Four months ago, he barely had a product. Now in November, CEO Keith Rabois has set an ambitious goal for his team at OpenStore: to close the year at the pace of getting new Shopify-based business every day.
“It will prove to me, when we get there and do it in an automated way, that we have a mechanical machine that can expand,” Rabois says. “That’s the goal for this quarter. But unfortunately, it’s been X quarter days, so back to work.”
OpenStore, founded in March, does everything in a hurry. The startup was launched with the support of Founders Fund, where Rabois is an investment partner, and startup studio Atomic. In June, he reached a mentioned $250 million valuation after raising $30 million in a tour led by Khosla Ventures ahead of launch. Now, with a team of 35 and more than a dozen merchants joined on its platform representing tens of millions of revenue, the Miami-based startup is back in the well of making Rabois’ goal a reality.
OpenStore has raised $75 million in a Series B funding round led by General Catalyst, the company says. Atomic, Founders Fund, and Khosla Ventures, which spearheaded their first series just five months ago, also participated. After investment, OpenStore is now worth $750 million, says an informed source Forbes Triple the valuation of the company during the same short period.
Launched after a holiday chat between Rabois and fellow Miami transplant buddy Jack Abraham, co-founder of Atomic, OpenStore’s basic premise is to use software to quickly evaluate, price, and bid on “long-tail” merchants who sell through the Shopify platform , usually with a single program – numbers in the millions in annual sales. OpenStore then hopes to leverage its superior technology and resources to boost sales of the acquired product lines, and eventually combine under one e-commerce brand that compares Rabois to Wish at all price points, or Wayfair for all shopping segments.
Rabois says that taking advantage of economies of scale could improve margins on such products and allow OpenStore to lower prices, speeding adoption with consumers. Its software can leverage data from mass-earned brands, in the meantime, to improve spending on marketing like Instagram ads, and extract better prices from logistics providers like FedEx and UPS.
Traders sell their entire business – this is not the equivalent of venture capital, or a new form of financing – they are cashing in their entirety. But the founders of OpenStore see themselves as the good guys in this scenario. In an interview, Abraham said he first came up with the after one of his founders asked him he mentored how she could easily sell her company, which makes organic skin care products. “We knew it had a really big gap to cross to get to the point where the company could have liquidity,” he says now. external capital raising, investors expect tens of millions of returns; The founder was closer to $3 million.
According to Abraham, a commissioned external partner of Atomic (Which is famous for its startups To address gaps in the market — even if you’re not always first) I found that 80% of smaller sellers surveyed on Shopify were open to acquisition. “Giving them the liquidity and the choice to do whatever they want to do in the rest of their lives, including winning… He is very pro-entrepreneurial,” he claims.
Businesses sign up by raising their hands and sharing their login credentials on Shopify, so the OpenStore can work on their sales data. OpenStore has bought over a dozen so far, ranging from jewelry to frozen foods. One early recipient: FarmFoods, a brand that sells raised meat responsibly online, founded by a former Tesla director of human resources in 2018. According to OpenStore, Land’s business grew fivefold during the pandemic in 2020; Taking a multi-million dollar cash offer allowed her to go ahead to “unlock her next endeavour.”
If all of this sounds familiar, it is because rolling stock has proven to be a boom in business in recent years, Especially in the Amazon ecosystemThrasio startup Thrasio has spent hundreds of millions on a portfolio of more than 200 brands, raised hundreds of millions in other debt, and recently secured $1 billion in an equity investment of more than $5 billion. in October (An evaluation that may seem cheap now to some).
OpenStore claims to have very little in common with these players, though the obvious. “All of these assemblers that you see on Amazon are just financial engineering, because Amazon provides the blocking and the processing and all the moving pieces,” Rabois says. “The founders who run these companies have an easier job than me, which is great for them. The bad news is that there aren’t a lot of ways to improve that business, because Amazon is very good at what Amazon does.”
But that doesn’t mean Amazon aggregators won’t set their sights on the neighboring Kingdom of Shopify, as OpenStore is already facing other entrants like Pattern Brands.launched by the team Behind the once influential branding agency in Gin Lane and backed by its own group of venture capital firms. While Rabois claims he hasn’t encountered a direct competitor in talks with potential dealers to sell, it appears to be a safe bet that it won’t be for long.
Hence the big funding round. For now, accessing debt is still costly for OpenStore as a young company, meaning some of that $75 million will go directly to its acquisitions pile. The company also plans to increase headcount to 50 by the end of the year, and then 150 over the next year — many of them engineers to improve its software and make faster deal decisions, ultimately within an hour. Rabois says he doesn’t “carefully select” companies to proactively target Shopify’s 1.7 million in a pool of less than $10 million. But that may change with more data and software in time, too.
“They are the market leaders in the Shopify ecosystem, but there are bigger insights to being able to build something much bigger,” says Mark Crane, General Catalyst partner.
For now, investors are betting just as much on Rabois, who says he raised the new funding in just one day. A member of the PayPal mafia and former COO of Square, Rabois also co-founded Opendoor, a company today with a $13 billion market capitalization similarly applying technology to automate volatile homes, building Midas Caliber List Venture capital portfolio in Khosla Ventures and now Founders Fund. The power of these tech stars has attracted talents such as OpenStore President Michael Rubinstein, and the former President of AppNexus; Meanwhile, Rapoa’s tireless preaching of Miami’s burgeoning tech scene has helped attract talent from Google, Facebook and Uber.
Three-quarters of the OpenStore team transferred to their new jobs, though Rabois continues to invest for Founders Fund across the US “If I am publicly stating that people should build in Miami, I have to build a company in Miami to lead by example.” , ” He says.