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Shopify Inc. has made a strategic investment in Israeli e-commerce marketing company Yotpo, Inc., the latest in a string of deals by the Ottawa retail software giant to deepen financial ties to vendors that serve its 1.7-million-plus merchant customers.
Yotpo said in a release the deal, which it described as a multiyear partnership, will “position Yotpo as one of the early launch partners for new Shopify development features.” Terms were not disclosed, but Israeli publication Globes reported the amount invested was US$30-million, citing sources close to the matter.
Yotpo sells five products through Shopify’s app store that plug into the Canadian company’s software used by merchants to manage their stores and operations. The products include customer engagement features that help with loyalty and referrals, text message marketing and reviews. Yotpo reached a US$1.4-billion valuation with its previous funding, announced in May and had raised more than US$400-million prior to the Shopify deal.
“This platform partnership directly responds to the enormous amount of time and energy merchants currently are required to spend competing for customer attention, Yotpo CEO Tomer Tagrin said in a release. “Through deeper integration between our two technologies, Yotpo and Shopify are working together to innovate on the marketing tech stack and dramatically recode the infrastructure of eCommerce.”
Brandon Chu, VP Product Acceleration at Shopify, said in the release: “Yotpo is a shining example of what is possible in the Shopify Ecosystem of partners and developers. We have watched the team deliver incredible value to merchants and have admired their tenacity and passion for building a better version of eCommerce where independent brands own relationships with their customers. Their marketing technology solutions have become trusted by thousands of merchants, and we are thrilled to invest in their growth and create even more impact, together.
Canada’s most valuable company for years has taken pride in the value created by partners that provide services to its merchant customers. For example, last year they generated US$12.5-billion in combined revenue, compared with the US$2.9-billion Shopify booked itself. Several have achieved multi-billion dollar valuations and/or raised hundreds of millions of dollars in growth capital, including Yotpo, online marketing services providers Klaviyo Inc. and antifraud software seller Signifyd Inc.
But since the start of the pandemic Shopify has embarked on a new strategy, using its clout in the surging global ecommerce business to take a bigger bite out of the huge spinoff value it has created. Shopify has made a string of strategic minority investments in companies that provide services to its merchants, include Silicon Valley’s most valuable private company Stripe Inc. – its exclusive provider of payments processing services – as well as online merchant financing marketplace Pipe Technologies of Miami. Shopify has also funded same-day delivery software provider Swyft Technologies, Inc of Toronto and Vancouver’s Bench Accounting Inc. this year. Shopify also recently disclosed it invested US$200-million in July for a stake in an unidentified partner.
The strategy has so far paid off handsomely for Shopify: the company booked more than US$2-billion in net profit in the first half of the year, largely driven by strategic deals with two vendors that went public in well-received offerings.
In one of those deals, Shopify agreed to make Israeli company Global-E Online – which helps online merchants conduct global sales in the native languages and currencies of their customers – its exclusive provider of cross-border services for its merchants. In return Shopify received warrants to buy 19.6 million shares for one penny each plus an undisclosed fee on transactions Global-E processes for them. Global-E went public in May and its stock more than doubled by June 30, creating an unrealized paper gain of US$814.6-million for Shopify in the second quarter.
Shopify also recorded a US$1.26-billion profit in the first quarter largely owing to a similar deal with Affirm Holdings Inc., after the provider of instalment financing for ecommerce consumers went public in January. Shopify’s investments in its partners were valued at US$2.8-billion as of June 30, accounting for 23.4 per cent of its total assets.
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