Why I Am Not Changing My Thesis About The eCommerce Integration Sector
I picked up a few notes about the eCommerce integration space in the last week. I had left the space a little bit for dead - I'm not sure this changes my thesis, it's difficult for these companies to survive on their own. While a necessary service, merchants do not allocate the same funding to these integration tasks as they do advertising, marketing, supply chain, payments, or customers.
Lengow, the French multichannel integration company, was acquired by a PE firm Marlin Equity Partners, which has made a number of eCom tech investments in the past.
Cin7 acquired two companies in this tech/operations area with OrderHive and DEAR Systems, following the acquisition of other firms like TradeGecko (Intuit) and StitchLabs (Square).
In the "there's still hope" department, Pipe17 a company that feels like StitchLabs reborn, just landed $8m in funding. What?
I think the difference here with Pipe17 is the logistics focus. Its investors have a deep connection to that world, and with supply chain technology firms getting so much investment (witness: Shipmonk, Flexe), this feels like an eCommerce tech play into a 3PL space that has typically struggled with connectivity.
Ron Whitman added some thoughts on this, saying “The failings in this area are largely a symptom of the way that venture funds allocate investment and advise portfolio companies. Integration is 2 parts - software yes but in ecommerce it is also very human and nuanced eg has a significant service component. VCs like the idea of the software but cringe at the service. When they realize how much friction it is to scale and how slim the margins are compared to other SaaS, they cut and run.”
Jason Greenwood cosigned Ron’s words, and added his own: “Integration doesn’t get the budget? Maybe not in terms of opex (it doesn’t need much of one anyway) but in terms of capex it sure does! I’ve seen instances where integration costs in a project outstrip the website dev costs! Integration in an API centric world is more important, not less... I don’t see integration going away any time soon. It’s just a very very hard business to scale.” Very hard indeed.
