The e-commerce boom that started with the COVID-19 pandemic shows little sign of slowing down, and today a company called Shopware, which provides a set of open source tools to power online shopping experiences for some 100,000 mid-sized and larger brands, is announcing $100 million in funding to capture the opportunity.
The money is notable not just for its nine-figure size, but also because of its context. This is the first outside funding that Shopware has ever raised — it has been bootstrapped and profitable since being founded back in 2000, when e-commerce was really only getting its start — and it’s coming in part from a big strategic backer: the payments behemoth PayPal and Carlyle (by way of its Carlyle Europe Technology Partners fund) are its two first outside investors.
“This funding will help us supercharge our international growth – enabling Shopware to capture the significant opportunities ahead of us,” said Stefan Hamann, co-CEO of Shopware, in a statement. “As a business, we are proud to have been profitable from day one, and are excited to work closely alongside Carlyle and PayPal to build on Shopware’s positioning in the long term.”
Shopware is not disclosing its valuation but notes that Carlyle and PayPal are coming on as minority investors. Sebastian and Stefan Hamann — the brothers who co-founded Shopware in the modest (population: around 7,000) town of Schöppingen in the northwest of Germany near the Dutch border — will retain a significant majority stake in Shopware, the company said in a statement. They will also stay on as co-CEOs.
Shopware’s sweet spot up to now has been serving mid-market companies and brands that are not necessarily digitally-native businesses but very much have had to take on digital channels to keep up with the times and how consumers discover and shop for goods and services today.
In other words, the tools that it has built are there to help companies have a presence and stack up against the rest of the online landscape, but they are built with a view to making them easy enough for non-tech companies and their partners to use. Its customer list includes the likes of M&Ms and Haribo (finally justifying the use of the phrase “sweet spot”), consumer electronics company Philips, Stabilo and many others.
The mid-market segment has in many ways been underserved for years: The very biggest companies typically build solutions in-house or work with systems integrators to build customized e-commerce backends; and smaller companies had/have a range of website builders, purpose-built platforms like Shopify and a plethora of marketplaces to sell online.
But as e-commerce has continued to become increasingly mainstream — and for a period of time during the height of the pandemic essentially became the only game in town — not only has the funnel of potential brands and companies needing help getting online become much wider, but the companies building tools to serve those customers have also increased in number. Shopware competitors now include the likes of Shopify Plus, Magento and others building a mixture of headless and other components, which brands and others can mix and match to power online shopping experiences, be they via their own websites, via mobile apps or by way of third-party platforms like social media sites or marketplaces.
Indeed, the fact that there are so many touch points today underscores the complexity of the market, but also the opportunity. This is partly where PayPal fits into the picture. It’s one of several payment providers that Shopware already works with, and so the two had an existing relationship. This investment will potentially mean that Shopware will be a vehicle for PayPal to channel more of its newer initiatives as it looks to grow its own payments business beyond basic transactions. But from what we understand, it will not preclude Shopware from continuing to work with PayPal competitors.
“The past few years have accelerated the need for an open-source approach that provides outstanding shopping experiences for customers, and we are poised to further benefit from this growth opportunity,” said Sebastian Hamann in a statement. “We’re looking forward to working with Carlyle and PayPal — two companies with strong expertise in digital commerce — on the next stage of our journey.”
Shopware’s tools today include a platform where its customers can integrate the many other services that are brought together in e-commerce experiences (including inventory management, billing and so on), an engine to build progressive web apps to run a site’s front end, guided shopping tools and a business process automation builder.
The plan will be to use the funding both to continue expanding those tools against those being built by Shopware’s competition but also to tap into what are some newer, burgeoning opportunities in areas like B2B — that is, brands selling not to consumers but business users. That will need its own dedicated investment to develop because, like its B2C counterpart, sites selling to business users have seen a boom in the last couple of years, but they have their own particular challenges, integrating complex workflows and handling omnichannel landscapes different from those a consumer-focused business might encounter.
“Shopware, a company 100% bootstrapped prior to this investment, is ideally suited to CETP’s strategy of partnering with ambitious, founder-led technology companies. We were attracted to the company’s highly flexible omnichannel platform, its strong momentum in the underserved mid-market merchant segment, and the entrepreneurial drive of the two co-founders,” said Michael Wand, MD and co-head of Carlyle’s CETP, in a statement. “We look forward to working with Sebastian and Stefan and the rest of the Shopware team in supporting the business become an international leader in digital commerce technology.” Wand and CETP director Constantin Boye are joining Shopware’s board with this round.