14 Jan Acquiring eCommerce Businesses: “The Exit” Podcast
This week, our CEO Ari Horowitz was a featured guest on “The Exit,” a podcast presented by Flippa, featuring expert entrepreneurs “who have been there and done it.” During the episode, “Acquiring e-Commerce Business,” Ari discussed what led him to co-found Yardline, considerations for advancing capital, how our deals are structured, and what’s coming in 2021. Here are some of the highlights from the episode:
What led you to co-found Yardline?
A passion for entrepreneurship, combined with the capital and expertise to help companies that aren’t yet ready to be acquired. With Yardline Capital we’re enabling people to live the entrepreneurial dream, leave the shackles of the corporate environment and do something they’re passionate about.
When you’re interested in a business, what are the initial things Yardline looks at?
It comes down to the person running the business — that’s ultimately what we bet on, because that typically drives the success of the business. We look at your data, using algorithms originally developed at Thrasio and then updated for Yardline’s specialty, and then bundle in our operational expertise to make predictions on future cash flows. From there, we decide if we can advance capital, how much, for what period of time and at what rates. The key is getting to know the founder, and a lot of that is done digitally.
That’s the benefit with ecommerce companies — the data can show you Facebook ads, what types of sales are converting, what things are working for the business, and essentially, an owner’s skillset. Amazon is just the beginning. We’re bullish on what’s happening with Instagram Shopping and other marketplaces where people can establish themselves and gain real estate.
What does an e-commerce business looking to make an exit need to get in order?
Ensuring the entrepreneur has a handle on their business and understands the fundamentals. There will be things that can’t be controlled, but what’s important is how you react and manage through them. You also don’t need to give up equity — if you can demonstrate performance on one of these platforms, such as Amazon that comes with the understanding that people will continue to buy there, you should be able to continue growing your e-commerce business, and shouldn’t have to sell a piece of your company to do so. You can come to Yardline to fund that growth. This is the time when entrepreneurs would be grabbing as much land as they can.
How does repayment work?
Using the data to create a future expectation of sales, we turn around a quick qualification. We’ll issue capital for you to be able to buy more inventory, ramp up advertising spend or expand to other platforms. As a partner, we take a percentage of the revenues until we get our capital back, plus our fees. The faster you grow, the better we do.
What’s next in 2021?
Expansion of different marketplaces.
We’re going to focus on some of the other emerging platforms like Instagram Shopping, where you get served up things you’re not sure you want, but makes things more discoverable. The power of influencers is also going to come through.
We see a lot of opportunities in the UK, Germany, Japan and similar markets where it’s more difficult for companies to secure funding, but where Amazon is particularly strong.
What would you tell Ari 10 years ago?
You can always get more money, but you can’t get more time. Try to do things, but if it’s not working, walk away and move onto the next thing. Take capital when it’s available to you and get the best price you can. I’ve never seen a business fail by having too much cash, but I’ve certainly seen the opposite.