The Marketplace Boom   //   March 26, 2024

Commercetools is the latest e-commerce platform pursuing a path to IPO

More e-commerce platforms are joining the IPO pipeline.

Commercetools — a composable commerce provider that gives retailers the tools to build customized payment, checkout and other services — is setting the groundwork to go public, Modern Retail has learned. While the company wouldn’t provide specifics, a spokesperson said, markets permitting, an IPO could happen within the next 12 to 24 months.

The news comes as Commercetools announced its annual recurring revenue grew 65% in the Americas in 2023, while its growth merchandise value increased 45% year-over-year to more than $30 billion. Commercetools is now “not far off” from profitability, CFO Dan Murphy told Modern Retail.

“Like anything, we’re going to build our company for growth, and 2024 is another stepping stone,” Murphy, who joined Commercetools eight months ago, said. “I expect 2025 to be a good year as well, when we’re looking forward. We’ll continue to watch the IPO market and the opportunities that are out there… I’m here to help build a big business and get it ready for that next step.”

While IPOs reached an all-time record in 2021, fewer companies went public in 2022 and 2023, largely because of rising interest rates and geopolitical concerns. Now, though, more IPOs are starting to trickle in. Reddit, Birkenstock and Amer Sports all made their market debuts in the last six months. Notably, more tech platforms players are joining the landscape, too; Instacart went public in September as Maplebear, while Klaviyo, one of the biggest players in the Shopify ecosystem, went public a day later. Ibotta, a cash-back rewards and payments app that partners with brands, filed to go public on Friday after turning a profit last year.

E-commerce is certainly not new, but the sector has grown as retailers have made the channel a bigger part of their businesses. In fact, eMarketer expects e-commerce to be responsible for 23.6% of all retail sales worldwide in 2025, up from 22.5% in 2024. Companies that address growth in this area are now getting more interest from clients and investors alike.

Arjun Bhatia, research analyst at William Blair, told Modern Retail that there’s been an “explosion” of commerce software companies, both public and private, recently. “If you think about the larger companies, they can’t do everything, and they certainly can’t do everything well,” Bhatia said. “And that’s where the younger startups have come in and addressed gaps in the market. What happened over the past few years is, they saw great demand.”

That demand hasn’t always held steady, though. In the last couple years, as interest rates rose, capital dried up, affecting software companies’ growth, Bhatia said. Now, the landscape is looking healthier. “It does seem like we’re getting close to turning a corner,” he said. “I think it’s too early to declare victory. But it certainly seems like the rate of deceleration in growth is improving. And companies, especially the good ones, have learned to operate in this market.”

Recently-public companies have reported mixed results. Last month, Klaviyo reported fourth-quarter revenue of $201.6 million, representing 39% year-over-year growth. Maplebear reported fourth-quarter net income of $135 million, down $331 million year-over-year. Its total revenue for the quarter was $803 million, up 6% year-over-year.

Commercetools, which is based in Germany, brings in more revenue than both Shopify and BigCommerce did when they went public in 2015 and 2020, respectively, Murphy said. “We’ve got the structure in place to be able to do it [go public] when we’re ready, or when the market’s ready or when we want,” he said. He listed three benefits in going public: “Access to capital,” “marketing” and “validity in the North American market.”

This influx of software companies comes as their services become more ubiquitous. In the past, only the largest and wealthiest companies could afford e-commerce solutions, Rob Oliver, senior research analyst at Baird, told Modern Retail. Now, he said, “A business of any size can get the equivalent of a tech stack [from a SaaS]… There’s a democratization of that opportunity.”

Commercetools raised $140 million in funding at a $1.9 billion valuation at the end of 2021. It is not planning any further funding rounds between now and its IPO, Murphy said. “I’m actually very happy with the balance sheet and where the balance sheet is, in order to execute what we have in front of us,” he said. “We’re investing in the business, but we’ve got the levers in place that we can pull to invest more if we want to, or to move towards profitability.”

According to Murphy, going public is a different game with a different set of rules compared to only a few years ago. “One of the things that we need to monitor is, if you go back to the 2020, 2019 timeframe, you could go public with two dogs and a banjo, if it was SPAC or something else,” Murphy said. “And it’s a little bit different now. Size does matter. The size of your revenue stack does matter. And the path to profitability matters, as well.”