Category Archives: Ecommerce

Rinse’s Series B round

Rinse is a tech-enabled laundry and dry cleaning managed marketplace where we’re investors. The company recently announced the closing of its $14M Series B round of funding led by Partech Ventures.

Now that Rinse has solidified its playbook for expanding into geographies and bringing these geographies to contribution margin profitability, it will be using the new funding to apply the same playbook to grow to 10 new US cities. Rinse is currently operational in San Francisco, Los Angeles, and Washington DC, and among the 10 new cities that it will expand to are New York, Chicago, and Boston.

We commend the Rinse team for their decision to achieve operational excellence with their existing model before rolling it out to new cities. This requires patience and this patience eventually pays off.

We also thank Partech and Rinse’s existing investors for continuing to support the company on its exciting journey.

The implications of Amazon buying Whole Foods

Amazon announced yesterday that it has reached an agreement to buy Whole Foods for $13.7 billion in cash. Here are my thoughts on the implications of the deal:

1. A few days ago, Amazon was rumored to be interested in buying enterprise messaging platform Slack for $9 billion. The alternative for Slack is a $500M funding round at a $5 billion post-money valuation. Independent of which path Slack takes, the fact that a single company is in a position to realistically bid for a grocery chain and an enterprise messaging platform in the same week shows the extent of Amazon’s past ambitions and current cross-market dominance.

2. Amazon is paying $13.7 billion in cash for Whole Foods. This is 64% of the $21.5 billion of cash on Amazon’s balance sheet as of the most recent quarter. Amazon has recently been eeking out small profit margins thanks in large part to the financial performance of Amazon Web Services. In addition, the deal will likely attract debt financing without much difficulty given Amazon’s size and the health of its businesses. However, this is a very large transaction, even for Amazon. In fact, it’s the company’s largest acquisition to date, considerably ahead of its second largest acquisition to date of Twitch for $970M. This signals the importance of the move.

3. Amazon’s move is consistent with the omni-channel strategy that it has recently begun rolling out, for example by opening physical bookstores to complement its core e-commerce book sales. As fairly commoditized products, both groceries and books are categories where the benefits of physical stores are lower than those for non-commoditized product categories like furniture and clothing. However, after an e-commerce company acquires its initial online native customers, physical stores remain an essential part of growing the business due to the fact that the majority of customers in product categories like groceries still shop offline. There will come a day when this is no longer the case, but we’re not there yet. The end game is different than the approach necessary to get to the end game and Amazon’s move shows that it acknowledges the latter fact.

4. Whole Foods’ premium customers are a great match for the Amazon Prime subscription service as both customer groups are high spenders. Adding Whole Foods deliveries to Amazon Prime will make the latter service much more valuable to existing and new customers, while Whole Foods locations will help expose the supermarket’s high spending customers who don’t use Prime to the service.

5. Amazon’s logistics capabilities make it likely that it will take over Whole Foods deliveries from Whole Foods’ existing delivery partner Instacart. I don’t know what fraction of Instacart deliveries are from Whole Foods, but Whole Foods is the grocery chain that is said to have had the biggest contribution to Instacart’s early traction. This is why Whole Foods invested an estimated $36 million in Instacart. Instacart currently faces the real risk of losing one of its biggest partners, if not the biggest.

6. Whole Foods’ more than 460 locations across the US and Canada will serve as a great testing ground for, and enable the mainstream rollout of, Amazon Go checkout technology. This will further improve Whole Foods’ premium customer experience.

7. Since Whole Foods only operates in the US and Canada, companies that face the risk of being displaced by Amazon making similar moves in other countries have the opportunity to prepare their defenses and preempt these moves. These companies include horizontal e-commerce players, offline grocers, and logistics companies. Given the scale and scope of Amazon’s ambitions and demonstrated execution, it’s likely that what these companies don’t do, Amazon eventually will.

Rinse at Twilio’s developer conference

Tech-enabled dry cleaning and laundry service Rinse, where we’re investors, was featured at Twilio‘s developer conference, Signal, last week.

Rinse uses Twilio’s SMS API and Twilio co-founder Jeff Lawson is a Rinse customer.

The segment featuring Rinse’s co-founder Ajay Prakash is between minutes 38 and 45 in the conference’s opening keynote speech below.

Modanisa’s English ad

Modanisa is an online modest female fashion retailer where we’re investors.

The company recently aired its first online video ad in English which targets an international audience. With over 65% of Modanisa’s revenue coming from outside of Turkey, this ad firmly establishes Modanisa’s position as an international e-commerce company.

Here’s the full ad.

Middle East Venture Partners and Mohamed Alabbar

Middle East Venture Partners (MEVP), our co-investors in Volt, announced this week that Mohamed Alabbar, chairman of Emaar Properties, has acquired a stake in the general partner which manages its funds.

The details of the transaction aren’t disclosed. However, given the size of Alabbar’s recent moves with Noon.com in the Middle Eastern e-commerce space, it’s likely a sizable transaction. This will give MEVP much more firepower with which to invest while retaining the MEVP team’s operational control over its investments.

I congratulate the MEVP team on the transaction and look forward to seeing its positive impact throughout the region.

Just like you

Our portfolio company Modanisa is the world’s leading e-commerce site dedicated to female Muslim fashion.

The company recently shared a short video dedicated to the women that it serves. What’s unique about the video is that it features the participation of non-Muslim women who wanted to show their support for the active lifestyles of Muslim women.

This is why the video is called Just Like You.

Tapu’s new round

Tapu, an online real estate auction marketplace where we’re investors, announced its new $1.2M funding round earlier this week.

The funding round which was led by existing investor Earlybird also included participation from existing investors Can Yucaoglu and Banu Kucukel.

Tapu has grown the number of online property sales that are completed on its marketplace to over 50 per month. Given the high price and lack of commoditization of these properties, that’s an impressive number.

Together with the new round, Tapu is well positioned to further grow this number by selling a greater number of properties on behalf of its existing partner banks while also attracting the properties of new business partners to its marketplace.

We value the continued support which our co-investors are showing the company and congratulate the Tapu team for their crisp execution and steady growth.

Buldumbuldum’s new round

Buldumbuldum, a mass customized products marketplace serving both consumers and businesses where we’re investors, announced its latest funding round last week.

All of the existing investors of the company including Nevzat Aydin, Melih Odemis, Can Yucaoglu, Birol Yucel, and us participated in the round.

The round’s proceeds will go towards Buldumbuldum’s capex investments in new printing machines and towards attracting and serving its first international customers. We look forward to following the company’s progress on both fronts.

Two takeaways from Souq’s exit to Amazon

Earlier this week, Amazon announced that it acquired Souq, the largest horizontal e-commerce company in the Middle East, for $650M.

The transaction has been covered at length elsewhere so I won’t repeat this coverage here. Instead, I’ll share my two key takeaways from the transaction.

First, it’s proof that big tech exits do happen in the region. After Turkey’s leading food ordering marketplace Yemeksepeti’s $589M purchase by Delivery Hero in 2015, this takes us a step closer to producing the Middle East’s first billion dollar tech company exit.

Amazon, which has a track record of growing on its own in international markets, chose instead to acquire Souq. This decision reflects the quality, size, and strength of the company that Souq’s team built. Souq is a big entrepreneurial success story.

Second, making money as a regional tech investor is possible, but not easy. Souq is reported to have raised $425M of funding prior to its exit and its last $275M round is said to have been completed at a $1B post-money valuation.

The second fact suggests that investors in the company’s last round only got their money back or made a return because of the liquidation preference on their investment. In its absence, they would have lost money.

This also shows that headline private market valuations should often be taken with a grain of salt.

Regarding the first fact, since the Souq team also walked off with money from the exit, the return to the average investor in the company was less than $650M / $425M = 1.5X. That’s not a great return for a risky and illiquid asset class like venture capital.

In other words, depending on what the liquidation stack looks like, some investors made money on the exit but many others didn’t.

Just because you have shares in a company that achieves a large exit doesn’t mean you make money.

TazeDirekt relaunching

My partner Hasan’s online grocery business TazeDirekt was purchased by Migros, one of Turkey’s leading grocery chains, following TazeDirekt’s closing in February of last year.

Migros recently announced that it will be relaunching TazeDirekt’s service next Tuesday, March 21st. If you’d like to be notified of the relaunch, you can sign up at this link. Or you can simply visit the TazeDirekt website to place your order on Tuesday. The initial relaunch will be serving Istanbul.

Up to its close, TazeDirekt had developed into a brand which offered its customers great products and consistent great service. In exchange, TazeDirekt’s customers loved the brand.

I hope that the Migros team successfully continues where Hasan and his team left off.