Why We Acquired Snipcart

By Duda

Following Francois’ Selling Snipcart blog series, I decided to give it a shot too and give you a sneak peak into the initial research process for an eCommerce solution at Duda that went on behind the scenes, and led to our first acquisition. This research was my first product strategy assignment, and probably the most interesting one I could’ve received.

Today Duda provide a sole eCommerce solution using a third-party provider. Our customers can build a website on Duda and add store functionality with a click. We’re happy with the solution they provide and they’ve been a great partner for many years now.

Even so, we wanted to grow our market share in the eCommerce website market and improve the experience for customers, by providing a flexible and performance driven solution. My assignment was to search for relevant alternatives to Ecwid that could help us achieve these goals.

STRATEGIES

To begin, we defined three possible strategies that could allow us to accomplish the goals mentioned above:

1. PARTNERSHIPS
   Partnering with multiple e-Commerce providers, in addition to Ecwid, that are well branded as best in class, such as Shopify, BigCommerce, etc.
2. M&A
   Merge and acquire an e-Commerce solution company
3. NATIVE
   Develop a native Duda e-Commerce solution, using open-source

Each strategy has its advantages and disadvantages.

Strategy 1: PARTNERSHIPS

Pros

• Gives our clients a variety of choices that will meet different needs, and improves the conversion rates of stores built on Duda
• Allows Duda to continue to invest in developing our platform, with the goal of remaining a leader in the website builder market

Cons

• We’d still just get a cut from the eCommerce plan purchase
• Gross margin of eComm products will continue to be low compared to our standard sites
• Partnerships could be risky. If a partner decides to stop doing business with us or wants to make changes to the contract, it could impact our profits
• It’s harder to control the product — missing features, like payment gateways and shipping providers, could be deal breakers for potential clients. Integrations also don’t always work flawlessly with the platform they’re implemented into, preventing us from providing a great UX experience to our users
• A lot of effort is invested in the integration itself, rather than on improving the product

Strategy 2: M&A

Pros

• Time to market — acquiring and merging with a company would allow us to enter the eCommerce market much quicker, and the revenue stream would follow suit
• Team of experts — the assets of an acquisition aren’t just the developed product itself, it’s also the team behind it. An M&A would more than just save us the trouble and time of finding a team to develop a product — we’d have a team of eCommerce experts on our side, with a deeper understanding in this field than anyone Duda could find and hire

Cons

• An acquisition would require Duda to divert a major part of its attention and resources from the development of the website builder
• The M&A process itself would require a lot of time, effort and money
• We’d compete with big companies, like Shopify and BigCommerce
• It may save us some work, but we’d still need to implement it in the platform and work on “Dudafying” it
• The R&D team would be divided between countries, making work more complicated

Strategy 3: NATIVE

Pros

• Duda won’t share the revenue stream from eCommerce purchases
• A native solution provides better user experience
• We could customize it to meet our clients’ needs
• We already have some features that are relevant for eCommerce (Appstore, payment system, connected data & collections)

Cons

• We’d still be reliant on an external source
• Hiring a team and beginning to develop the store management would take a long time, and it would be a big investment (we’re not talking about another squad, but a group of squads).
• We’d be competing with big fish — Shopify, BigCommerce, Square, which will require more resources from all departments

Defining Parameters

Next, we defined various parameters for potential companies that we’d look into.

Some are more technical:

• Location
  It’s important to be in a compatible time zone that allows us to communicate continuously. Buying a company also means opening a new office, and in this case, a new office with R&D
• Amount raised, how many rounds and when
• Company size and growth
  The larger the company is, the harder it is to make an M&A work. Their growth can also be an indication of the amount of work and profitability they have
• Client segment
  Are they promoting their product to agencies? SMBs? Enterprise eCommerce stores?
• And more

Some are more product-oriented:

• Do we have a feature overlap (eg. website builder, app store, template page, etc)?
• What type of websites do their customers build with their solution?
• How robust is their API and what does it provide?
• What features do they offer (marketing tools, payment gateways & methods, white labeling, app store, etc.)
• What are their users saying about the solution?
• And many more

Hunting

We searched for potential companies in multiple sources: Crunchbase, AngelList, ProductHunt, eCommerce Summits (eg. Netlify’s eCommerce Summit), Startup Nation Central’s directory, Facebook communities, set Google news alerts, etc. When Clubhouse had its momentum, I even searched for relevant rooms.

All the tools I used to search for potential companies (By Duda)

By the end of the research my inbox was immensely abused, and to this day I still need to unsubscribe from different mailing lists.

So what filtered out most companies?

Most of the headless eCommerce solutions were suitable for large companies, which didn’t suit our business model. Our customers mostly build websites for SMBs. The majority of companies were designed for large stores with high GMVs, product and pricing model wise.

I reached out to some of the potential companies to conduct a meeting with a rep and collect missing pieces that couldn’t be found online.

One of them was with François Lanthier Nadeau, Head of Snipcart. He was very eye-levelled and a bit amusing (ate his morning cereal during our call). The idea of a partnership seemed interesting to him, but at the time they had their hands full and there were only about 10 people on the team. They were in a great place (Crossed the 1M ARR bar!), and I wasn’t sure whether that would lead to a lack of interest in an acquisition as well.

Eventually, it came down to about 8 suitable prioritised survivors. That’s where my part came to an end and the real work began for Amir, Itai and the rest of the squad that made the Snipcart acquisition happen.

Epilogue

Nowadays the Snipcart team and two other squads are working hard to deliver a great solution to our customers that will take Duda to another league.

Chillaxing from all the arak shots in Snipcart’s trip to Jerusalem (By Duda)

Thanks to Avraham Khanukaev for helping out with this post :)