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BigCommerce IPO | S-1 Breakdown

By 

Alex Clayton

Max Motschwiller

Jul 23, 2020

Company Overview

BigCommerce, a SaaS platform that enables merchants to build online stores, filed for a $100M IPO. The $100M is a placeholder figure and is likely to change. Morgan Stanley is leading the IPO and BigCommerce is now the 5th pure-play SaaS IPO to file this year (Procore, ZoomInfo, nCino, Jamf) and the 3rd in the past few weeks. They plan to trade on the Nasdaq under the ticker “BIGC”. Given the massive upswell in public SaaS company valuations, it's no surprise BigCommerce is taking advantage of what is seemingly a wide-open IPO window for high-growth SaaS companies. nCino, which just started trading, priced at $31/share after an initial range of $22-24/share and traded up almost 150% on the first day of trading. Moreover, BigCommerce is riding the biggest shift in commerce today -- merchants needing to move online. While it was already growing, COVID has necessitated this change and BigCommerce is riding the wave. Merchants of all sizes desperately need to move their storefronts online and the companies enabling this shift stand to be huge beneficiaries. For example, Shopify, BigCommerce's largest competitor, went public in 2015 and is up a whopping 57x / 5600% from their IPO price (as of 22-Jul-2020).

BigCommerce's product gives businesses of all sizes, ranging from SMBs --> enterprises in both the B2C and B2B commerce segments -- all the tools they need to transact online. The company was originally focused on SMBs but in 2015 made a strategic decision to serve larger customers. The product is simple to use as ~70% of implementations are completed within 2 months and SMBs can create a store in a few hours starting at $29.95 per month. BigCommerce's enterprise and mid-market customers -- which they define as merchants with annual online sales from $1M to the billions of dollars per site, represent around half of their ARR (annual recurring revenue). BigCommerce's mission is to "power global ecommerce success by delivering the industry’s best and most versatile multi-tenant SaaS platform." As of June 1, 2020, BigCommerce had ~60,000 online stores across 120 countries. They ended last quarter at $137.1M of ARR (revenue run-rate as they define it), up ~27% year-over-year. BigCommerce was founded in Australia in 2003 as Interspire and in 2013 changed their name to BigCommerce. The company is based in Austin, TX, and has 690 full-time-employees (FTEs). Company headquarters was moved to the U.S. in 2011. Below is a key milestone timeline from their S-1.

  • 2009: BigCommerce launches in Sydney, Australia, with a simple, low-cost, all-in-one ecommerce solution, delivered through the cloud, targeting the SMB segment.
  • 2010: BigCommerce’s customer base reaches 10,000 online stores.
  • 2011–2014: Headquarters relocate to Austin, Texas. We raise private capital in a series of investment rounds to fund growth from investors including General Catalyst, Revolution Growth, and Softbank.
  • 2015: Brent Bellm joins as president and chief executive officer. New executive team expands focus to mid-market and large enterprise customer segments, investing significantly in research and development over the subsequent five-year period.
  • 2016–2018: BigCommerce raises additional rounds of private capital from investors including GGV Capital and Goldman Sachs. Using an “open SaaS” strategy, we expand our ecosystem of technology and service partners that offer complementary capabilities such as payments, shipping, marketing, and accounting. ARR surpasses $100 million.
  • 2019: BigCommerce expands go-to-market teams in Europe and Australia, launches a presence in Asia, and scales engineering capacity in Kyiv, Ukraine. We reach approximately 60,000 stores. Our “headless” commerce capabilities gain traction across a wide range of leading CMSs and progressive web application frameworks.

Product

BigCommerce offers a complete SaaS solution for businesses of all sizes to create digital storefronts and shopping experiences across B2B and B2C segments and enables their customers to sell across multiple sales channels, such as online storefronts, marketplaces, search engines, POS systems, and social networks. The product encompasses both front end experiences for their customers' shoppers as well as the back-end store management feature set and serves customers of all sizes, industries, and geographies. BigCommerce has pre-built applications and integrations (600+) through their marketplace, BigCommerce Apps Marketplace. A few features include:

  • Shopping Experiences: BigCommerce offers native tooling and open source frameworks to enable their customers to build storefronts. The company offers 100+ free and paid theme templates and also supports headless commerce (decoupling of the front-end customer experience from the back-end commerce functionality) and supports products and integrations into Drupal, WordPress, Adobe, Acquia and other web frameworks like Gatsby and Zeit.
  • Selling across multiple channels: BigCommerce enables customers to sell across many different channels such as marketplaces (Amazon, eBay, etc), offline stores (POS integrations), social networks (Facebook and Instagram), and other channels such as across search engines, B2B and wholesale.
  • Store management: Features for customers to manage their entire store such as analytics, cataloging, pricing, inventory and order management, payments, promotions, shipping, and tax.

BigCommerce prides themselves on platform openness and the configurable nature of their product through open APIs and SDKs -- while common for many SaaS companies, they're the first to define it as "Open SaaS" to my knowledge. Their API can support large customers and scales to 400+ API calls per second. The company also offers paid professional services to help customers get up and running through implementation and launch consulting/services and solutions architects. An image of their product stack from the S-1 is below.

Source: Company S-1

Summary Metrics and GTM (Go-to-Market)

BigCommerce sells their solutions to customers of all sizes and prices subscriptions based on a combination of GMV order volume and feature functionality. 74% of total revenue in 2019 was subscription and the remainder was from partner and services revenue. While they have 60,000+ total customers, accounts that are more than $2,000 in ACV (annual contract value) represent ~80% of total ARR. Of those, the average revenue per account last quarter was $12,094. Enterprise and mid-market customers, which are merchants with $1M --> $1B+ of annual revenue, represent ~50% of total ARR. Not surprisingly, the unit economics are better on larger customers and net revenue retention (NRR) for accounts with ACV greater than $2,000 was 108% and 106% for 2018 and 2019, respectively. It's likely the company is hovering around 100% or below for net revenue retention for the whole customer base of 60,000+. The company sells direct and the largest lead source of new mid-market and enterprise customers is from organic, inbound interest. Agency partners are also a source of leads and technology partners are increasingly becoming a meaningful lead source. For SMBs, the BigCommerce Essentials package offers 3 retail plans: Standard, Plus, and Pro, priced at $29.95, $79.95, and $299.95 per month, respectively. 70% of BigCommerce SMB customers come onto the platform in a self-serve fashion (pricing page here). Below are more stats on the business as well as industry stats from the S-1:

  • Last quarter the average implied ACV (ARR / total customers) was $2,285 and the company discloses for accounts >$2,000 in ACV (annual contract value), the average ACV was $12,094.
  • BigCommerce generates revenue from two sources 1) subscription solutions revenue which are primarily platform subscription fees. Subscription solutions are charged monthly, quarterly, or annually and generally charged per online store. Enterprise plans are generally for a fixed term of 1-3 years and non-cancelable. Retail plans, which are for SMB merchants, are changed monthly. 2) Partner and services revenue. Partner revenue is from their technology application ecosystem when merchants integrate into their marketplace. There are 600 independent partners spanning 15 categories. Services revenue is non-recurring professional services such as launch packages, implementation, and transfer services.
  • NRR for accounts with ACV greater than $2,000 was 108% and 106% for 2018 and 2019, respectively. While they don't disclose it, I would suspect the whole business is ~100% or slightly below.
  • As of June 24, 2020, 25% of BigCommerce's stores were located outside of the United States.
  • BigCommerce discloses an LTV:CAC ratio: "We measure the efficiency of new customer acquisition by comparing the lifetime value (“LTV”) of newly-acquired customers to the customer acquisition costs (“CAC”) of the associated time period to get an “LTV:CAC ratio.” We calculate LTV as gross profit from new sales during the four quarters of any given year divided by the estimated future subscription churn rate. We calculate CAC as total sales and marketing expense incurred during the associated preceding four quarters. The LTV:CAC ratio for 2019 includes LTV for the year ended December 31, 2019 and CAC for the four quarters ended September 30, 2019. On this basis, we estimate that our LTV:CAC ratio for 2019 was 4.4:1. This calculation assumes that the actual subscription churn rate for the period will remain consistent in future years."
  • The length of BigCommerce's sales cycles for mid-market and enterprise customers, from initial evaluation to contract execution, is generally 3-6 months.
  • More than 70% of BigCommerce SMB customers use a self-serve model and become customers without sales assistance. The largest lead source of new mid-market and large enterprise sales is from organic / inbound interest.
  • As of June 1, 2020, their average platform uptime for 2020 was 99.99%, which exceeded its average uptime for 2019 of 99.98%.
  • For the cyber five peak holiday shopping days, BigCommerce has reported zero site downtime every year since 2014.
  • As of December 31, 2019, ~10% of BigCommerce customers use BigCommerce primarily for B2B sales.
  • The company has an engineering center in Kyiv, Ukraine in 2019, which increased their lower-cost development capacity, further driving leverage in research and development spending as a percentage of revenue.
  • Sales commissions earned by BigCommerce's sales force are deferred and amortized over approximately 4 years.
  • BigCommerce has an issued patent in the United States, which expires March 20, 2036, and one pending patent application.
  • As of March 31, 2020, the company has $71.7M of total current and long-term indebtedness.

Industry Stats:

  • According to eMarketer, retail ecommerce was nonexistent in the early-1990s and grew to ~10% of all global retail spending in 2017. They predict it will take just 6 years for this percentage to more than double to 21% of global retail spending in 2023.
  • According to Internet Retailer’s Online Marketplaces Database report in 2019, 57% of global ecommerce occurs on marketplaces such as Amazon and eBay. For sales that are transacted on BigCommerce's customers’ ecommerce sites, roughly half of those originate from buyer journeys that began online somewhere else, such as a search engine, social network, or linked site.
  • According to Forrester, B2B ecommerce now exceeds $1 trillion in the U.S. and according to a Digital Commerce 360 survey of more than 200 B2B companies, 50%+ had yet to launch a transactional ecommerce site. Of those without an ecommerce site, 75% stated plans to have one within two years, signaling further growth ahead.
  • According to IDC, in 2020 B2C sites will account for 67% of total global spend on ecommerce platforms, while B2B sites will account for the remaining 33%.
  • IDC predicts that by 2023, digital transformation and innovation will account for more than 50% of all IT spending, as compared to 36% of IT spending in 2018.

The company also disclosed representative customer logos in their S-1 (below).

Source: S-1

COVID Impacts

COVID is a huge tailwind behind the ecommerce market in general, and BigCommerce is seeing positive operational impacts and called out a few stats in their S-1. See below:

  • In June 2020, eMarketer predicted that U.S. brick and mortar retail spending will decline by 14% in 2020, whereas U.S. consumer ecommerce spending will increase by 18%, the highest growth rate since their coverage began in 2008. The company discloses that "Our business has benefited from this shift, both in accelerated sales growth for our existing customers’ stores, and in our sales of new store subscriptions to customers."
  • Beginning in March 2020, BigCommerce's Essential plans increased significantly, growing 33%, 106%, and 86% year-over-year for March, April, and May 2020, respectively.
  • On the contrary, the company saw reductions in Enterprise plans of 14% and 13% year-over-year in March and April, respectively, from a few larger prospects stalling due to pandemic impact. Enterprise plans improved in May, growing 60% year-over-year. BigCommerce also mentions sales cycles are shortening and improvements in lead conversion and competitive win rates.
  • Revenue growth is accelerating for the company: Year-over-year revenue growth for Q1'2020 was 29.7% and ARR growth was 26.8%, an increase relative to the 22.8% year-over-year revenue growth rate and 25.8% year-over-year ARR growth rate in Q4'2019.
  • Partner and service revenue, a catalyst for this growth acceleration, increase 51.8% vs. the same quarter in 2019.

Market Opportunity

The market opportunity for BigCommerce is no doubt massive. According to eMarketer, more than half of the global population is online (4B+ internet users) and global retail ecommerce will reach $3.9 trillion in 2020, 17% of total retail spending, and is growing rapidly as a percentage of the total. Moreover, brands are increasingly focused on selling direct to consumers and need the tools to do so. BigCommerce references a new model of direct-to-consumer, vertically-integrated digitally native brands or “DNBs”, which represent 31 of the Internet Retailer Top 500 Stores. Moreover, "DNBs" grew much faster than rate than non-DMBs; 29.5% vs 17.6% for non-DNBs. Underpinning all of this is the massive shift towards digital everything and given COVID, we're packing years of digital transformation into months, which is helping BigCommerce in a huge way. According to IDC, the global market size for digital commerce applications was $4.7B in 2019 and is expected to grow to $7.8B by 2024, representing an 11% compound annual growth rate (CAGR). Below is an output from the S-1 that shows ecommerce spend as well as the growing percentage of ecommerce as a percentage of total retail spend.

Source: Company S-1

Competition

While the market opportunity for BigCommerce is massive, it's no doubt highly competitive. The company calls out a few competitors across segments. In the mid-market and large enterprise segments, they believe the primary competition to be Magento (Adobe), Salesforce Commerce Cloud (Demandware), and Shopify Plus. In the SMB segment, the company believes the primary competitors are Shopify and WooCommerce. Clearly, Shopify is the elephant in the room with a market cap of $120B+ and $1.7B of LTM (last-twelve-months) revenue and growing almost 50% year-over-year. While they don't mention them, other companies are building or offering commerce options such as Squarespace, Wix, and Webflow.

Investors and Ownership

Unfortunately, and similar to Jamf Software, the ownership section of this S-1 is blank (it will be updated here when subsequent filings emerge). According to Pitchbook, BigCommerce has raised $228.5M from investors including GGV, Revolution Growth, General Catalyst, Softbank, Tenaya, Floodgate, Summit, and others. As mentioned, the ownership section is blank in this filing, but 5%+ shareholders are Revolution Growth, General Catalyst, GGV and Softbank (we will know their exact ownership in the next filings). Their last round was a $64M Series F in April of 2018 led by Goldman Sachs at a $450M pre-money valuation, according to Pitchbook.

Shopify vs. BigCommerce

Shopify went public in May-2015 and has seen a dramatic increase in value since being a public company is up almost 60x from their IPO price. While BigCommerce is significantly behind Shopify in terms of traction, they will likely tell a similar story to public market investors about their growth prospects. Both were founded within a year of each other and were at similar scale at their IPO (BigCommerce is 97% of the size of Shopify on an LTM revenue-basis at IPO quarter). With that said, Shopify was growing significantly faster and more efficiently. Interestingly, Shopify's customers at the time were much smaller than BigCommerce's; the average customer was paying them 40% of what BigCommerce's average customer is paying them today. BigCommerce has raised almost twice as much money as well. Outputs below:

Source: Company S-1's. Market data as of 22-Jul-2020

Shopify vs. BigCommerce | Revenue-run-rate Index ($M)

Below is a chart plotting both company’s revenue-run-rate from a similar scale starting point. Note that Shopify did not disclose ARR, so I just took quarterly revenue and multiplied by 4 for each company. Shopify grew at a significantly faster pace at a similar scale to BigCommerce.

Source: Company S-1's

Financials and Other Metrics Outputs

BigCommerce has moderate scale for a SaaS IPO (some benchmarks on what it took for 2019). The company ended last quarter at $137.1M of ARR (they actually report ARR), up 27% YoY. Total revenue growth accelerated to 30% YoY last quarter as COVID has been a tailwind for the company. Non-GAAP gross margins were almost 80% last quarter and non-GAAP operating losses are shrinking and were at (17)% last quarter. Their implied months to pay back, which is the inverse of a CAC ratio (implied net new ARR multiplied by gross margin/sales and marketing spend of the prior quarter), was at a 33-month median over the past 9 quarters. According to Pitchbook, the company has raised $228.5M in equity and has $34M in cash on the balance sheet. Moreover, they have raised $77.8M in debt so have burned ~$272M to get to almost $137.1M in implied ARR, a 0.5 ratio of implied ending ARR / implied net burn at IPO. Outputs of other metrics are below:

Historical P&L & Metrics ($000's)

Source: Company S-1

Quarterly Revenue ($M)

Source: Company S-1

Ending ARR ($M)

BigCommerce added $8.6M of implied net new ARR over the past quarter and $29.0M over the past year.

Source: Company S-1

Quarterly non-GAAP Gross Margin and Operating Expenses as a % of Revenue

Source: Company S-1

GAAP and Non-GAAP Operating and Net Income / (Loss) Margins

Source: Company S-1

Accounts and Average ACV (Annual Contact Value) for >$2K Customers

BigCommerce discloses they have 60,000+ total customers, but only disclose the accounts with more than $2,000 in ACV on a quarterly-basis. As you can see, they are moving up-market and increasing their average customer size (up 60% over the past 9 quarters).

Source: Company S-1

ARR Percentage for Accounts >$2,000 in ACV

BigCommerce also released the below ARR mix, which shows a greater percentage of ARR being generated from their larger accounts over the past 9 quarters.

Source: Company S-1

Americas and EMEA/APAC Regions % Revenue Mix

Source: Company S-1

Sales Efficiency and Payback Periods

BigCommerce doesn’t release customer counts by quarter, but the below output plots their implied months to payback using the inverse of a CAC ratio (net new ARR multiplied by non-GAAP gross margin/non-GAAP sales and marketing spend of the prior quarter). The magic number is defined as net new ARR/non-GAAP sales and marketing spend of the prior quarter. BigCommerce is moderately efficient. They mention most of their leads are inbound in nature or partner-driven, so I would have expected them to have better sales efficiency. They don't disclose churn, which is likely high and dragging down their efficiency numbers. The median months-to-pay-back over the disclosure period is 33 months.

Source: Company S-1

Cash Flows ($M)

Source: Company S-1

Quarterly P&L (000's)

Source: Company S-1

‍Valuation ($M)

BigCommerce will trade like other high-growth SaaS companies: on a multiple of forward revenue and will certainly point to Shopify as the best comparable, although Shopify is trading at 50.6x NTM (next-twelve-months) revenue (as of 22-Jul-2020), the highest of any SaaS company. They're also growing much faster; LTM revenue growth is 46% at almost $2B of implied ARR (subscription revenue * 4), while BigCommerce is at almost $140M and growing ARR not quite 30% YoY. The output below uses NTM (next-twelve-months) revenue based on an illustrative range of growth rates and comparable EV (enterprise value) / NTM revenue multiples from other public, high-growth SaaS businesses. It also includes an implied ARR multiple range. As mentioned in other posts, companies do not release projections or guidance in S-1's. Certainly, with Shopify flirting with all-time share price highs (as with many other SaaS companies) and the massive tailwinds in the market, there likely isn't a better time for BigCommerce to IPO. While they likely won't get Shopify's multiple, they should trade in range with other high-growth SaaS companies.

Note: Enterprise value ranges and growth rates are illustrative.

BigCommerce isn't a market leader but will be the second-closest standalone public company competitor to Shopify. While their growth and unit economics look nothing like Shopify when they went public -- even though both companies were at very similar scale -- I suspect there will be an appetite to own a part of the rapidly growing ecommerce infrastructure market. Moreover, given the growth profile, I don't think BigCommerce will price their IPO at a premium multiple, so if you believe in the opportunity and BigCommerce's execution, you don't have to look to far to see a strong return. Shopify is almost 15x larger than BigCommerce in terms of ARR, and still growing close to 50% YoY. The market is massive and there is space for multiple players, and while BigCommerce is a very distant #2, they will be the only standalone public company competitor and could be an attractive acquisition candidate for any company looking to compete with Shopify. They're also telling a story around B2B commerce and more international expansion which is again a testament to the massive market of online commerce generally. As I mentioned there isn't a better time to be a public SaaS company than now and BigCommerce is in a large, proven market and still a smaller scale compared to most SaaS IPOs. I bet investors look past the unit economics, competition and scale and want to be a part of the story.

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Special thanks to my partner Anthony DeCamillo for the help on this post.

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