Shopify has this week launched Fraud Protect for Shopify Payments, a security system to safeguard merchants against fraudulent chargebacks. Currently available to select US stores only, the fraud protection system is derived from Shopify’s access to the millions of orders processed across its platform. Previously, Shopify merchants were left to manually review transactions for fraud. The new service now means Shopify will not only automatically screen purchases to detect fraud, but also assume the risk associated with fraudulent transactions. Pricing will be based on a small percentage of each order placed and screened.
In SaaS news, open-source search and analytics company Elastic has begun trading on the NYSE in what is viewed as one of the most successful tech IPOs of late. ESTC’s shares opened the first day of trading at $70 (nearly double the final offering price of $36 PPS) for a market cap of $4.85 billion (over 26 times the search and data analytics company’s revenue for the last twelve months). Elastic’s financial competitive edge comes in part from the relatively fast payback period of its customer acquisition costs (15 months).
The POS payment processing world continues to heat up with both Stripe and Shopify announcing new initiatives in the space in recent months. Square are responding in kind by announcing that they will now allow small businesses to offer customers the option to pay in monthly bundled pricing, through a new initiative called Square Installments. Available in 22 US states, the service would require customers to be preapproved for participation, and would allow eligibility for plans ranging from $250 to $10,000 in value. Square Capital, which also issues business loans to merchants, will automatically deduct monthly payments from users’ debit cards in a model similar to market leaders AfterPay and PayPal Credit.
New in digital products business listings this week we have a $208K algorithmic trading education platform, with years of operational history leading to a strong and well-known brand in a rapidly growing niche, diversified revenue channels including recurring monthly subscriptions driving steady MRR, high and stable traffic with over 1.2 million sessions and 2 million page views over the last year, keyword rankings for over 11,000 keywords, strong backlink profile and lean and scalable cost structure allowing for high net margins of c.85% in the LTM.
Featured in e-commerce business listings this week we have a $1.56M outdoor sports and recreation business, with earnings reaching a c.232% CAGR for the period 2016 to 2017, market-leading position in the growing bicycle industry forecast to reach $62 billion by 2025 and extensive operational documentation and SOPs, facilitating post-sale transition. If you are interested in either of the above businesses, please follow the link to request a prospectus.
In events news, Founder Thomas Smale is busy attending Rhodium Weekend in Las Vegas until Saturday, where he is looking forward to hosting an FE client dinner tonight – get in touch if you want an invite! FE’s New York team also enjoyed ProfitWell’s meetup on Thursday night, featuring CEO Patrick Campbell. Next week, the FE team will be attending SaaStock, where Thomas is emceeing and the team are hosting a booth on the expo floor. Be sure to stop by if you will be attending, or reply to this email if you will be in Dublin and would like to set up a meeting with Thomas!
Continue reading below for more on Shopify’s fraud protection for US merchants, Elastic’s IPO and Square’s offering monthly payments to customers.
- Years of operational history leading to a strong and well-known brand in a rapidly growing niche
- Diversified revenue channels including recurring monthly subscriptions driving steady MRR
- High and stable traffic with over 1.2 million sessions and 2 million page views in the LTM
- Hundreds of pages of informative content driving keyword rankings for over 11,000 keywords and securing a strong backlink profile
- Lean and scalable cost structure allowing for high net margins of c.85% in the LTM
Yearly net profit: $90,000
Asking price: $208,000
- Rapid revenue growth with earnings reaching a c.232% CAGR for the period 2016 to 2017
- Market leading position in the growing bicycle industry, currently valued at $45 billion and forecast to reach $62 billion by 2025
- Dozens of high quality SKUs with hundreds of five-star customer reviews
- Extensive operational documentation and SOPs, facilitating post-sale transition
Yearly net profit: $636,000
Asking price: $1,560,000
In The News…
Shopify Rolls Out Fraud Protection
Shopify has rolled out their initiative to help small storefronts combat online fraud through a new service called Fraud Protect.
Currently available to US merchants, the fraud protection service was originally announced at its Unite conference in early 2018, at the same time it introduced marketing app Shopify Ping along with multi-store inventory management support. Shopify has used its access to millions in processed orders to develop fraud protection technology that boasts the ability to accurately determine which orders are considered fraudulent. The e-commerce platform’s algorithms scrutinize incoming orders and determine whether they should be categorized as protected. If protected purchases turn out to be a fraudulent chargeback, Shopify will reimburse the merchant. This replaces the current legacy system of manually reviewing orders for fraud or relying on third party apps and services to detect errant transactions.
Shopify is offering the technology directly to merchant partners, both large and small.
Elastic IPO at $70 PPS
Search and analytics cloud company Elastic (ESTC) began trading on the NYSE last Friday, raising gross proceeds of $252 million.
Viewed as one of the most successful tech IPOs recently, Elastic’s surge in share pricing has been attributed to significant revenue growth and a successful business model most closely resembling freemium. The source code for all of the company’s products are provided for free, with the option to pay for extra functionalities. The company’s net expansion rate over the past few quarters is above 130%, making the efficiency of expanding revenue from existing customers relatively high. Combined with the relatively fast customer acquisition recovery cost of a 15 month payback period from attracted customers, the net expansion capabilities of the company have driven high revenue growth. Elastic’s 2018 fiscal year’s revenue growth reached an 81% increase year over year, while the first quarter of the 2019 fiscal year hit 77% growth year on year. The current share price of $70 gives Elastic a market capitalization of $4.85 billion, or around 26 times the company’s revenue over the last twelve months.
Elastic had initially set the range for its share price at $26-$29 pre-IPO, later raised it to $33-$35, and finally priced it at $36 per share before opening at $70.
Square Introduces Payment Installments
Square is launching a monthly installments payment plan for small businesses to let customers pay for large purchases in bundles.
The service, dubbed Square Installments, will generate payment plans for purchases ranging from $250 to $10,000, with the option for customers to pay over the course of three, six or 12 months (0-24% APR range). Currently available in 22 US states, the service requires customers to apply for approval. Customers receive a digital card to use once for payments, with no fees associated. Square Capital, which also issues business loans to merchants, offers the payment plans which operate by automatically deducting monthly payments from users’ debit cards. Following the model of companies like AfterPay and PayPal’s Credit, Square is entering the consumer lending space as more and more companies offer monthly installment options.
While market leading companies have usually limited the payment installment options to purchases from large retailers, Square Installments is capitalizing on the opportunity to offer similar payment options to small businesses.
To view the previous week’s newsletter, click here.
To view the following week’s newsletter, click here.