In this episode, we’re going to be speaking with a co-founder at OpenStore. It’s a company that provides instant liquidity for eCommerce entrepreneurs. It’s a great episode you do not want to miss.

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Welcome to the 2X eCommerce Podcast. The 2X eCommerce show is dedicated to digital commerce insights for retail and eCommerce teams. Each week on this podcast, we interview either eCommerce experts, a founder of a digitally native consumer brand representative from a best in class commerce SaaS product with a tight remit to give you ideas you can test right away on your brand. You can improve commerce growth metrics such as conversions, average order value, repeat customers, your audience size, and ultimately, your gross merchandise value or GMV or sales. We’re here to help you sell more sustainably.

In this episode, you’re about to read an interview I have with Michael Rubenstein. He is the Co-Founder and President of OpenStore, an acquisition business. OpenStore is a platform that enables the rapid sale of eCommerce businesses. Essentially, their proposition is the fact that not every Shopify merchant or DTC brand can achieve the massive scale of Allbirds, Glossier, Warby Parker, Boohoo, or even ASOS. VC funding and initial public offering are fundamental and critical to growing these businesses to a massive scale and conglomerates.

There are hundreds and thousands of successful Shopify businesses with a few million in revenue. We’re talking about $2 million to $10 million in revenue. The owners simply have limited options for what they can do with their businesses and what to do next. Their proposition is they connect to your Shopify store, look at your historical data, give you a near-instant valuation within 24 hours, and you can close a deal in about a week. They’re building out a platform. They’ve been around since 2021. This platform is a business selling platform direct to the acquirers if that makes sense.

It’s an interesting conversation I had with him. We talk about how to build your business ready-for-sale, what the building blocks are in that respect, how they built out OpenStore, the deals that they’re looking into, and what to do as an operator to optimize whatever access you’re looking to achieve. They’re based out of Miami, Florida. Miami, Florida is becoming a startup hub with a great migration out of California. There’s a growing hub in Miami, Florida. They’re part of that ecosystem. It’s interesting because he mentioned that they’re not a bank, they’re operators. They want to operate these businesses to their fullest potential.

He’s an interesting individual. A bit of background about Michael, he is also an Executive who played a key role in building two of the most iconic tech companies. AppNexus, which is acquired by AT&T in 2018, and DoubleClick. I remember DoubleClick’s acquisition by Google in 2008. He’s super clever. He has other co-founders and one of his co-founders is in the PayPal Mafia. There’s a lot of Silicon Valley brains and cash put into this startup. They are a player in the Shopify ecosystem and your Shopify stack if you think about it.

I have a massive announcement in the next episode and it’s going to be a different episode if you want to see that. How are you guys doing this 2022? How have you started the year? We’re going to be running some events this 2022. I’m going to do a prediction episode also. I’d like to know. Reach out to me via Twitter or LinkedIn. I like to interact with you guys. Some of you do that a lot. I want to thank our sponsors, Klaviyo, Rewind, and Gorgias. You guys are magnificent. I shall catch you on the other side. Stay blessed. Cheers.

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Welcome, Michael. I have been waiting for this conversation. Welcome to the 2X eCommerce Podcast.

Thank you. It’s a pleasure to be here.

Could you take a minute or two to introduce yourself and OpenStore?

I’ve spent the past two decades-plus building a number of pretty iconic digital marketing, digital advertising platform businesses, companies that are well known like DoubleClick and AppNexus. I’ve been close to the eCommerce space and helping eCommerce merchants build their businesses. My new business is OpenStore. It’s a unique business and a unique concept. We are providing instant liquidity to direct-to-consumer eCommerce merchants for their businesses. We’re buying and acquiring eCommerce businesses and they’re Shopify sellers, Shopify-based merchants. It’s an exciting concept around the growth of the eCommerce space and providing a real necessary service.

It’s incredible and exciting. I like the term instant liquidity for eCommerce entrepreneurs. A ton of readers are Shopify store owners. Also, I like the fact that you’re focused on Shopify. Why is there a need now? How long have you been on for? How did you come to the ideation and the birth of OpenStore?

We started the company in early 2021. The concept was originally hatched by one of our co-founders, Jack Abraham. He is a legendary entrepreneur and investor himself. He started a number of companies. Also, Keith Raboy, who’s a legendary Silicon Valley entrepreneur, executive investor. He relocated to Miami and has been focused on building the Miami tech scene. All exciting startups are built around solving a problem. The problem in this particular case is that if you look over the last several years, the number of eCommerce merchants that have built businesses on Shopify and other platforms exploded.

There are millions of these merchants. There are no good options for those entrepreneurs to sell their business when they get to the place where they’ve decided it’s time to sell. Not every entrepreneur certainly wants to sell their business. Some want to operate their business in perpetuity or for a long period of time. If you get to the point where you want to sell your business, it’s time to move on to the next thing, or people have different reasons and motivations, there aren’t great options in the marketplace. We provide that at OpenStore.

You got to Open.store, provide access to your Shopify order history, bank data, some other information like marketing data, and we will give you a price for the business within a business day. We also started providing some reporting and explaining how we get to the price that we provide as well. As an entrepreneur, it’s an incredible opportunity. You can sell your business. We have had situations where from the time someone has come to our website, we’ve acquired their business a week later. That is a compelling value proposition to know that as an entrepreneur, when it’s time to sell, you can do so in a way that’s clear and transparent. It’s streamlined, automated, and easy. You don’t have to worry or stress about a lot of the complexities that would be involved in selling your business otherwise.

There’s a lot to pick from what you said. Your turnaround time is unheard of. It sounds to me like there’s a lot of automation going on there. You did allude to the fact that you probably have a Shopify connector, which gets all their sales records over a period of time. They need to upload their bank statements. Is that all that’s required from merchants who are looking to sell their business or do you need other data points?

We connected to the bank account via Plaid. If people provide a P&L statement or some financial statements, that’s great. We strive to make it as easy as possible so that people can connect us with the information we need to price the business within minutes. From our side, you’re correct. We have built automation and algorithms that look at this data that we ingest about your business and allow us to turn around the price quickly. That’s exactly what we’ve invested in, making it streamlined and automated.

You’re generating a P&L from the data you see in Shopify. There are things that do not reflect in Shopify such as the cost of goods. How do you figure other expenses or COGS into the mix?

To the extent that people have that information and they upload it to us in the form of financial statements, that’s helpful. We’ll also connect to bank information and try to reconstruct that as best as we can as well.

That’s why it’s important to keep your personal expenses away from your business. For valuation such as this, everything is nice and clean. You know the expenses that are related to the business and the business alone. That makes a ton of sense. Are you operating in the US? Can you acquire UK businesses? What is your jurisdiction look like?

We’re acquiring US-based businesses. I would expect that we will be acquiring businesses outside the US at some point. We’re relatively new at this, starting with US-based businesses.

There are some UK businesses that predominantly sell in the US. The US is five times our market size. They might have Us versions of the UK site. Would they be in consideration? Are you looking to purchase US entities?

We probably could acquire a business if the majority of the business is in the US market at this point. I would recommend that UK-based merchants if you’re interested, go to Open.store. There’s no downside to giving us the information and receiving a price for your business. At minimum, you’ll get a sense of what we think your business is worth and why. It tends to be good and helpful information for people to have and we’ll go from there.

You’ve been around for over a year. How many businesses has OpenStore acquired?

We’ve acquired dozens of businesses at this point. We spent the first six months or so building the foundational team and building those foundational algorithms and workflow that would help us to automate and streamline that M&A process that you mentioned before. We started acquiring businesses in the late summer or early fall. We’ve acquired dozens. It’s ramping quickly. It’s quite normal for us to acquire multiple businesses per week at this point and things are moving quickly.

This is a bit of a complexity glitch, which is multi-channel Shopify stores. Maybe Shopify is the mothership and they’re doing maybe 20% on the marketplace. Would they only be selling the Shopify business? Is this something you just don’t touch?

We’re buying the whole business. We’re not just buying the Shopify portion of the business. At this point, we’re looking for businesses that are predominantly Shopify-based where the majority of the business is coming in through Shopify. We understand that some merchants monetize through some other channels. We’ll still price or acquire businesses that have that characteristic. If there’s too much business, more than a small portion coming through other channels at this point, that’s not in our sweet spot. We’re looking for predominantly Shopify-based businesses. Over time, I would expect we’ll expand that.

Let’s talk multiples. I’m trying to project for the readers. They know their gross margins, EBITDA, or what have you. What multiples should they expect from OpenStore?

It varies by business. Part of what we’re doing here is we’re not offering a multiple for your business. We are looking at what the data says about your business. We are determining how valuable we believe the business will be in the future. Our plan is we acquire these businesses and move them over to our platform. Our intention is to operate, build, and grow these businesses for the long term. Businesses clearly that we have reason to believe have a fantastic trajectory ahead of them will be priced well.

Businesses that are declining or maybe aren’t profitable or we can’t see the path, it’s less so. It varies. More than multiple, I would encourage people to think about the quality of the business. Is the business profitable? Is it growing? Are customers coming back and buying routinely from the company? Is there interesting new product development that’s happening that allows customers increasingly to buy more and more from the merchant? Those are the things that we’re looking at.

I was going to ask you to speak to your long-term vision for the brand. Not every eCommerce business is going to be like Allbirds, Warby Parker, or Glossier. Does OpenSource tend to find these diamonds in the rough brands and scale them to Warby Parker or what have you?

There are some brands out there that have that potential. We will provide the investment and the care for those brands to do so. It’s inevitable that some of the brands that we acquire in this large portfolio will have that potential. We’re bringing the team, the talent, the technology, the financial heft to the table to be able to invest and grow these businesses and help them realize their full potential.

Are you going to carry over their existing teams for brands that have teams? Is it your people? Are you going to have cross-functional teams or specific teams per brand? What does it look like post-acquisition?

Part of our value proposition to the owner of these businesses, the seller is that we are able to provide full liquidity and we allow you to move on to your next venture. There is a brief transition period after the sale. It could be weeks. As fast as possible is great for us. We take over the operations of these businesses.

The founders, the operators of these businesses don’t come along with the acquisition. They may have some staff or some relationships in operating the businesses that we determine are important to keep on as part of the transition and we evaluate that as part of our diligence and transition period. Our clear value proposition to the entrepreneur is that we allow you to get liquidity for the business and move on to whatever is next.

What about verticals? Are you biased to certain verticals? Are you open to any and every vertical? There are some gray areas of verticals such as CBD, hemp, vaping. Are you open to all verticals?

We’re relatively vertical agnostic at this stage. If a merchant comes in and they represent a category or they have a product line that doesn’t fit with our portfolio, we’ll let them know. We’d like to say that we’re category or vertical agnostic.

Why didn’t you become Amazon aggregators? It sounds like you guys are consolidating at scale, DTC, eCommerce brands on Shopify. You’re doing almost the same thing the aggregators are doing. Why didn’t you opt for the Amazon aggregator module? I’d be interested to know why.

The thing we have in common with the Amazon aggregators is that we’re both acquiring businesses. There are many differences between the business we’re building and the business that we typically see in the Amazon aggregation space. For one, we have a quick turnaround period. We’ve invested a lot in automation for the M&A process itself.

Some of the Amazon merchants have quoted that the process could take months to sell businesses. We’re aiming for days or weeks here. Also, Amazon aggregators are interested. Marketplace sellers were interested in direct-to-consumer sellers and brands. The eCommerce space is a big, vibrant space. We’ve chosen our direction, our path. We’re interested in working with, acquiring, and operating ourselves direct-to-consumer businesses.

Do you have any customer stories? Anything memorable from an acquisition standpoint? I want to get into the eyes and feet of an entrepreneur who’s been running their business. They approached you and eventually sold. How smooth was the process and how life-changing was the experience with yourselves?

One of the cool things about OpenStore, one of the things I enjoy most is working with entrepreneurs, especially, for me, having built and sold businesses before which were large enterprises working with big corporate customers. It’s always fun. The relatability and the human element of working with small and medium-sized business owners, you can’t beat that. It’s fun to work with people every day who are pouring their heart and soul into building these businesses and want to see them land in a great place, want to receive a fair offer when they’re ready to sell. It’s gratifying.

One that comes to mind is our first seller was a company called FarmFoods. It was started before the pandemic by an entrepreneur who previously had a career in HR and worked at companies like Tesla. It’s an online organic meat delivery across a variety of different meat, poultry, and so forth. It’s a category that took off during the pandemic.

As you can imagine, more and more people are ordering their meat for delivery online as opposed to going to their local grocery store, especially given the fact that these meats are locally sourced, organic, sustainable, and so forth. The business experienced a lot of growth in a short period of time during the pandemic. The founder felt like it was the right time to sell the business and move to the next adventure for herself. Also, put it into the hands of folks who are experts and passionate about scaling the business and fully realizing the vision and the opportunity for the business.

We acquired FarmFoods as our first brand. It’s been great and exciting. It’s been a win for us. We now own this fantastic brand in an interesting space that has high potential. We’re are excited about growing it. It’s a win for the entrepreneur, a multimillion-dollar payout that ultimately can be the fuel for whatever it is that she’s going to pursue next in life.

It’s almost like a habit-forming product. It’s a product category. You’d always buy groceries. I can imagine their retention rates were up the roof. That’s the predictability of future revenue. They piled up their value I presume given the fact they were such a young business. It started probably March of 2020, the start of the pandemic, Q2 or Q1 of 2020.

It started a little before then but it took off during that period.

There’s one question I’m going to ask. There are some entrepreneurs reading this who are fired up in regards to wanting to sell their business for the highest value possible. They’re thinking, “How can I maximize value now? I’ve been running my business for X amount of months or years. I’ve been thinking about an exit at some point.” What are the key components they should be looking at when they get to Open.store? You guys give them a life-changing deal. It’s forward-thinking. What layers or what should they start thinking about from a value-growth perspective?

A couple of thoughts. One is you don’t have to plan or think too much before going to Open.store. You can come to us and give us your information. It takes minutes to give us access to Shopify orders, your bank data, Facebook, marketing spend. We’ll turn around a price in a business day. We’ll give you access to helpful information as to how we’re arriving at the price that we’re arriving at.

You don’t have to prepare for months to be able to come to our website and submit. We recognized that some people will come, they’ll price their business, and they may decide for a year that they want to sell. They can come back then and do it again. It’s totally fine. We encourage people to engage with us and begin that relationship.

In terms of what we are looking for, it’s the same stuff that an entrepreneur is looking for when they’re growing their business. We’re not bankers. We’re operators. Our intention is to continue to operate and grow these businesses. We want to know that the business is growing and the business is profitable or on a path to profitability.

We want to know that customers like the products and that they’re coming back and buying the products again and again. We want to see that there’s innovation happening in the space. We’re going to want to see that marketing can be done cost-effectively, efficiently, and so forth with these customers. It’s pretty much the basics that any entrepreneur will be looking at when they’re running their own business as well.

What’s your outlook for eCommerce in 2022? What is your outlook from your personal perspective? You’re going through a lot of deal flow. You’re also speaking with entrepreneurs on a daily basis. I’d like you to give your perspective of 2022 with the context of what has already happened in 2021 and 2020.

We’re coming out of a multi-year period where eCommerce growth has been pretty phenomenal. The tailwinds of the pandemic have helped the growth of the sector. There are some near-term challenges. You have supply chain issues, which are well documented, well understood, and much discussed at this point. You also have tougher year-on-year comps. The ability to continue to grow at the rate at which an entrepreneur may have seen growth over the last couple of years gets harder and harder every year.

If you zoom out, the macro view on the eCommerce space is incredible. We’re all in this space because we believe tremendously in the ten-year growth of the space. There are near-term challenges. What we see working with entrepreneurs is access to financing, access to liquidity, access to things like that also doesn’t exist well right now. That’s part of the problem that we are here to try to help address.

Michael, it’s been an absolute pleasure having you. Before I let you go, we have what we call our rapid-fire section. It’s a list of about 6, 7 questions. If you could answer each of them with a single sentence, it’ll be brilliant. We want to know a little bit about you. That is the purpose of this section of the podcast. What advice would you give yourself several years ago?

Buy Bitcoin.

Are you a morning person?

Yes, absolutely.

What’s your daily morning routine?

I wake up and do my best thinking first thing in the morning to the extent that I can try to give myself some space to think through the toughest problem that I have on my plate and then move on to family time, work out, work, the usual.

What are some things you can’t live without?

My family means everything to me. Also, interesting challenges.

What book are you reading or listening to?

A colleague of mine recommended a fitness book to me that I started reading, which I need to get through. I can’t remember the name.

The final question is, what’s been your best mistake to date? A setback that’s given you the biggest feedback?

I’ve learned a lot from hires that I’ve made, good and bad. In some respects, probably more from the bad hires. It’s helped me understand a lot better who my colleagues should be and who to bring into the business. It’s helpful on a day-to-day basis as we’re hiring and rapidly scaling up this business at OpenStore. That’s what comes to mind.

Michael, it’s been an absolute pleasure having you on the show. It’s Open.store for those who are reading. Where are you guys most active from a social media perspective? For those who want to follow what you guys are doing, what are the best platforms to follow OpenStore?

I would say Twitter or LinkedIn.

Are you active in either yourself?

Somewhat more on LinkedIn. The company is active on both platforms.

It’s been an absolute pleasure speaking with you and learning more about OpenStore. Thank you.

Thank you so much. It’s been a pleasure.

Cheers.