How 17 E-commerce Companies Generated Stunning Returns
In a third and final blog in this series, we reveal the breakout e-commerce names (both US & International) that consumers, employees and VCs wanted a piece of and identify the commonalities among each of them.
Last week I published “7 Things VCs Look For… Does E-commerce Fit?” and the week prior “10 Reasons E-commerce Startups Will E-xplode in 2016”, which discussed the theory for what we look for in e-commerce companies. Many of you have asked for examples of e-commerce companies with the best VC returns, so this week we give you exactly that.
Many investors still remain skeptical that e-commerce startups can generate strong returns. This is still true in most cases but the specifics are key here and the breakout startups below are 17 names that have become strong consumer brands and produced very attractive returns. The “How” is key.
The above identifies not just US breakout names but also International, where we have seen a significant number of billion dollar exits.
Lightspeed has offices in Silicon Valley, Israel, India and China so I thought it unfair to give our view point from Silicon Valley alone. I have spoken to our other offices in depth and below are their thoughts.
Similarly to the US, our partners abroad look for e-commerce companies that display:
- high absolute contribution margin per order
- high retention / frequency of purchase
- strong brand recognition
- low working capital intensity
- ability for entrepreneurs to access capital
- how vulnerable the company is to being rolled over by Amazon/Alibaba (is there a defensive moat either due to a long enough head start or a model, local nuance or category that the international giants will not go after?)
My home country of the UK is leading the way with regards to e-commerce as a % of total Retail sales (15% and rising). The chart below shows how countries such as China and the UK are seeing rapid growth and it is no surprise that Venture Capitalists in markets such as China, India and the UK see opportunity in e-commerce. I would argue that there remains significant opportunity both in these markets and also the US, as they play catch up and a larger % of retail sales continues to move online.
E-commerce in the U.S is currently 8.5% of retail sales and this has far more room to grow (some estimates say to 20% in 10 years). If we look across the pond, then the U.S. significantly lags behind countries such as the UK, where e-commerce represents 15% of retail sales at present.
Lightspeed continues to look at e-commerce startups, both US and International, with potential to be breakout companies and brands. If this sounds like you, please drop me a note at email@example.com