Practical Ecommerce: You are an astute, pioneering tech investor. Why invest in SMB ecommerce?
Steve Case: We look to invest in people and ideas that could change the world, and we look for large, swing-for-the-fences ideas. They could be small businesses now, but we feel that they may be large businesses over time because they are focused on disrupting large sectors of the market and impacting important aspects of people’s lives. That’s the beginning front.
In terms of why we are interested in ecommerce especially, only about 10 percent of retail today happens through ecommerce. That is growing and will continue to grow. We wanted to be well-positioned in that industry, so we made numerous ecommerce-related investments.
In addition, we believe that we’re starting to see the democratization of ecommerce. Some of the big players will continue to be important, but there is an opportunity for everyone to play whenever they have the tools which enable them to do so, both in terms of it being easy to start and then simple to scale.
PEC: By our account, there are approximately 600 ecommerce platforms — hosted and licensed. Your organization, via Revolution Growth, spent $40 million in Bigcommerce. Why did you select Bigcommerce and none of the others?
Case: We spoke to a number [of platforms] when we were attempting to understand the company. But we reasoned Bigcommerce had the product and the platform and the people and the spouses to emerge as the leader in the industry. They are those that we think are the winner. We strive to be helpful not only in terms of providing the investment funds, but also concerning working to help enlarge their teams or establish new strategic alliances and things like that.
We think Bigcommerce had the ideal solution. Some of this was because they had crafted the design of this platform in a really wise manner and been very thoughtful in attempting to determine ways to make it simple for people to begin and, too, easy for individuals to grow together with the platform and keep with the platform. As a company expands, as its needs expand, Bigcommerce can expand together.
Bigcommerce also admits this is the type of company where partnerships make sense. There is an old African proverb that in case you would like to go fast, you can go , but if you would like to go far, you must go together. That applies in the ecommerce area also. Instead of attempt to do everything themselves, Bigcommerce has attempted to create a platform that leverages the innovation happening across the ecosystem — such as open APIs so people can have apps in the Bigcommerce platform and partnering with payment providers as opposed to attempting to be a payment solution by themselves.
That open approach and platform approach was a key reason why we spent. Bigcommerce had the ideal strategy, had the ideal team, had the ideal platform, and had the beginnings of the perfect partnerships to emerge as the leader in this space.
PEC: as soon as you create a $40 million investment in a platform such as Bigcommerce, what do you do then? How closely are you currently involved?
Case: We do get involved with the business since, as I said, it is partially about the investment capital, but partially that which we try to do is work together with the firm, roll up our sleeves and try to be useful. In cases like this, I joined the board of Bigcommerce and have been involved in considering its partnership strategy, the role partners played. It was significant before; it is even more important now as we’re attempting to set a tapestry of alliances around Bigcommerce. That’s where we believe we can concentrate most of our efforts.
PEC: Many observers think that ecommerce for smaller businesses will be increasingly tricky. They mention the growing dominance of enormous marketplace retailers, such as Amazon and Walmart. How can a smaller ecommerce firm prosper in that environment?
Case: I am bullish on the role which these smaller players can perform. I certainly recognize that there are a number of dominant players such as Amazon and Walmart. I believe they’ll continue to have an important function. But we’re beginning to see customer preference for a vast array of merchants, not only a few.
It is not that surprising to me since we have seen the exact same type of evolution over the last couple of decades in different sectors of the market — things like restaurants, where there are surely some big players such as McDonald’s, Chipotle, and many others. But there is also a continuing, important role for smaller restaurants. Perhaps a chef has one or two restaurants. Despite the fact that the large players have grown quickly, there’s been a significant role for the market, specialized companies which are providing a different sort of experience.
Similarly, we have seen that idea of this long-tail with content, there are certainly important media companies which have a substantial presence on the market. But we have also seen an explosion in voices, an explosion through sites and Twitter and Facebook and other social networking platforms. There are now far more people providing content — being basically journalists — sharing their point of view than a decade ago.
That proliferation of voices suggests that customer desire isn’t simply a couple of media companies to perform that role, not only a couple of restaurant chains to nourish them, but a wide selection of providers. We believe the same dynamic is currently happening in ecommerce.
The arrival of platforms such as Bigcommerce has allowed everybody to engage with quite robust solutions that even a couple of decades ago would have caused plenty of money and taken plenty of time. Now you can be up and running quickly and inexpensively through Bigcommerce.
I believe that will accelerate the adoption around ecommerce and accelerate this democratization of ecommerce and the maturation of the exact same long-tail phenomenon that we have seen in sectors like content too now applying to trade.
PEC: Let us talk about your investment company, Revolution. Can you tell us about the firm?
Case: We began Revolution about a decade ago. We have two components of it: Revolution Ventures, which focuses on early-stage investment, investing in startups, and Revolution Growth, which concentrates on later-stage investing, what we think of as speedups. In Bigcommerce, given the scale that they had when we begin talking to them, the $40 million investment came from Revolution development. It’s the largest investment we have made from that fund. It shows our commitment to ecommerce and, especially, our dedication to Bigcommerce.
What we look for are terrific entrepreneurs with disruptive ideas which have the potential to alter how we live our daily lives and restructure — disrupt, if you will — crucial sectors of the market.
We look at things in a rather wide context. We have invested in dozens of companies over the last ten years. It’s been a good deal of fun. This is informed by my experience as a co-founder of America Online, or AOL, now 30 years back.
We believed that the Web would become part of daily life. But, at the moment, only 3% of people were online. When we said we wanted to get America on the internet, we knew it is going to take some time. It took us a long time, but ultimately people realized the significance of it.
Finally, we could set up the partnerships which propel us. The Internet took off. At its peak, AOL profited from this, as more than half of all of the online traffic in the USA in the late 1990s went through AOL. We saw firsthand, as an entrepreneur, the energy of an idea, the energy of gambling on a business comparatively early that had a big idea, and the power of partnerships which encompassed AOL.
That exact same philosophy applies to what we do . We search for those breakthrough ideas from terrific entrepreneurs who’ve built great teams, but we can help them choose those groups into the next level, helping recruit on the people front. We believe in partnerships, so perhaps there are ways we can leverage the community.
We want to be helpful on the policy front since we believe the next wave of companies, a third wave of the world wide web, will have more of a relationship with authorities, as buyers or regulators.
Those are the chances we search for, where we believe in the idea, consider it has the potential to be a substantial company. We also think that we can add some value in certain discreet areas beyond simply being an investor.
PEC: You mentioned at the beginning you had spent in other ecommerce companies, along with Bigcommerce. Are you able to state what those are?
Case: There are a wide variety of companies. We really were involved in the arrival of ecommerce now over two decades ago. It’s amusing to consider now, but I recall going to conventions back then where there would be a fairly vigorous debate whether ecommerce could take off. There were clearly some bullish views, however, the cynical view was that no one could ever feel comfortable entering their credit card online due to the fear of hackers.
Now, we are at a stage where not only do people willingly put their credit card online, but they ask the suppliers, the merchants, to store the credit card information so that they won’t have to input it again. Now they do not mind those merchants tracking their purchases so that they can recommend other products which may be of interest. It just shows you how quickly this whole phenomenon has developed.
During the past few years, we have had a few different investments, especially in ecommerce, from our expansion fund. One is a company named Lolly Wolly Doodle that has pioneered the use of social media — originally Facebook but has expanded — as a means to create demand for their apparel products, which target young women.
We have also invested in CustomInk, that was in the group t-shirt company — the ability to purchase 50 or 100 of these customized t-shirts. That is growing quite quickly, and they are moving into a few other sectors.
We have also, through our partnership activity, Revolution Ventures, spent in Booker, which will be supplying a booking platform for various different providers.
Though our biggest investment is in Bigcommerce for the reasons I said.
PEC: We’ve got a few questions related to macro problems that could impact the continued development of ecommerce, especially for smaller businesses. The first one, online payments, you have alluded to. Credit card processing statements are hard to comprehend; credit card processing charges may change from 1 merchant account provider to another. Fraud is always a danger. What is the future of online payments?
Case: The entire online sector keeps growing rapidly. Online payments have to be parcel that. It will have to continue to evolve so it is easy and secure for merchants in addition to being suitable and affordable for clients.
A strategy at Bigcommerce is to not do this on your own but to partner with other businesses. There are already partnerships involving Bigcommerce and companies like PayPal and Stripe. Lately, Bigcommerce did another round of investment, and one of the shareholders at the business was American Express, which is just another example of a mainstream payment provider recognizing that things are shifting in the trade space, especially in the ecommerce area.
PEC: The next macro query relates to sales taxation. The change in brick-and-mortar retailing to online has placed local taxing districts in a fiscal bind. There is a mishmash of state legislation to deal with the matter, which complicates the issue for merchants. Congress has gotten involved but has not enacted laws to date. What is the answer for ecommerce sales taxes?
Case: I had been involved 20-plus years back in trying to have the Congress to not taxation ecommerce since, in the first days, it was important that there not be some limitations put in place or bottlenecks or barriers put in place which may slow the development of ecommerce.
It’s still, now, only 10 percent of retail, but, obviously, it is growing rapidly. It is not surprising that Congress is taking a new look at it. I don’t know just what they have to do. I have been involved recently in talks with Congress on those issues, but I think, finally, it is more of a national solution. It isn’t the type of patchwork of inconsistent state laws as you referenced.
PEC: Anything else?
Case: The reason we are so excited is we have seen the development of ecommerce over the last couple of decades. We have seen it go from an idea that had its cynics and critics that did not think it would ever get off the floor to being a pretty considerable industry and a fairly significant and growing sector of trade all around. But there is still a great deal of chances to grow.
We are big believers in enabling merchants to be players in ecommerce. That is a key driver behind our investment with Bigcommerce. We want to ensure everyone has the resources to compete on a global stage and do it inexpensively.
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