Shopify is arming the rebels. Shopify App developers are building the weapons.
Zooming in on Shopify's app store ecosystem
Happy Sunday, Founders and Friends.
If you’re not paying attention to the Shopify ecosystem yet, consider this your signal.
We’re taking our eyes off of Bloom’s typical enterprise SaaS content this week to bring you a special edition of the weekly bloom focused on the micro-(and not-so-micro)-SaaS companies being built on the shoulders of Shopify’s app partner ecosystem.
“Amazon is trying to build an empire. Shopify is trying to arm the rebels.” Tobi Lutki, CEO of Shopify.
…and Shopify app developers are building the weapons and ammunition.
The online retail network has exploded over the past year, with e-commerce sales reaching an estimated $839.02 billion in total revenue in 2020, a 40.3% growth rate.
As consumer preference shifts to online commerce and web penetration continues globally, the demand for innovation in online retail is higher than ever. Last quarter, Shopify reported $41.1B GMV (+99%).
Consumer adoption and market growth of Shopify’s e-commerce platform is impressive, but the true valuation of $SHOP is at the unspoken core of the company- the app ecosystem. We’re zooming in on what makes Shopify a true challenger to Amazon.
Benedict Evans recently reported on Shopify’s earnings.
The Ecosystem
In Q1 of 2021, Shopify reported $233.7 million in earnings for it’s app partner ecosystem. With over 3,000 apps in the Shopify app store, e-commerce merchants are able to create and scale their business through custom built solutions developed solely for the Shopify ecosystem.
This growth shouldn’t come as a surprise to our friends in the Bloom community as Bloom Venture Partners General Partner, Jay Vasantharajah, predicted this shift in 2019…
“This creates a powerful network effect that is similar to that of Apple’s App Store. The more merchants on Shopify, the more developers are incentivized to create Shopify apps. The more Shopify apps and developers there are to help merchants, the more incentivized merchants are to sell using Shopify. This network effect has become increasingly obvious with Bold Commerce, the largest Shopify app developer, recently raising $22m to scale their growth.” - Jay Vasantharajah
When considering Shopify partner revenue in 2020 was higher than 2018 and 2019 combined, we can’t help but be bullish on the ecosystem for 2021.
While some apps are only bringing in enough to cover monthly AWS costs, some of the hottest companies in venture capital are doing 8-figures in ARR built on the shoulders of the Shopify ecosystem. Postscript, an SMS marketing solution, recently raised a $35M Series B lead by Greylock.
Postscript is built exclusively for Shopify merchants, available for install only in the Shopify App Store. Alex Beller, President of Postscript, attributes much success to the built-in distribution of Shopify’s App Store- also pointing out a sign of health in the ecosystem.
Builders and Buyers
Developers are building apps that directly solve the needs of Shopify merchants. Shopify’s app store features 12 product categories, curated similar to the success of Apple’s App Store- including solutions in marketing, supply chain, customer support and finance management.
Shopify provides founders and developers the opportunity to build and scale micro-SaaS businesses inside their ecosystem, at the cost of 20% of revenue.
The key success driver for the ecosystem is it’s enablement. Builders are able to build and scale hockey-stick businesses within 12 months.
Founder tip: free isn’t always better.
Shopify App Marketplaces
As the Shopify ecosystem grows with consumer adoption, app developers are finding success building solutions that generate sustainable MRR.
And where there’s builders, there’s buyers. Online marketplaces, like MicroAcquire, are seeing a rise in Shopify apps transactions.
Interested in buying or selling a Shopify app? Check out these marketplaces
Or you want to get started building your own e-commerce SaaS business? Zain Manji is breaking it down in his guide to building Shopify apps 👇
The Shopify ecosystem shows no sign of weakness as they continue to arm the rebels. We’re optimistic on the opportunity at hand for founders and developers that are building business on the growing shoulders of the Shopify ecosystem.
Do you know of a Shopify app looking for financing or acquisition? Let’s talk!
Bloom’s Job Board
We recently launched our new job board! Loaded with 35+ open roles at Bloom’s portfolio companies- ranging from engineering, product, marketing.
Are you, or someone in your network, looking for a new role? Check this out, and share with a friend.
End Note
Thanks for joining us for another edition of the weekly bloom. At Bloom Venture Partners we buy, build + invest in SaaS.
We’re excited to continue backing remarkable teams on their quest of changing the way we work, live + create.
As always, if you enjoyed this week’s newsletter we'd love it if you shared it with a friend, co-founder or anyone that would find value.
This was such a great read!