BigCommerce (BIGC) Investment Memo
Meera Equities 11.24.2020
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Investment Thesis:
As commerce moves online, businesses need to anticipate changing customer expectations and deliver engaging and personalized experiences across all channels. Additionally, the entire shopping journey is transitioning, including desktop to mobile, more responsive applications, and the in-venue experience. In the digital age, businesses need a platform like BigCommerce for cross-channel commerce that nimbly keeps them at the forefront of user experience and innovation.
Company Description:
BigCommerce Holdings, Inc. provides technology services. Its software-as-a-service platform powers its customers branded e-commerce stores and their cross-channel connections to online marketplaces, social networks, and offline point-of-sale (POS) systems.
Qualitative
Overview:
Sector: Technology
Industry: Software – Application
Competitors: SHOP,
Strategy: Partner Centric
Core Products Focus – Strive to create the industry’s best eCommerce platform and innovate faster than competitors by focusing on developing a single core product.
Best-of-breed Choice – tightly integrated solutions across verticals.
Cooperative marketing & sales – BIGC co-markets and co-sells with their strategic technology partners in each category.
High gross margins – BIGC earns a high-margin revenue share from a subset of their strategic partners which compliments the high gross margins of their core eCommerce platform.
Business Model: Ignite Growth, Not Complexity
Flexible open SaaS platform leading a new era of ecommerce
Provide a comprehensive platform for launching and scaling an ecommerce operation including store design, catalog management, hosting, checkout, order management, reporting, shipping, accounting, and API management.
Power both customers banded ecommerce stores and their cross-channel connections to marketplaces, social networks, and offline point-of-sale.
Market: SMBs, mid-markets, and large enterprises
As of September 30, 2020, BigCommerce has ~60,000 stores in ~150 countries
According to eMarketer, ecommerce is expected to grow to 21% of all global retail spending in 2023.
Global retail ecommerce is expected to reach $3.9T in 2020 and is forecasted to reach $6.3T in 2024 (eMarketer).
Differentiation: Open SaaS Platform
BIGC believes their platform openness is industry-leading for SaaS, spanning every part of the ecommerce retail business.
BIGC’s open SaaS, as a strategy, competes with the flexibility of legacy software and can scale up to 400 API calls per second per customer.
BIGC customers benefit from a platform that seamlessly progresses its capabilities and performance regularly allowing customers to save money and stay ahead of industry trends.
X-Factor: Earn revenue share and customer referrals from our extensive partner ecosystem
BIGC’s strategy is to partner – not compete – within their ecosystem.
Many strategic technology partners pay BIGC a revenue share on their gross sales on their joint customers and/or collaborate to co-sell/market BIGC to new and existing customers.
BIGC plans to grow partner-sourced revenue by expanding the value and scope of existing partnerships.
Cash Cow: Enterprise Plans
Higher LTV and stronger retention
Subscription services make up 67.5% ($27M of $40M) of total revenue and enterprise plans make up 54% of total subscription revenue.
“Internet Retailer states that SaaS has now become the top choice of the largest U.S. retail ecommerce sites planning to re-platform, and we are aggressively positioning ourselves as the best SaaS solution for this segment.”
Growth Opportunities:
Retain & grow with existing customers through product and service leadership
Acquire new mid-market and large enterprise customers
Acquire new SMB customers
Expanding into new & emerging segments; headless commerce, B2B, & large enterprises
Expand internationally
Quantitative
Risks
BIGC is not yet profitable.
BIGC is a new publicly traded growth stock and is subject to increased volatility compared to more established competitors.
Sales cycles with mid-market & large enterprises can be long and unpredictable.
BIGC operates in a very competitive industry.
Learn Something
Company Materials: 10-Q | Q3 Presentation | Investor Relations | S-1
Digital.com: “BigCommerce Review – 10 Reasons Why You Should (or Shouldn’t) Trust Their E-Commerce Software”
nchannel: Advantages & Disadvantages of SaaS eCommerce Platforms
Futures: Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and price.
