Relay Commerce raised $27 million to acquire more e-commerce tools

Relay Commerce, a New York City-based startup, raised $27 million in equity and debt funding earlier this year to fuel more acquisitions of e-commerce software businesses.

Why it matters: It’s a twist on the e-commerce aggregator trend that boomed during the pandemic — but the company is betting on software instead of widgets.

Details: Relay Commerce was incubated inside NYC-based VC firm Primary Venture Partners, which put in an initial $750,000 pre-seed check last year into the company to get it going.

• Primary led the $6.25 million seed round (which closed in May), with Twelve Below, AlleyCorp, and Max Ventures also participating. TriplePoint Capital provided a $20 million debt facility.

What they’re saying: “The bigger, broader vision for us — I look at us as just a [software-as-a-service] company,” co-founder and CEO Ricardo Hinds tells Axios.

• Relay has already acquired three companies at undisclosed prices: Fomo, Pop, and SmartrMail.
• It’s currently targeting companies with about $1 million-$3 million in annual recurring revenue, with their first couple thousand customers, and whose tech is built atop platforms including Shopify.
• “The initial focus is certainly bootstrapped [companies] because the message really resonates with those founders,” says Relay co-founder and director of acquisitions Austin Simon, adding that it’s possible the company will also acquire venture-backed companies down the line as they, too, start to look for more exit options given the current market.

Between the lines: The company points to CM Group, which owns software businesses such as Sailthru and Campaign Monitor, as a model for what it wants to build. (Primary Venture Partners general partner Cassie Young was previously CM Group’s chief customer officer.)

• Relay also doesn’t want to sunset the individual products’ brands. Instead, the idea is that by bringing them under one roof, it can run — and grow — them more efficiently and cross-sell to their respective customers.
• It’s also not fazed by Shopify’s own recent admission that it overestimated the permanent leap of e-commerce amid the pandemic boom (and subsequently laid off about 10% of its workforce in July).

The bottom line: Even in e-commerce, software margins remain king.

Editor’s note: This story has been updated to clarify that Shopify is among the software tools Relay Commerce is focused on, not the only one.