|Thu Apr 11 2013 22:02:07|
eBay Vendor ChannelAdvisor Files to Go Public
By: Ina Steiner
ChannelAdvisor, a company that helps online merchants sell on eBay, Amazon and other marketplaces and as well as comparison shopping engines, filed today with the SEC to take the company public and plans to list its common stock on the New York Stock Exchange under the ticker symbol ECOM. For anyone curious about ChannelAdvisor's financials, there are some nuggets revealed in the prospectus, some of which I share below.
ChannelAdvisor has raised millions of dollars from investors - and going public is one way for them to hope for a return on their investment. eBay itself participated in a funding round when ChannelAdvisor went through a particularly rough patch in 2008 and had to lay off 20% of its workforce. That round brought the total raised to $80 million. At the time, some believed eBay had to participate since ChannelAdvisor clients made up a significant portion of eBay's Gross Merchandise Volume in the U.S. ("too big to fail" syndrome).
In addition to ChannelAdvisor, there was a cluster of companies back in the early 2000's who helped online sellers sell on eBay, including Andale, AuctionWatch (which became Vendio), AuctionWorks (which became MarketWorks), Auctiva and Zoovy.
Unlike most of the other inventory management service providers at the time, ChannelAdvisor went after large brands and retailers in addition to servicing PowerSellers, and CEO Scot Wingo publicly supported eBay's focus on fixed-price over auction listings. It also expanded overseas and has a presence in Europe, Australia, and recently opened an office in Hong Kong.
Some of the founders/CEOs of those early ecommerce vendors famously didn't get along with each other. I always suspected eBay had something to do with some of the tensions among developers (in addition to big egos and fighting for their piece of the pie). Looking back, eBay used to charge developers $5,000 to go through a certification process and then pay up to $10,000 a year plus $2.90 per 1,000 API calls - in order to integrate their listing tools with the eBay Marketplace. These were companies who helped sellers list on its site, thereby helping eBay make money. It was difficult to pass those costs along to eBay sellers - even in those days, there wasn't a lot of profit margin in selling on eBay.
It's interesting to see what has become of some of those eBay inventory management companies. Vendio bought Andale, whose founder Munjal Shah went on to find success in a new company called Like.com, which he sold to Google for what some guessed was close to $100 million.
Alibaba acquired Vendio and Auctiva, which are still operating, as is Zoovy.
ChannelAdvisor acquired MarketWorks and folded it into the company.
Because of the amount of money they raised (in addition to the founders' ambitions), Andale and ChannelAdvisor always wanted to go public.
Why file for the IPO this week isn't clear - ChannelAdvisor states in its prospectus it is an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act), and said it intends to take advantage of some of the exemptions from reporting requirements that are applicable to other public companies that are not emerging growth companies.
Here are some interesting factoids and abstracts from the preliminary prospectus, you can find it on the SEC.gov website.
- ChannelAdvisor earned revenue of $53.6 million in 2012.
- ChannelAdvisor incurred a net loss of $4.9 million in 2012 (and had a net loss for the past three years included in the filing).
- ChannelAdvisor's gross margin, based on total revenue, expanded from 66.8% in 2010 to 72.5% in 2012.
- Founder and CEO Scot Wingo owns 10.6% of shares in the company; Aris Buinevicius owns 8.6%. It did not reveal how many shares Michael Jones, a former VP now at eBay, owns.
- Kodiak Venture Partners owns 24.4%; New Enterprise Associates owns 24%; Advanced Technology Ventures owns 18.5%.
- ChannelAdvisor has an accumulated deficit of $79.5 million as of December 31, 2012.
- Scot Wingo earned $125,000 in salary in 2011 and 2012 -
- Under "Risk Factors" (which always sound dire in an IPO prospectus) the company writes, "While we anticipate that our existing cash, together with availability under our existing credit facility, will be sufficient to fund our operations for at least the next 12 months, we may need to raise additional capital to fund operations in the future or to meet various objectives."
In its press release on Thursday, ChannelAdvisor said billions of dollars in merchandise value are driven through its platform every year and it has thousands of customers.
There's a lot to wade through in the filing, which you can find on the SEC website.