Our Investment in Profit Peak

Profit Peak enables e-Commerce businesses to measure and optimise for profitability. In real-time, in one place, for the first time!

We are thrilled to announce our investment into the Pre-Seed round for Profit Peak. We met the founders, Carla and David, in late-2023 and they blew us away. So it was our great pleasure to have participated in their capital raise, led by Macdoch Ventures with participation from several sophisticated VCs and strategic angels.

Profit Peak is a unique investment. The team was pre-revenue but managed to close out a commitment in less than 2 weeks. Here’s a breakdown on how we built up our conviction.

Image: Profit Peak Cofounders — Carla Penn-Kahn, David Kahn

Flipping the Script: Putting Profit First

Ecommerce brands struggle with optimising for profitability. They’re busy trying to figure out the impacts on their bottom line. And they can’t focus on growth — which is what they’re good at!

Here’s the main reasons that ecommerce brands struggle with profit optimisation:

1. Advertising platforms don’t share data
   Brands use numerous digital channels — Instagram, TikTok, Google — which complicates ad spend attribution to sales. Without accurate attribution, product profitability is unclear. For example, a customer might interact with a Google Ad, an Instagram reel, and a Facebook Ad before purchasing. Both Google and Facebook claim the sale, causing revenue discrepancies. This can lead to predicted revenues being up to four times higher than actual revenues. Key questions arise: How do I track customer actions accurately? How much did acquiring each customer truly cost?
2. Digital advertising optimises for revenue through ROAS
   ROAS (Return on Advertising Spend) measures revenue per ad spend. However, optimizing for revenue isn’t the same as optimizing for profit. ROAS ignores crucial ecommerce factors like return rates, shipping fees, and profit margins. For instance, if Product A has higher returns but higher conversions than Product B, ads will favour Product A, potentially losing money. This isn’t optimal.
3. Businesses make inventory decisions without understanding real costs
   Ecommerce’s major expenses — ad spend, shipping, and returns — are often siloed, obscuring true inventory ROI. This leaves operators uncertain about product profitability, leading to poor inventory decisions. Without accurate data, businesses may overinvest in unprofitable products or underinvest in profitable ones.

This translates into huge profitability differentials between products. Ecommerce operators don’t have the tools to optimise their businesses for sustainable growth. And post-ZIRP (zero interest-rate policy era i.e. the ‘free money’ era), this is essential.

Technology as a Profitability Enabler

Profit Peak is an analytics software that allows ecommerce businesses to make smarter decisions around profitability and capital efficiency. The single interface solves for inaccuracies in data and real-time attribution, allowing you to measure exactly what a customer journey looks like. The platform is able to connect a businesses sales channels, first party data ad-spend, inventory data, influencer relationships, company expenses and customer profiles.

Profit Peak is a Shopify and Magento native software. So customers are able to install the product in 15 minutes, allowing Profit Peak to pull a line of code on the store and collect first party data layers. The customer is then able to upload a fixed and variable pro forma monthly P&L into Profit Peak. This allows them to include things like agency fees, rent or any other line items. Profit Peak will then analyse their profitability across the store’s inventory. This enables ecommerce businesses to drive profit-led growth.

Deeply Unfair Advantages

Carla and David are experienced ecommerce operators. They ran two market leading Australian eCommerce brands in the kitchenware category for nearly 10 years prior to founding Profit Peak. Carla and David led those brands to two successful exits. So they understand ecommerce. And the common pain points faced by players in this space. We are BIG believers in investing in founders with deep industry expertise.

One of the pain points they experienced was their inability to drive profit-led growth. They searched the market for software that would bring inventory analytics and ad data together to better understand their customers and ad spend. Although there was a lot of attribution software in the market, none of it aligned specifically to inventory. They developed an internal tool in early 2023 which combined their own first party data into their inventory analytics. The results were compelling. And what’s more, over the course of the year they found that other ecommerce players had the same issue.

We’re very excited about this investment and are thrilled to be working with an exceptional founding team. Carla and David are world class operators with a deeply unfair advantage in the ecommerce space. After our first meeting we knew that we had to invest in them, regardless of the opportunity they were chasing. If you know an ecommerce operator that could use this technology, they can join the waitlist for beta access here!

For the record, any opinions represent my views and me only.