Global retail e-commerce is expected to be a $25 trillion business this year, and today one of the companies that has built a set of tools to help larger enterprises to sell to consumers online has raised a large growth round to meet that demand. Commercetools, a German startup that provides a set of APIs that power e-commerce sales and related functions for large businesses, has raised $145 million (€130 million) in a growth round of funding led by Insight Partners, at a valuation that we understand from a close source is around $300 million.
The funding comes at the same time that commercetools is getting spun out by REWE, a German retail and tourist services giant that acquired the startup in 2015 for an undisclosed amount.
The route the company took after that is a not-totally-uncommon one for tech startups acquired by non-tech companies: commercetools had been acquired by REWE as part of a strategy to take some of its own e-commerce tech in-house, but commercetools had always continued to work with outside clients and has been growing at about 60-70% annually, CEO and co-founder Dirk Hoerig said in an interview.
Current companies include Audi, Bang & Olufsen, Carhartt, Yamaha and some very big names in retail products and services (including major telco/media brands in the USA that you will definitely know). Ultimately, the decision was taken to bring in outside funding and spin out the businesses as an independent startup once again to supercharge that growth. REWE will remain a significant shareholder with this deal.
Hoerig said that commercetools had raised only around $30 million in outside funding when it was a startup ahead of getting acquired.
Although e-commerce has grown over the last couple of years with slightly less momentum than in previous years given wider economic uncertainty, it continues to expand, and in that growth, we’ve seen a swing back to individual retail brands looking for ways of connecting more directly with customers outside of the third-party marketplaces (like Amazon) that have come to dominate how people spending money online.
That is giving a boost to those providing essentially non-tech businesses the tools to build e-commerce activity by offering “headless” tools that are attached to front-end systems designed by others.
Shopify, which focuses more on providing e-commerce tools by way of APIs to medium and smaller customers, has ballooned to some 800,000 customers. Commercetools focuses more on companies that typically generate revenues in excess of $100 million annually, Hoerig said.
Commercetools has no plans to expand to smaller companies — “We have no plan to compete against Shopify,” Hoerig said. Nor is there any strategy in place to extend into logistics, another important component of e-commerce services.
Instead, it wants to use the funding to continue expanding its business in North America and other parts of the world, as well as to continue building up its B2B2B offering — that is, tools for businesses to sell to other businesses. This is an area that companies like Alibaba are very strong in (and Amazon has been also growing its business), and the idea is to provide tools to let companies sell on their own sites either as a complement to, or to replace, third-party marketplaces.
Another area where it will continue to figure where it can play better is in the development of better online-to-offline technology.
Richard Wells and Matt Gatto of Insight are both joining the board with this deal.
“With a strong track record of investing in retail software leaders, we are excited to have the opportunity to invest in commercetools and help them scale up internationally,” said Wells in a statement. “In our opinion commercetools represents the next wave of enterprise commerce software and has the potential to unlock powerful innovation and growth within the e-commerce sector.”