an episode of the Tropical MBA podcast over a year ago now:
It was great to see him getting the recognition he deserves in a post on Axial, a platform for business owners and investors to do deals, talking about the ecommerce explosion in the lower middle market (which is a place Flippa now plays with the recent $35MM app portfolio sale).
In the article it states how:
e-commerce stores becoming a new asset class for investors in the lower middle market. Many have been inspired by the e-commerce store aggregator and unicorn company Thrasio, which has raised $3.4 billion to date.
And Prasla talks about the multiples he is currently experiencing:
When you have anywhere from zero to $250,000 in SDE, you’re typically able to sell it for 3.2x SDE. If you’re between $250,000 and $500,000, that multiple is about 3.6x. If you’re at half a million to $2 million, you’re at the 4-5x multiple.
Axial also recently put out a great podcast where the CEO Peter Lehrman talks with Kelcey Lehrich (mentioned in my HoldCo newsletter) on building an ecommerce holding company:
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Alts by Flippa is owned by Flippa. Nothing in this email is financial advice and we are not professional investment advisers. We send weekly updates on what we're doing personally - consider it informational and for entertainment purposes only.