Deal Radar 2010: BigCommerce

Not only are Americans buying more online, but they’re also buying more types of products online, including items such as health products, cosmetics, and beauty products that were once the sole domain of physical stores. Of course, products such as books and small electronics that have long been bought over the Internet remain popular. All of this bodes well for BigCommerce, which provides SaaS e-commerce products for small businesses in a variety of retail categories.

Austin, Texas-based BigCommerce was founded by Mitchell Harper and Eddie Machaalani, who met in an online programming forum. Harper was involved in e-commerce for three years before the pair started Interspire, BigCommerce’s parent company, in 2003.

Harper and Machaalani, a Web designer, founded Interspire and later BigCommerce because they saw that there was no e-commerce product really designed for the non-technical business owner. To get such a product, one either had to be a Web developer who could code or a larger company with an in-house IT team. The software itself was either something off the shelf that had few features or a custom-built program that took months to be up and running. Machaalani saw that open source offerings were gaining traction in the market, but he also knew they were still too hard to use for the average business owner because they were built and designed by developers, who were not necessarily proficient in user interface design. Harper decided to build a fully-featured offering for businesses that wanted to sell online but didn’t have the IT team or the budget to do so. In 2007, Harper led the engineering team that built the first version of Interspire Shopping Cart, which went on to be released as the company’s SaaS offering (BigCommerce) in August 2009.

The company’s biggest challenge was the shift from download-to-own software to SaaS. Pioneers like Salesforce.com and Google validated the market, which made BigCommerce  confident enough to make the switch. SaaS was the “light at the end of the tunnel” of supporting custom PHP scripts via download-to-own software. But the company says that because it controls its own hardware platform, SaaS is very easy to support.

According to the U.S. SBA Office of Advocacy, there were about 29.6 million small businesses (defined as having fewer than 500 employees) in America in 2008. BigCommerce estimates that 16% or 4.7 million of these are retailers. At BigCommerce’s average revenue of $40 per customer per month, the estimated TAM is $2.22 billion.

BigCommerce offers five plans: bronze ($24.95 a month), silver ($39.95), gold ($79.95), platinum ($149.95), and diamond ($299.95). All include services such as hosting, PayPal and Google Checkout support, coupons, search engine optimization, conversion tracking, and real-time postal quotes. The number of products a business can sell, gigabytes of bandwidth, and the number of staff logins differ for each plan.

Top verticals are apparel (particularly women’s and children’s), health (products such as vitamins and supplements), and software and hardware. These three segments account for around 50% of the customer base; other segments are fragmented. Customers include Mint&Berry, which sells organic skin care products; Houston Astros pitcher Roy Oswalt; Kiri Kids Clothing; Luxe Purses; Sanibel Diamond; and UUNNO, which sells products like massage chairs and saunas.

There are a number of competitors. GoEMerchant, 3DCart, Yahoo Merchant, Volusion, CoreCommernce, and Miva Merchantare just a few. Larger firms such as NetSuite and Microsoft also sell e-commerce software for small businesses. The E-Commerce Software Review 2010rated BigCommerce first out of ten companies on a set of criteria that include features, ease of use and setup, fraud protection, and help and documentation. The company aims to differentiate itself by being not just an online storefront but also a marketing platform with social networking integration.

According to compete.com, there were just under 45,000 unique visitors to the site in January. Around 5,000 visitors per day go to BigCommerce.com with a double-digit conversion rate from trial-to-paid. The company has 725 partners who actively promote BigCommerce to their clients via web design and marketing agencies. Further, BigCommerce has 3,650 affiliates on Commission Junction.

The company is 100% bootstrapped. All profits from Interspire were used to grow BigCommerce in terms of engineering, marketing, and so forth. Interspire has no debt or outside funding and has been profitable since its founding. BigCommerce currently has 3,000 customers and yearly recurring revenues of $1.5 million. It is forecasting 13,000 customers by the end of 2010. Further, it is growing at 114% month-on-month. The team expects BigCommerce to be profitable by the end of the year and plans to continue to use Interspire profits to fund growth until then. There are no plans for VC funding.

A relentless focus on being “an all-in-one offering that’s dead easy to use” has helped the company to gain traction. When it passes phase 1 (10,000 customers) and then phase 2 (20,000 customers), if an acquisition opportunity presents itself the company may consider it, but the team says that for now they just want to continue growing.

Recommended Reading
Deal Radar 2009: SugarCRM
Deal Radar 2009: Spiceworks
Deal Radar 2008: Everest Software

This segment is a part in the series : Deal Radar 2010