/ 6 min read
Jan 19, 2023
But it’s more likely you know him from the 20+ years he spent growing companies like PayPal, LinkedIn, Square, and Opendoor from zero revenue to IPOs and market capitalizations over $1 billion. He’s also a prolific angel investor in names like YouTube, Airbnb, Palantir, and Lyft.
In the first installment of our two-part recap, Keith unpacks a host of topics, including:
Unpacking OpenStore’s effortless application process
How OpenStore is modernizing legacy brand acquisitions
The OpenStore playbook for scaling acquired Shopify stores
“If you don’t want to run your Shopify store for the next 40 years, let OpenStore look at your data, give you an offer in 24 hours, and make your life easy.”
That’s how Keith sums up the OpenStore pitch — and just how effortless it is for Shopify stores to receive a valuation. All it takes is:
Connecting your business’s Shopify account
Providing financial metrics that Shopify doesn’t track (i.e., by uploading a screenshot of your P&L or answering a short questionnaire about it)
OpenStore's brand portfolio is horizontally broad by design, so virtually any category or vertical — excluding legal or policy red flags like firearms — is fair game. Otherwise, our team looks for:
DTC businesses targeting U.S. customers
DTC businesses with more than half of their sales happening on Shopify
DTC businesses with at least one year of operating history in the “sweet spot” of sales ($500,000 at the low end and $10 million at the high end)
From there, our team evaluates your Shopify metrics to make an offer. Once an offer is accepted, merchants can close and cash out in as little as 2 weeks.
Numerous founders of OpenStore-acquired brands have pointed to our straightforward, data-based, algorithmic valuation process as a highlight of selling to us.
OpenStore calculates the worth of the operating business and a portion of inventory.
Stitch the two values together, and you have an OpenStore offer.
The acquisition process for merchants is notoriously nightmarish in terms of logistics: offboarding founders, knowledge transfers, onboarding new operators, etc.
Within a year, our team cracked how to structure 100+ employees to run acquisitions and handoffs as quickly and seamlessly as possible. When we say “quick,” we mean some acquisition flows are finished in days. Most take no longer than two weeks.
Keith walks through two guidelines for making that goal a reality.
OpenStore can onboard as rapidly as we do because we run a highly truncated diligence process. In fact, our workflow was designed from the ground up to close up to one deal per day.
We don’t ask unnecessary, extraneous questions
We simplify applications to easily verifiable data points
We don’t harp on single digits so things can close ASAP
Keith also attributes this to OpenStore’s combination of math and human labor.
After all, human brains excel in some areas while math and, by extension, AI are more proficient in others. The best systems combine the two in ideal ratios.
That combination, for example, is how fraud was addressed during Keith’s stints at PayPal and Square and how they executed underwriting at Opendoor.
Ultimately, the speed of OpenStore’s acquisitions comes down to 10% human intelligence and 90% machinery. Over time, you’re ideally dialing up the percentage executed by software.
Keith admits that after OpenStore closed our first acquisition just over a year ago, the first 3–7 brands under our belt were massive learning experiences.
We still needed an operations team to orchestrate absorptions and complicated handoffs, which meant systems failed to transfer correctly. Figuring out how to build and productize the necessary workflows was an extensive learning curve.
But, since March 2022, we’ve established and refined an increasingly sophisticated ops engine with world-class designers, engineers, growth teams, and more.
Our general ops team filters into functional units that handle absorption and day-to-day management of our brand portfolio, including:
Marketing — Teams handling everything from high-level customer acquisition and retention to optimizing open rates with Klaviyo
Procurement — Dealing with inventory, demand forecasting, pricing tests, etc.
Customer support — A pivotal function for keeping a new portfolio brand’s existing customer base happy and maintaining their loyalty post-acquisition
At a glance, OpenStore is uniquely suited to grow and elevate our portfolio of brands in three ways. Keith breaks those down for the Limited Supply audience.
Many merchants who sell to us have reached a point where scale is stunted by capital constraints. That's where OpenStore comes in:
We bring the funds and industry know-how to invest in new tactics for accelerating growth. Examples of short-term improvements include top-line growth, such as:
Negotiating for better shipping costs than standard off-the-shelf deals
Introducing top-of-the-line enablement tech or new channels like influencer marketing
OpenStore can afford to pioneer more innovative tactics, including:
Procurement tooling — We've built and shipped a successful demand forecasting tool to help our brands avoid stockouts.
Influencer-product matchmaking — OpenStore plans to match long-tail influencers (thousands of followers, not millions) with long-tail SKUs that they're well-suited to. This ensures the most efficient promotion possible to their audiences.
Native e-commerce apps — None of OpenStore’s acquisitions have native apps, even though push notifications drive retention and exclusive in-app features drive acquisitions. So, we’re working on a proprietary suite of tools to build them ourselves.
Keith emphasizes that he was taught to run businesses with math and statistics, and you see this ethos in many of OpenStore’s internal systems.
When considering new products for acquired brands, we leverage data to distinguish what's proprietary, unique, and highly local within a brand's framework.
Put simply, we don’t aspire to ship creative ideas unless they’re predicated on data.
However, with enough consumer and transaction data, you gain insights into what could work downstream. Keith compares our approach to Netflix’s content formulation model:
The streaming service started by solely repackaging other studios' content. After over a decade of data, they had the strategic advantage of knowing what consumers watch and search for, directing how they generate original material for years to come.
Head to the second installment of our Limited Supply recap, to learn about OpenStore’s origins and how it plans to grow into an iconic company with permanent value.
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