Jeremy Horowitz: The Untold Truth About Shopify Plus and the App Stacks Behind 8-Figure Shopify Brands

Jay Myers: Jeremy, this is long overdue. Thank you so much for coming on the show. I am a avid follower on LinkedIn. I, I read all your content been following you for a while and I actually, I can't believe this is the first time I've seen you in three dimensional moving.

So, thanks for coming. Can give us a quick, I want to, it's so much on my list to talk about today, but quick little background. Tell us a little bit about you, who you are and your journey of like how you got to where you are today.

Jeremy Horowitz': Yeah. Thanks for having me. I am really shocked we've never met in person. 'cause over a decade ago I was actually a bold customer of kind of the original suite. Apps. So it's crazy that we've never met in person. But it's one of these, it's like I, it's what I love about this space. You can be a digital friend for forever

Jay Myers: Right.

Jeremy Horowitz': meet someone.

Yeah, so the quick background on myself, I got into the space building Magento connections back in the day. Very early, found this thing called Shopify. I was working at a dev agency where we were basically migrating WooCommerce sites over to Shopify very, very early. And for everyone, for frame of reference, like we threw a party in New York City around when Shopify hit 250,000 stores like that on a meetup.

Like that was the big thing back

Jay Myers: yeah.

Jeremy Horowitz': Which I know Jay, you way predate that. 'Cause you were original store, like the first five, 10,000

Jay Myers: Yeah. 6,000 in 2009, and it was, yeah, the original, like, it was very, very, very basic. Like the original Shopify admin had like five buttons up across the top, and it was nothing like it was today. There was 20 apps in the app store when I, when I put my first store on Shopify. So.

Jeremy Horowitz': Which is crazy. There are now 3 million stores and 11,000 over 11,000 apps, which is just crazy to see that evolution. But yeah, from back then, I basically went to the brand side. I managed Shopify plus Amazon, mostly e-commerce for a bunch of high growth brands. Then the most notable one being Lumi, which was Kim Kardashian's favorite selfie case, phone case, bright lights on it, take photos of yourself, friends, food, that kind of thing.

Back on social media and Instagram are going vertical. Did that for a couple years. Also worked for an automotive aftermarket business where I met my partner and now our private equity fund. Scaled that from six to eight figures. Built some SaaS, basically solving that brand's problem. Spun it out.

All three businesses exit late 20 18, 20 19. At that time. I go to work for a couple of Shopify apps. Most notably being gorgeous, we start doing some early stage checks and then looking to get back into private equity and acquiring brands and SaaS. About a year ago, I leave gorgeous to go build what we're now working on because Ventures full-time, which is a private equity fund focusing on acquiring Shopify brands and Shopify apps, really anything in e-commerce.

But, you know, 90% of e-commerce is Shopify at this point. Where we do that now. We recently acquired a Shopify app earlier this year called Coco ai, which is WhatsApp marketing for Shopify brands. And we're still on the hunt for our, what we call our platform brand or that big brand that we're gonna grow and scale.

And yeah, in that meantime, I've decided to post what I think are helpful comments on LinkedIn every day you can debate and argue whether they're or not. Yeah. And then just have been meeting a bunch of great partners and working with awesome people like yourself.

Jay Myers: Oh, awesome. Well, thank you. I mean, such great context and I, I dunno if you mentioned it, but I know, I know this like you've worked with, just for context here, for listeners over 17,000 brands I think it's very interesting that you invest in both the, the app side, like the tools and the brand side.

That's, I think, pretty unique. There might be a couple other people, like, I think Nick Sharma does that a little bit. He's more on the brand side. But I think there's a few others in the space that do that. So I really excited to hear your pers your perspective on things. And so, and Coco ai I definitely want to get into as well too.

I know that was your, I, so I actually reached out to you, I think it was a couple months ago to get you on the podcast and you said, Nope, I can't talk. I'm in the middle of an acquisition. Pause everything for a month until this is done and then we can talk. So, excited to

Jeremy Horowitz': it was literally during our embargo, like it was literally during the two or three weeks we were closing

Jay Myers: Well, and.

Jeremy Horowitz': talk about.

Jay Myers: And good on you for having the, I, I don't know, I guess like the wisdom to know, like I, distractions are everywhere, you know, there's just so much going on and like focusing on what needs to get done at what time and prioritizing and anyone that doesn't, I.

Respect that I think is not someone you wanna, not someone you want in your life anyway. So, I thought that was awesome that you said, Nope, check back in three weeks I'm doing this and I, I respect that. So,

Jeremy Horowitz': Thank you and now we're here. Excited.

Jay Myers: now we're here. Now the, the, so, okay, so let's, there's a lot of, I've got a lot of notes here, a lot of ways these conversations can go.

But the, the first one I wanna dive into is you, you post a lot about Shopify apps. And I think and I, I think you're, I think the content you put out is fantastic. I actually, we've circulated it a lot of times within Bold, we see one of your posts or report or you and it's not just the listings of like top 10.

It's often the insights behind them and the, and the color that you share on things that I find quite interesting. So first of all, anyone listening, if you wanna get kind of good insight on what's happening in the app space. Follow Jeremy on, I see it on LinkedIn, or do, do you post the same stuff on Twitter?

I just don't, or XI I'm not on there as much, but,

Jeremy Horowitz': I'm much more active on

Jay Myers: okay. So I would say go to LinkedIn then you just don't get the anger of going on X and everything else that comes, comes

Jeremy Horowitz': the other reason I.

Jay Myers: Yeah. Okay. It's if I'm feeling like fighting, I go on X, you know, and I just see a whole bunch of posts of people I don't follow.

That just gets you angry. So anyways, but LinkedIn is still, still good. So let's dive into this. So you I, you've, you've worked with brands, you've been on the app side, you're now acquiring apps. Let's talk about maybe let's start with like Shopify, the larger Shopify brands, Shopify Plus brands.

Like what are some of the big shifts you're seeing in Tech Stacks of, let's say 1 million and up brands right now?

Jeremy Horowitz': Yeah, so that's a great question. Also, just something I want to dive in and clarify 'cause this has been really interesting in, in my evolution as well. So for anyone who isn't familiar, I basically do an annual report where I analyze the top 100 apps that the larger Shopify brands use. 20 23, 20 24. The first two years I started posting them publicly.

I actually called them Shopify Plus because I think everybody always associates Shopify Plus to the biggest Shopify brands. And while there's some truth to that. The really interesting thing that we found as we dug into the data more and more is two really interesting insights. The first one is the average revenue per year for a Shopify Plus brand is $2 million,

Jay Myers: Hmm.

Jeremy Horowitz': which is much smaller than at least when I originally thought, you know, I think of Shopify Plus.

I was thought of the 10, 50, a hundred million dollars brands. You know, the biggest brands that, you know, the, the great case studies is when it Harley goes on CNN and Fox Business and all those other places that they talk about. But actually, when you looked at the, when I looked at the data, 75% of brands on Shopify Plus are between 500 and 500,002 and a half million dollars in revenue a year.

So it's actually much smaller brands than you would expect on, plus. The other interesting thing that we found. There are twice as many brands that just do above a million in revenue a year on Shopify. And that's an estimated number. You know, it's not pinpoint accurate, but it's pretty directionally. I've qa the data a lot.

It's directionally accurate, not literally accurate, but around a hundred, there's about roughly 40 to 50,000 stores on, plus there are rif, there are 103,000 stores that are doing over a million dollars a year on Shopify. And so what's really interesting is, and I have a whole bunch of conspiracy theories, if you wanna go down this

Jay Myers: I do. I, I, you know what's the reason I do wanna go down this rabbit hole is someone actually emailed me the other day, one of our listeners, and they said, Jay, I would love to hear an episode just about Shopify Plus. Why to pick plus when not to pick, plus, when it makes sense, why do, like, they literally said, do a whole episode just talking about plus, and I don't wanna do this whole episode about that, but I'd love to hear this rabbit hole.

So.

Jeremy Horowitz': I'll, I'll give you like the short clip that you can like mix in a bunch of experts and hopefully you find people smarter than me to do the other segments. Okay, so the quick, the quick thing on plus I think from talking with, I don't know, a hundred, probably 200 merchants about this today. Basically the everyone who decides to upgrade to plus, unless you're truly a big brand, like if you are 20 million and up, I think you know, that's like a hundred percent of those brands are on plus, but everybody sub 20 million, which is actually the majority of brands on plus and probably the majority of people who ask that question.

Usually the three use cases I hear of why to upgraded plus one is you and one and is like 80% of the reason is you want to save on payment processing, which is where my whole conspiracy theory comes from because it's very interesting. Usually Shopify will give you significant discounts on your payment processing fees, so Right.

If you expect to do a lot more revenue, you can bring those fees down. It should, you know, the math should work out that it's a great savings for you with all of the other adjusted causes costs. The two is internationalization.

Jay Myers: Mm-hmm.

Jeremy Horowitz': so, you know, if you're expanding from North America to Europe or APAC in Australia sorry, APAC in Asia you know, and you need the US store, UK store, French store, German store, it's really, it's a really elegant solution versus, you know, back in our day when you just literally had to set up seven different Shopify instances and had seven different accounts and it was a real, I

Jay Myers: Yep.

Jeremy Horowitz': that.

It was a real nightmare. And then the third one is you have a complex ops tech stack. So you need an integration with something like an ERP or you have something super custom on the backend where you just kinda need to like break open the backside of Shopify and you can't do that on a regular plan.

Those are the three most common use cases. Honestly, though, like 80% of it is just you want to save on the payment processing

Jay Myers: Yeah, and I think actually Shopify triggers an email when you hit. A certain threshold I've seen it where it says you should consider plus because you might save money on processing fees and like that, that is the value proposition. Like it's save money by switching to plus, which it's probably different opinions on that,

Jeremy Horowitz': Yeah. Well, okay, so here's my conspiracy theory. I actually think Shopify wants more of that. Like we're, I'll call big SMBB, lower mid market brand to stay on advanced and to stay on the, the top plan.

Jay Myers: Hmm,

Jeremy Horowitz': And here's why. I think they're actually easier to serve customers that don't need or expect as much, right?

You don't have the, well, they don't really have msms anymore, but you don't have all the servicing costs of them. And Shopify actually captures a higher, well, like I say, lemme take a step back. 70% of Shopify's revenue and 60% of their gross profits come from payment processing and me, what they call merchant services,

Jay Myers: Yep.

Jeremy Horowitz': Almost all of that is payment processing now that they don't have fulfillment. So like right, Shopify is essentially a payment processing business that has some software on the front end that you know, is very profitable as a great offering, great service, but really their business is the payment processing.

And that advanced, I think there's actually like a real business value to capturing the 3% or 2.9% plus 30 cents for brands doing one to 10 million and keeping them on advance where it's a little bit of an easier plan. So you're actually getting more payment processing at a lower cost of service to Shopify.

And so I think it's a really interesting, like, you know, I mean again, like the, my whole thing of how I think Shopify's gonna be a trillion dollar business of like where does plus really live in the future? Because it's essentially just like a very sophisticated enterprise FE plan for small brands that maybe don't need all the feature set.

Versus like a true enterprise offering that you know is gonna go grab the mid-market and enterprise brands and bring them over from a social source commerce cloud or,

Jay Myers: Yeah.

Jeremy Horowitz': Agenda doesn't exist anymore. But custom, really custom carts is gonna be the other major new source of business for Shopify.

Jay Myers: Yep.

Jeremy Horowitz': And so I think it was really interesting of like, I have this whole, like, it's basically like, does Shopify even want people to upgrade to Shopify Plus anymore?

Because like, it may make them more money to keep them on advance

Jay Myers: Yeah, I wonder if they're stickier though, if they're on plus. Well, no. Yeah. Interesting.

Jeremy Horowitz': you sign a con, you probably do sign an annual

Jay Myers: you, you do, you sign it, you sign one year or three year, so it's a little bit, yeah, it's,

Jeremy Horowitz': they gotta pay salespeople to sell that. They gotta pay the service people to service it. So there's a, I mean, I, I haven't, they don't break out their data on their financial reports to that level, but I do have a, I do have a guess that it is actually more profitable for them to not do it for the, you know, sub 20 million brand.

Jay Myers: Yeah. I, I, I would bet you're right for sure. One question that goes through my mind, and I know they do actually have a plan above, plus they call it platinum. We, we see merchants, like when, when someone installs one of our apps, we, we get the plan details and we see platinum. There's actually about 50 different plans.

They've all been, 'cause they changed their plan names and then there's staff plans, there's grandfathered plans, there's, oh my goodness, like, then they have like all their affiliate plans. So there's like, with Rogers, there's different plans with U Africa, which is like an agency. Anyways, there's all these literally in the backend we have, we have to parse it all for our analytics.

And there's like, there's

Jeremy Horowitz': have a matrix of all these

Jay Myers: there's literally about eight different plans that are, plus there's there's, there's one that used to be specifically for, I don't they still have it or not, but it was for like celebrity plans and they called it. I think it might have been VIP or something. They gave it a cer a different name that was basically a, you know, there's a lot of celebrity brands and Kim Kardashian obviously makes a lot of money, but the celebrities brands that are like maybe musicians or they're on TV and they, they have a t-shirt clothing line that actually doesn't do much money at all.

But it's more like they are a celebrity and they have a brand. They still, they don't wanna put them on a basic plan. They want to give them better

Jeremy Horowitz': VIT Act.

Jay Myers: even though they're really not selling much. They're selling mer like Bon Jovi would be an example. Like, he's got a merch store, doesn't do millions of dollars a month, but it's his merch store.

Right. Like, so, I, I I've thought for a while that. I ke and I may, I think they do, they just don't promote it. But like to have a a proper plan above, plus that is like true enterprise where they actually are on site with, with merchants and actually acting on their behalf, helping them make decisions.

And really, and I know they do this 'cause they we have people on our team that have been at Shopify and they talk about like, oh yeah, I actually flew to Gym Shark and I spent a week in their office helping them launch their, their launch. And they, they were on the Shopify Plus team. And I know they don't do that for every Shopify Plus merchant.

So there's definitely different levels of plus treatment, but I don't, I don't think it's explicitly like stated at X amount or it's kind of maybe just a handpicked thing.

Jeremy Horowitz': Yeah, and my guess is that. I mean, they kind of called the commerce components for a little bit. Like, my guess is whatever, figuring out that problem is going to be the next massive swing in their enterprise value. Like for Shopify stock price, figuring out what is their true like mid-market enterprise clear narrative plan, go to market strategy of, you know, I think like the big wins recently have been like on running and some of, I think LVM H's smaller brands like, you know, the, the like master luxury brands.

Like how do you get the rest of, we, we did another part of this article of like, how do you get the rest of lvm H'S portfolio and like all, whatever, it's 300 billion in sales that they're doing. And I think like they really like nailing that to me is what the next 10 years for Shopify is gonna be about.

Of just like, here's the, like we won e-commerce basically in the SMB and lower mid market. This is how everyone had a larger brand who isn't B2B. You know if you are A-D-D-T-C, but if you're basically a consumer brand, you have to use Shopify because of X, Y, Z. And I think providing that clarity is gonna become where the next like 200 to $500 billion in their market cap comes from.

Jay Myers: Yeah. Okay. Let's talk this, I, I, I find this all like super fascinating. I think a lot of our listeners are probably fall in that advanced section. So before going too far down, that let's, I know you've got a lot of insight and, and data on different categories of apps. What's, what apps do you think are like, and you can, we can talk about specific ones, or we can just talk categories, but like, let's, let's take a, you know, a store doing a million plus a year.

Let's start with like, what shifts are you seeing in app usage, their tech stack that those stores are using now versus three to four years ago? Like, what does some of that change look like that you're seeing?

Jeremy Horowitz': So much of a simpler tech stack, I think three to four years ago and even before that. And I think also like, so I, I really spent most of my time on the brand side 20 14, 20 15 to 2019 2020 I guess is when I officially made the switch from the brand side to the app side. And it was so much a, what, you know, what's the app for that?

How can I plug in a point solution to do the one thing that I need and kinda plug the holes of my site? And it was kinda the beauty of the early Shopify ecosystem of, you know, Shopify had this great core and then there was a ton of open area and surface area to fill in from an agency and a vendor perspective.

The most interesting thing, the most interesting insight from this year's report and looking at kind of this, this segment globally, 'cause right, if we think about it, there's 3 million Shopify stores overall on the entire platform. 103,000 that are over this million thresholds. That's 3%. I mean, we're talking about a very, very, very small segment of the overall population, but even stores that are at that scale, what was most interesting to me is how few apps they actually use.

And what I mean by that is we look at market penetration. So if we sum up all the apps in every single category and then we basically bucket every major category, email and SMS, I've kind of just put into one big bucket today. 'cause a lot of people are, you know, most platforms offer both, or most brands are using, both have has 84% adoption for, so 84% of the brands in this space use an email or an SMS tool.

I'm sure some people know it's like, what are the other 16%

Jay Myers: That that's what, that's where my mind went. Like, are the other 16% not using email or are they just using something that isn't maybe a Shopify app.

Jeremy Horowitz': So there's two, there's two, there are two qualifications. We remove all of native Shopify native apps. So like any that Shopify produces, we do not include in the report. So if a brand is using Shopify email, in theory they could, you know, the 16% in theory could be doing

Jay Myers: Could be that.

Jeremy Horowitz': Or you know, they could just not be u they literal legitimately could not be using an email.

And our SS tool, which is crazy as it sounds, I've actually seen it, you know, fairly common of SEO took off and my brand's doing very well. Meta ads took off and, you know, that's my only focus. But what was mind blowing to me is the second number two categories reviews, which at least from my perspective and like kind of the old school e-comm, was, you know, you install Shopify, you run traffic and you set up reviews as the first thing.

Only 55% of stores even use a reviews tool.

Jay Myers: Hmm.

Jeremy Horowitz': that. Half of Shopify stores who are doing over a million in revenue don't have a reviews tool plugged into their website.

Jay Myers: does Shopify, they do, they do have a native review solution too,

Jeremy Horowitz': They sunset it.

Jay Myers: Oh, okay. So you, so that would, so if, what about yeah, that is, that is mind blowing to me. Like, I wonder if, like, trust Trustpilot, would that show up as a reviews app? Or would like,

Jeremy Horowitz': is the number four or five

Jay Myers: oh, it's up there. What? And Okay. Interesting.

Jeremy Horowitz': Yeah. So judge.me is the number one player in reviews for this segment, and it's actually been astonishing to see their growth. They're at about 22,000 installs now. They grew 70, they're, they're growing faster than Klaviyo, which is the number one overall app.

Has about 46,000 stores, you know, like dominates the space. Billion dollars in revenue. I'm sure everybody is. Very familiar with them. They're, Quavo is growing at about 7,000, 7,300 stores year over year. Judge me is growing at 7,700 and just why that's so impressive to me is I think judge me, judge me is around like a 10 million a RR business.

And so the amount of just raw growth that they've had has been incredible. And also last year's growth was basically growing 50%. Like they basically grew, half of their entire install base in the last year has been this insane growth. So like play, there are still players that are growing a lot of adoption.

But the surprising thing to me, and especially just as a number two, right, like, customer support, BMPL where the other categories, influencer loyalty, subscriptions, reviews, return, or sorry, not reviews, returns. All these other categories are smaller than that 55%. So it's, what was really interesting to me is it was also, it's a little bit of like a cliff jump from one to one of like BNPL is the number two biggest category.

Analytics and data are probably right there and around like 30%, which means two thirds of stores aren't using these tools.

Jay Myers: Right.

Jeremy Horowitz': it's, it's, it's, it's, it was very surprising to me. But I also think like most e-commerce stores truly just run on like Shopify advertising, one or two advertising platforms and maybe email.

And I think there's prob when we look at, we looked, we've looked at the 10 million segment as well. And I would say that's the big jump where you do see a lot more adoption of a lot more

Jay Myers: Mm-hmm.

Jeremy Horowitz': But it was very surprising to me how many, how many stores are still using very, very, very simple tech stacks.

Even at one to, you know, the majority of our report is gonna be one to two and a half million dollar a year stores.

Jay Myers: Yeah, I want, do you like looking at your list? Yeah. The category breakdown. You've got email, email, SMS up at the top, reviews, customer support, buy now, pay later. Like all the ones you mentioned, like would it be fair for someone to look at your list and go, okay, that's, that's basically my checklist. Like I need a email and SMS up, SMS app.

I need reviews, I need customer support, restock alerts, influence, influencer slash affiliate. Like all of these seem like, I can't imagine not having, I mean, you could go without a loyalty program and some stores don't do subscriptions, so that's okay, but to not have a returns. Oh, well Shopify has returns a return solution.

Magic returns, right? They acquired

Jeremy Horowitz': Yeah. But I think the other thing about returns and which what I'm really fascinated about that category specifically is one, you know, if you think about all the categories that don't even take returns, beauty and cosmetics, food and bev, like, they usually just don't even, you know. Keep it, throw it away, or like, you know, the Casper thing, like throw the thing away.

We don't want it back because it's too expensive. Versus I think that's very much a mid-market segment.

Jay Myers: right,

Jeremy Horowitz': Like when we look at the 10 million segment, it's a lot more adoption and returns and you know, then it's like footwear, apparel, like the key categories, but it's much more of a concentration.

Whereas like, it, it's this interesting thing of like, it's something that like, you know, if you run a store and you're used to it, you expect to have it. But most brands actually probably don't use it. And if you're, you know, if you're a million dollar a year store, you're probably getting, you know, even in a high category like footwear, apparel, swimwear, you're probably only looking at five to 10 returns a week.

Jay Myers: right.

Jeremy Horowitz': probably don't need like a dedicated tool that you pay for that any of a team manage. Like it probably is just like someone in your support

Jay Myers: Contact customer support email.

Jeremy Horowitz': You know, it's probably dropped down in a contact form. And so I think that's the other interesting thing of like. I, I think it's two things.

I think it's one, it's how you build your business. So like for your influencer point before, I think like it's very weird to see the shifts of like, okay, my, my, I talked before. I worked at a brand that was in completely influencer driven, like, you know, it wasn't just like we had the biggest influence in the world at the time using it, promoting the tool, but then we had like an army of influencers below, below that.

And so we had a heavy investment in tech and support against that versus we weren't spending a lot on meta at the time, so we didn't have the tech stack and all of the infrastructure, you know, the attribution tool and the server side tracking. Well that stuff didn't exist then, but you know, today the server side tracking tool and the influencer tracking tool and all, all of those other things around content creation.

So I think that's another really interesting distinguish of like, how is the brand built? And then you'll see the explosion of tech stack around that. Where I, I, a couple years ago I remember working with a couple billion dollar brands and they were like, didn't do any email segmentation and they didn't do a lot, you know, they didn't, didn't make heavy investments in email 'cause they were doing so much stuff in other categories.

I think that really dictates where brands invest as well. 'Cause yeah, the, the most like, jarring thing for me coming out of this report's, like kind of the concept of like, what's the checklist is I had reviews always at the top of that checklist. Like I just assumed, you know, it's one of the first three things you install.

You just plug it up before you drive traffic and you get going. But it seems like there is a meaningful shift away from that. And

Jay Myers: Hmm.

Jeremy Horowitz': I think there will be something that plugs into that same third party social proof kind of, you know, we're not just talking great about ourselves Lane, I don't know

Jay Myers: What it is, but

Jeremy Horowitz': is or what that will become.

I have a couple guesses based on what I'm seeing, but I think there's like a shift that we're gonna see where reviews will become a new, will change the name of that category around how do we, how do we get other people to talk about us on our website to convince people to buy.

Jay Myers: that's, yeah. The need for social. Validation will always be there. The, you know, it's the jobs to be done theory, the job needs to be done. The tool that does it might be different. And actually, it's funny you mentioned it because I had Claudio from video wise, are you familiar with video wise?

Jeremy Horowitz': That was gonna be one of my guesses. Like what Replaces

Jay Myers: Yeah, I, I, so I actually use it on one of the stores I, I help manage. And a lot of the stores, they, that's literally what they're using it for is just UGC. So it's just user generated content on the product pages and it's, it's customers doing reviews and so obviously it's a little bit more curated, but I think that's what everyone goes to right away in the reviews.

Like I know reviews.io and stamped, and I'm pretty sure Judge me does this too. They support, like you can upload. Images and videos, and that's always what I go to, like in Amazon, I always look at the video reviews anyway. I don't read through everything. But yeah, so I mean, that might be, that might be like video of, well, what do you think actually like this, looking at this list like that, if you fast forwarded three years from now, what, what is gonna break into the category?

What, and what's gonna shuffle in this list? And so for those listening, it's emails at the top, then reviews, customer support, buy now, pay later, restock alerts, influencer affiliate loyalty, subscription returns, and then analytics tools. What, what changes in three years from now?

Jeremy Horowitz': Yeah. Okay. So the, the, I think the thing that's already changed, which blew me away the most is the analytics data piece. We didn't even, I don't think we even included it in the first year of the report in 2023. This, in the 2025 version, it's 30% market adoption. It's a little bit of a hodgepodge category still.

'cause you know, we have things like. Clarity and Hotjar and lucky Orange, like screen recording tools along with like attribution and service side tracking tools like Triple Whale and Elvar. So, you know, they're not clean necessarily competitors, but I think, you know, if you, if we look back to the last three years, that category is defined by, I lost the, all the data that made Facebook a magic money machine and how do I get as much visibility back into that data as possible.

And so, you know, if we look back into the 2023 report, that that category was probably like dominated by Hotjar, Google Optimize. Yeah, I honestly don't even remember any of the other players back then 'cause it was such an important category. And now I think you're seeing so many brands that, because they're very dependent on meta.

They're using all of these other things to fill that gap of how can I either plug more data back into meta just so that it has the data it used to have to run? Or how do I get more data so that I'm more, you know, aware I have more information, I can make those decisions that Meta used to make. I think that will only continue.

I think the other piece, which would be very interesting to see how that evolves is whether another major ad platform comes in and dominates. You know, there was a little bit of that app Loving Bubble at the end of last year. Everybody's still trying to figure out TikTok, who knows where that will go.

But if there's that, you know, if YouTube ever finally figures out how to make work for DTC brands, which I've been wrong calling it, that's a niche, major ad platform for six years in a row now. I think that will become, those tools will only become even more important as, how do I just have one central place where all my data is that then I can just fan it out into every tool possible.

I think that's why you're seeing a lot of those data capture tools also start to integrate with the email and the SMS providers. 'cause it's basically the same concept of just get data, get the consumer data from my website into every marketing tool as quickly as possible.

Jay Myers: Yeah.

Jeremy Horowitz': So to me that's a big one. I think the reviews piece is a really big one.

I, I think even from this conversation, we may even like rebrand it to social proof

Jay Myers: Hmm.

Jeremy Horowitz': because I bet, like, one of the things I have seen as a, my same thing as you in my own shopping behavior and just on sites in general is the video. I don't really, I don't know if video reviews is the proper term for it, but embedded videos on the site that are either influencers or customers talking about the product.

I think the one big thing that I've started looking into a little bit that's shocking that it's been missing in this space is q and a embedded on Shopify.

Jay Myers: interesting.

Jeremy Horowitz': I think with the core Amazon experience, right? It's reviews q and a how many, you know, I think this is the other last social proof of like 500 people bought this product in the last month.

Jay Myers: Yeah.

Jeremy Horowitz': And so I think like we'll start to just see whether there's one app, multiple apps that kind of fill that void of what are all of the other proof points that, you know, people like this thing, it's the equivalent of the Amazon badge or the prime offer. So I think that would be big shift. I think this is probably a counterintuitive hot take.

I actually think customer support's not going anywhere. I actually think that it's, it is a two, two horse race, very, very tight between Zendesk and Gorg. Zendesk has, has been always ahead, gorg is always growing faster and just about to catch up and, and beat it the past three years. So it'd be interesting to see if Gorg can take kind of the Klaviyo, MailChimp where, you know, they were able to push out the legacy sas become that, you know.

Everybody loves tool or it will just be the back and forth, but I think they've already disrupted themselves. Like that's just gonna become ai

Jay Myers: Mm-hmm.

Jeremy Horowitz': I don't know that there's necessarily gonna be a new player that comes in and, and really like completely overtakes that market. And then I think loyalty and subscription are gonna merge, and I'm not a hundred percent sure returns will continue to be its own category.

I think that's kinda my last major hot take. I think, I think with the domination of email and SMS and how we'll call like middle adoption or not high adoption that subscription and loyalty have, and considering they're trying to really do the same thing in two different mechanics. I think we're just gonna see a convergence of what's a tool or a suite that just gets people back to my website and buy.

And whether that's through incentivizing, over a, you know, RFM model or like the sc you know, the how do people actually buy and scatter model or the habitual come back on a routine basis. To me, I think that's the last category that's gonna see like a major overhaul. 'cause it seems like it's slowed down versus where it was five years ago.

And just knowing all the players in that space, all the money that's been raised, I think we're gonna see a reinvention of that model of just like, you know, I looked at through so many brands accounts and it's like 80% of their customers buy one time and then never come back and buy again. And so like what's a, you know, outside of just email and SMS, which I think everybody knows, like what sits either on top or around that, that gets, you know, that solves that one and done problem and gets repurchase rates up.

Jay Myers: Yeah. I'm gonna jump to this 'cause I wanted to ask one more question, but since you're on that topic, let's, let's actually jump to this. 'cause you, one of the things is you invest in, in e-commerce businesses too. And I, I wanted to ask, I I get asked this all the time. I know brands I've invested in, I own apps.

I've invested in apps. I've never invested in an e-commerce company. But I do get a lot of e-commerce companies asking me, Hey, Jay, who's a we're looking to take the next step. Who's a, who's a good investor, and what do they look for? I definitely have some thoughts. I know repeat rate is probably something you look at and you just, you touched on that a little bit.

So I thought I'd go here. Brands listening right now, and I know not everyone's goal is to to sell or get acquired or to even get any investment at all, but a lot of times it's, it's becoming more and more the path of e-commerce is you, you start T two C, you build a bit of a good brand, then you break into retail and that, that requires money.

That requires, you're starting to need to order huge amounts to get on shelves and cost money to get on shelves. And then that's usually where people look to, to raise. And what should brands be thinking about to prepare for investment to set themself up for success if you're looking at them as a potential brand to invest in?

Jeremy Horowitz': Awesome. Okay. It's a big one. 80. All right. So great.

Jay Myers: you started on it, so I

Jeremy Horowitz': Yeah. Yeah. Okay. So break ba a great brand to invest in. I'll do the basics and then I'll do probably what are more interesting answers. So the basics, really strong unit economics you know. Depending on it is a wide variety of caddy. I would say like lowest gross margin business is probably food and bev around 40% highest gross margin business is, you know, usually skincare and makeup, something like that, that's closer to 80, 90% gross margins.

You know, then what's your cac, what's your contribution margin? And then I think depending on where you are in your growth curve, are you profitable or not? High level benchmarks to think about. You usually want your, I analyze about 50 public brands a year as well, in addition to the investments we make.

The high level averages are about a 50% gross margin, a 30% contribution margin, which is your gross margin, minus sales and marketing costs, and then a 10 to 15% net income margin. You can also, you also refer to this as ebitda, but just, you know, take your sales minus your product costs, minus your marketing and sales costs, then minus basically everything else it takes to run your business.

That's your net income or your EBITDA costs. So really strong p and l, really strong balance sheet with good growth, right? If you are looking to, well, I guess if you are looking to exit your business, it's not as important. We do wanna see growth. If you were looking for a growth round, you need to be at like, you know, either very, very consistently, 30 to 30, 30 to 50% year over year, or 50%.

Plus, if you know, you're making the big bet that we gotta invest in your business, 'cause this thing is going to the moon. Second component is just really strong team, regardless of whether you're looking to invest or sell. I think that this gets overlooked a lot, and especially by, you know, very, very hungry founders who can learn everything and scale a business really quickly on a very lean team.

Jay Myers: Mm-hmm.

Jeremy Horowitz': problem is, is that then you become, we call it key, key man risk, right? Like, if you get hit, you, if you wanna go take a vacation, if you get hit by a bus, that then the whole business kind of folds. And so really clear, like really clear standard operating procedures. Who's the second in line, you know?

Most of the time e-commerce businesses come down to, do you have someone in marketing? Do you have someone in operations, and do you have someone in finance? I don't mean to, you know, deride any other role in the business, but like at the end of the day, those, if you have those three quarter things humming, everything else can be figured out. And so, you know, in exit or an investment, maybe that's, you know, some of the reason you need an investment. Do you have really, really just absolute killers in those three key roles that can get people into the system, get inventory into the system, and then make sure that you do have the cash to fund that whole process.

And then I'd say like the third basic is some sort of differentiation in the market. You know, IP is always an awesome thing that we look for and is like on our checklist of, in our due diligence. But let's be honest, 90% of e-commerce brands today are all buying stuff from somewhere else, could buy the same thing or something similar enough that it's honestly a, a pretty not that hard to enter the competition.

Jay Myers: Yeah.

Jeremy Horowitz': What about your business makes you special and you're not just the 50th clean beauty brand or the 900th yoga pants business, or you know, very much the lookalike to everybody else because that needs to grow and build. I like to say that especially physical product, business and e-commerce businesses need an asymmetric synergy.

Something that's actually incredibly different, and this is why I think aggregators and portfolio of brands typically actually do not work, is you need something that's actually incredibly, inherently custom to your business and unique about your business. That's what makes it stand out because 90% of this game is actually really what I call CAC hacks.

How do you actually invert your marketing and sales cost structures to sell more so that you, you know, your gross margins, which at a certain point will become fixed, can grow over time. I mean, I know that's a lot, a very tense

Jay Myers: Yeah. No.

Jeremy Horowitz': Now for the interesting components. Something really stands out and I would say like, are the mouthwatering investments.

And, and I think for anyone who's like, all right, I'm not really to sell my business, I don't wanna listen anymore. The one thing I always want to hammer and why I share my content is you are the biggest investor and owner of your business. You should be thinking about how you leverage the value of the business the most, regardless of, you know, hold it for 60 years, sell it tomorrow.

It shouldn't really matter. Like you should be thinking about, okay, these are the same tactics that will make my business be worth more and more valuable to me as well. So the really mouthwatering stuff, if you can take any of the averages in the unit economics that I talked about and really blow something out of the water.

So, you know, we looked at a couple of brands the past year that had 25 to 30% net income margins.

Jay Myers: Hmm.

Jeremy Horowitz': we looked at some brands that had 80 or 95% gross margins. We looked at some that were spending little to nothing on marketing because essentially when someone like us comes in. We, so we raise money from our investors, which then we go deploy in the companies.

I always have to write a deal memo, which is how a lot of my content or actually originally started of what's called EBITDA expansion. And all that means in English for a normal person is how is this thing gonna make more profit?

Jay Myers: Mm-hmm.

Jeremy Horowitz': And so if you have one of those interesting pieces where your unit economics is what I would just say outside of an average, then that gives us room and a playground.

And same thing on the SaaS side of the business, SaaS business as well. That gives us room in a playground to go either, you know, Hey, Mar marketing is insanely low. Let's go put in some paid media experts, blah marketing. Yes, the percentages might come down, but if we can get the dollar amounts up, that solves our need, right?

Because at the end of the day, it's all about the amount of dollars that you have moving through the system. So that's another, that's a really interesting one. You know, something that makes it truly unique. I always like to say that the. I don't really believe in moats anymore. I know that was a very popular term 10 years ago.

To me it's what are you doing that someone cannot or will not do? I think a lot of brands, I think a lot of people and investors specifically obsess over the, you know, we have intellectual property or we have this crazy way of doing something. I think really what are the most interesting businesses to me now are just like, one, we're just willing to grind and just be in the mud and do something that candidly other people just aren't willing to do.

And I think that like, you know, maybe, and this is just a little bit of my take on Western business recently, but like, I think that's a little bit lost of like, you know, we're just literally willing to get in the mud and shovel it. The second piece is, is like can have we figured out something that is truly unique that someone can't just clone, copy or rip off tomorrow?

It's rare. I've sometimes seen it, but those are also very compelling. And I'd say the third thing of like what makes a really compelling and really interesting and something that you should think about. Is a very, especially in a consumer brand, something that is high recurring, think it's incredibly hard to actually do that.

I've looked through so many accounts and just so everybody knows, 'cause I feel like this is a little bit of like the locker room situation of what does everyone else's look like. Most brands repurchase rates, if they're in that, you know, six to eight figures and growing is usually around 10 to 15% and what repurchase rate is, 'cause it's a little bit different than when Shopify shows you in the dashboard is when I acquire a customer, what percentage out of the a hundred customers that I acquire actually come back to buy a second time?

Shopify most of the time shows you actually like what is the percentage of revenue that comes from returning customers? Which is helpful to know, but is not the same thing. Why that's super important is because at the end of the day. I don't wanna continue to spend money to acquire customers. Like there, there has to be a day and a timeframe where the continued investment just does not make sense.

And we can get into like the deep economic theory of why that is true. And so essentially what like we all want to see is can we turn down or eventually turn off the marketing lever and there's enough customers at enough profit, which is why people, investors love SAS businesses. 'cause you have that built in that people can come back and continue to buy.

I think we all got a little too obsessed with the subscription business mechanics of that five years ago that like everybody's like, you have to have a subscription business because that's the only way customers come back. And that's, you know, the best way to increase your valuation. What I've actually seen a lot of the brands have the most success is if the business model naturally makes sense, they will invest in a subscription program or they figured out a different mechanic to their business.

Whether it's more frequent product drops, whether it's a really well thought out loyalty program, whether it's, you know, 1500 other things that you could possibly do. Do you just have that built in to, to wrap up where we started, do you have that built in where, you know, you can just continually print profits and you can eventually increase your overall net profit by reducing your, essentially your cost to get someone to buy?

Jay Myers: Yeah, I love, I love it. I So is there is, first of all, is there a number you look that you think is a healthy repeat order rate?

Jeremy Horowitz': That's a great question. So this is one of the biggest and probably most annoying if it depends, right? Because if your brand is growing vertical and you're growing a hundred percent year over year,

Jay Myers: you're gonna have naturally less,

Jeremy Horowitz': you should, I mean, you know, it's great if you actually can't have a higher repurchase rate, but you actually probably will naturally 'cause you're acquiring a ton of customers to grow that quickly, you probably will have a lower repurchase rate.

The really annoying part about this answer is also, I don't wanna see it be too high, right? If you have like an 80 or a 90%

Jay Myers: You're not acquiring enough new.

Jeremy Horowitz': You're probably not, or, or maybe that's a good op. You know, maybe that's one of those things I mentioned before, like it's so outta the average that it's a good opportunity for us to come in, throw on the gas, on acquisition, and then grow more.

But usually when a brand's that high, you're kind of in the coasting to sun setting phase of a business. And so target range, I would say is just generally higher than 10%. Lower than 40, 50%. It will greatly fluctuate though, based on the strategy of your business, based on this lifecycle and stage of your business.

You know, if it gets below 10, 15%, I'm very concerned. And if it gets above 50%, I'm very concerned in one direction or the other. But there's, I wouldn't say like, you know, it's, it's not like, you know, you should shoot for two or 3% conversion rate. It's a huge fluctuation based on also what your business is, right?

Like if you sell a car or mattresses or you know. One time massive high ticket items that you, someone shouldn't be, you know, re you know, if you sell the product well, they shouldn't be repurchasing frequently. You should also take that into consideration versus, you know, if you're a consumable where someone could be coming back every month, that's a huge important thing to keep in mind as

Jay Myers: Yeah. Do you care if, if a stored. Pick any whatever, if, if they're doing 40% repurchases, let's just say they have 40% of their customers are subscribers, or do you, if let's say they have a 40% repurchase rate, they're not subscribers, they're not even using a subscription app, but they have a 40% repurchase rate, do you look at that differently or do you say 40% repurchase is 40% repurchase, like as long as the numbers show, and if that's been maybe consistent for the last six months, it's not a spike. Does that matter? Or

Jeremy Horowitz': Yeah, I would say it does, and we look at it, we do look at it differently. Once you're introduce, if you're truly at 40% subscriptions, which is astonishing and like good on you, that's a very,

Jay Myers: would be high, yes.

Jeremy Horowitz': Yeah, that's a, that's a great subscription. You're almost probably a subscription business at that point, you know?

Then we're gonna go and tear up all of your subscription metrics. What's your LTV? How long do people stay subscribed? What's your churn rate? How often people pause, and then almost our entire analysis and valuation of your business becomes around that. Because I think, I do think that there is a component of, you have a little bit more of locked in revenue.

You know, it's very rare that someone sends up for like an annual subscription in D two C, for example. But if you can get people this consistently, say, six to 12 months.

Jay Myers: Mm-hmm.

Jeremy Horowitz': Now, what I will say on the other side, where I probably have a little bit of contrarian view here, is I look at the same business and go, well, can we just sell them six months worth of stuff in a bundle up front for the same value?

Because the one, the one challenge that I think the, our entire ecosystem overt, rotated the last five years. Is in that LTV to CAC con equation that everybody loves. You need to have the cash flow to get from your CAC costs to when you actually get paid back. Like right, if you're waiting six months to get paid back on what you originally put in on a physical product, you know, it's just, it's tougher.

And so I like to think about that a little bit differently because the, the one thing to your question that I think is super important to look at, because you can't look at anything in a vacuum, is what's their cap, right? For that 40% loyalty or, or you know, 40% repurchase versus 40%

Jay Myers: Mm.

Jeremy Horowitz': Is it the same?

Because if it's the same, then it's a way different calculation and good on the subscription brand 'cause it's honestly impressive and you're, you're probably getting repaid much faster. But if it's not and you have a way higher CAC on the subscription brand, then we really then need to look at what your cash flow situation and how long can we eat the cash flow to get to that place because.

You know, you're almost starting to get into retail payment timelines where, you know, we're putting cash out to buy inventory nine months before we're actually getting paid back again. And I think too few brand owners obsess and optimize around like the, the cash flow part is actually what we spend most of our like, and most honestly, most institutional investors spend their time on.

Because if you can solve the cashflow problem, everything else solves itself.

Jay Myers: you, and you're almost always gonna see higher CAC for a subscription. And I mean, we do with like customers using our subscription tool for it's just, it, it takes more to get someone to click subscribe and to buy it one time. It's a commitment. So there's, there's inherently a higher customer acquisition cost versus buying something one time.

But then if you can figure out how to get them to reorder that your CAC is, I would be willing to bet almost to always lower on a store that is selling something one time, but they have a 40% reorder rate versus a store that doesn't have a reorder rate necessarily, but it's a 40% subscription, like it's gonna be higher CAC almost every time on that.

Jeremy Horowitz': Well, 'cause the brands also convince themselves that they can spend the higher CAC because they have the L TV on the backend.

Jay Myers: exactly. So yeah, there's that too. So what, what what are some mistakes? So for listeners saying like, like what are mistakes and pitfalls you've seen brands get into where they've done stuff wrong and, and you've maybe looked at their, their business or their operations or their, their books and finances or something.

And like, something that comes to mind for me is if I was investing in an e-commerce company and if like a hundred percent of their traffic came from Facebook and Instagram ads or something like that, that would be like, I feel like a red flag for me. 'Cause sometimes ads can change how you can acquire if all of a sudden tomorrow.

Is spending another a hundred billion on ads and you can't acquire customers for the same amount anymore. You know, so like what are some red flags you look at to that brands can think about, to avoid, to not be in that situation?

Jeremy Horowitz': Yeah, so I think that channel diversity is a great one and one that we look at a lot. I think it's not only from the marketing perspective, but also from the sales channel perspective.

Jay Myers: Hmm.

Jeremy Horowitz': 90% of our revenue comes from a meta, you know, like a meta. Shopify funnel and it's like, you know, if one thing breaks that funnel, our business is dead.

Or 90% of our, you know, 80% of our business is Amazon and they could shut the lights off tomorrow. We see both of those are very common. I put that in bucket one. Bucket two on the financial side, two different pieces, kind of the same thing, either using way too many MCA merchant cash advances. This is like Shopify capital loan,

Jay Myers: Hmm.

Jeremy Horowitz': where they don't, like a brand doesn't really understand that they're not getting a debt, they're not getting debt that they can pay repay over time.

They're getting remitted, which absolutely just sucks all the cash outta their business. And you know, that actually gives a little bit of like a good opportunity for us to come in and step in and help them like refactor that because you know, we can give them the proper debt vehicles that, you know, you're not paying what essentially annualizes out to like 40 or 80% interest rates on these short-term payback loans.

But really like. Not having good cash flow in the business, which I know is the most boring and uninteresting topic. And when I worked with eCom brands originally, I hated

Jay Myers: but it's the most important.

Jeremy Horowitz': it is truly the most important. And really understanding payment terms with their suppliers. I will say, I cannot tell you how many people have come to us asking for money.

And I'm like, what are your payment terms with your suppliers? And everybody goes, what do you mean? And I go, we can take half your business today, or you can go renegotiate and ask for 15, 30, 60, 90 days of your supplier, grow twice as fast and own the rest of your business. And you know, and I always love negotiating against myself for some reason.

That's the first thing I'm gonna do when I buy your business also.

Jay Myers: Well, and the fact that if they didn't even consider that, then maybe that's a red flag too, right? Like

Jeremy Horowitz': Yeah, well, it's also, it's one of those opportunities for us where we can step in and be of value as well to help them through those negotiations and figure it out. 'cause the, the earlier you are, those are hard negotiations. Like, you know, if you're not one of your supplier's largest businesses, they aren't gonna be as willing to play ball.

But sometimes in some cases, and this is goes back to those that union economics were so important. Sometimes we'll even offer to pay the, the supplier more to get longer terms. You know, we're gonna pay you two or 3% of our gross margin back to get 15, 60, 90 days. And that's actually what grows your business the fastest.

And that's the most key important part on the financial side. And I think MCA Cas, the reason imcas are kind of the symptom of, I don't really have great cash flow, so I get into these death cycles by using MCA, it strips all the cash outta my business, and I need to figure out how to do that all over again and again and again.

And it's just this brutal merry-go-round.

Jay Myers: Do you think it's too easy for merchants to access that?

Jeremy Horowitz': Yes, I absolutely, like, I, I had this whole, I had this whole rant. I don't know how anti Shopify we wanna get. I had this whole rant that I think actually Shopify Capital will be like the embarrassing black mark product on Shopify's legacy. They have over $1,000,000,001.2 billion in outstanding loans to existing merchants around this.

And I'll give them credit. It has gotten better from what it was when they launched it, I don't know, six, seven years ago. But I cannot tell you how many brands I've seen that just like, get themselves into a death spiral. 'cause you know, I'm remitting out, whatever it is, 17% of my daily sales, I've gotta pay for my team and I gotta make this huge inventory load in.

And I can't, you know, I'm just stuck in this death cycle. I'm gonna start discounting and aggressively running meta ads so I can get the cash to pay back the loan. And I got no profits to do anything else with,

Jay Myers: what if they made a app that was a investment analyzer app that if you as a brand were interested in investment, you could install this app and it analyzed everything that an investor cares about. So I install it at, in ma it, it analyzes, it basically gives me like an investor dashboard that now you agree to it 'cause you're a store, you're, you're installing it.

But now there's. 50 investors investment, like, you know, you being one of them and 50 others who the, the store. I agree to install this app. I agree to have it push and then maybe it keeps some, you know, PII private information separate, but like it shows the, the core metrics. And then I could get a notification in my Shopify or in the app somewhere saying that, you know, because ventures is has expressed interest, almost like a matchmaker thing.

And you might only care about certain metrics and another investor might care about something. Some people invest in beauty, some people invest in food, some people invest in pet supplies, whatever. But it basically, it was like, like maybe something like that would be, do you get the vision what I'm seeing or to explain that?

Well, but like, I feel like there,

Jeremy Horowitz': From 2019, I actually have a PRD for exactly this. Like literally I had the exact same thought of like, you know, could, could you just tap in, share some basic information? You know, investors put in their criteria, you sync your Shopify store and then you get the

Jay Myers: And every investor is under an NDA. So you agree that like by installing SAP, you agree to share information with this group of investors for the purpose of expressing interest in investment or something like

Jeremy Horowitz': exactly. And then you can, yeah. I even looked into the, like, in the us the SEC laws around like, you know, because you're technically at the, you're starting to move into being a broker at that point. So you can facilitate intros, that's fine. You just can't run the deal. Because you need to have certain licenses and certifications for that.

The, the largest challenge is actually most of the, most of what we actually look at comes outta QuickBook QuickBooks on Shopify because so much of the p and l doesn't actually live in Shopify.

Jay Myers: information. Ah, good point.

Jeremy Horowitz': It's impo, you know, it would be impossible, like I could look at your top line, you know, as a brand wants to send me their top line metrics and what they're selling in their category.

It would be interesting to like, start a conversation. But, you know, the first thing I'm gonna ask, the first thing we always do ask when we don't get the information is what's your earnings for the past 12 months? And that Shopify hasn't eaten enough of the entire stack yet to have that data in the platform.

And then the other process, the other part of that is also I think Shopify Capital killed that concept because they did exactly the same thing except

Jay Myers: be competing against

Jeremy Horowitz': all the other data. We'll just basically float you a crazy, you know, a. That's unfair way to phrase it. We're gonna float you a high fee loan. That's very easy for you.

And I honestly think merch because I, I, it was really like, at the time to shop, my capital started taking off. I was like, okay, but this, this idea is probably not gonna pan out for me. It just made it too easy for merchants to get the capital. I think like for all, you know, for us, you're gonna go through a, a fastest, like a six week cycle.

We're gonna do a bunch of due diligence, we're gonna ask you a bunch of questions, we're gonna look through your business, and then you're gonna get the capital. You know, Shopify sends you an email, you click a button, they already have all your information, and then they're just, the money's in your account later that day, the next day, or like within a week.

So they think it's just like, I mean, I hope brands learn that that's not the right path for them, but it's, yeah, I think Shopify just made it way too easy to get the money and merchant's like, well, it's a loan. You know, I don't, nobody controls my business. I don't, you know, it's, I don't have to sign covenants and all the other things that make, you know, other types of debts.

Scary. Yes. I love the idea. I would love to see it and make my life on our side as well. Like, you know, I could just, I think AI is perfect for this. I have a couple criteria, this is what's important to us. Go find me all the potential, you know, potential deals we could look at. Then I have an inbox. If we can go meet people, I'm sure the brand

Jay Myers: bare minimum, it could get you the first step. It could show that like, there's potential here, but then you, you still need to do your deeper analysis and their financial software. But it could, it could maybe indicate, okay, here's a segment that could be interesting and you express interest and then you do the, a little bit more diligence with in QuickBooks or NetSuite, whatever they're using.

So, I dunno, it's, it's definitely interesting.

Jeremy Horowitz': so the, the top Shopify app for it comes 'cause we, we pay data providers to get this data.

Jay Myers: Hmm.

Jeremy Horowitz': We, the, I always try to like, my whole, the whole content of my brand is like, we do so much research for everything we do that I try to put the interesting and non stuff I didn't sign NDAs for in the public.

Like we pay all these data providers to see who is growing very quickly and who is expanding into new channels and who does have, you know, the signals that we would find to be successful in it so that we can help, that. It helps us determine our strategy and thesis and who we talk to. And you know, like that it's a huge business that like a lot of people pay for is these like data providers to understand where things are moving.

It's where a lot of like the big VC and firms use as well for their, for their checks as well. Yeah, it's a big business. You just gotta figure out the me mechanism to get enough brands to opt into it. And I, I also, I think the difference now is, you know, there are a hundred thousand stores that are around a million, which I would say is like that starting point for these conversations.

Whereas yeah, when I looked at it five years ago, it was probably like five to probably not that, probably two to 5,000. So, yeah, I mean, you got a side hustle.

Jay Myers: Hey man. Always looking for, always looking for something. No Things are good at bold and definitely not, but, but I think it would be valuable for, I don't know, maybe there's something there. There's so, there's so many. There's companies that are, are investment firms that are, are, are doing this little bit of a, like, I, I don't wanna call it a roll up strategy, but like aggregate, like, you know, acquiring stores that look the same and having an efficiency of costs and their marketing and they're all their other teams and applying it to it.

And it just, maybe, maybe it's done already, like maybe this is exists but just not on mass, but more one-to-one with some of these. So I dunno,

Jeremy Horowitz': Yeah. Well the, the good part of your insight is that everybody, we all keep this stuff close to our own chest, like what we do with like our system. I think what you're referring to, which I think did work pretty well for them when they launched it was open store, had a basically like a free valuation kit and you just like synced some things in, pumped a bunch of data and they were, I mean, back then I think they were sending out offers like within a day.

But I think there's something more interesting of like the marketplace of, Hey, I can. Express interest in selling my business here. The, at a high level, when we start the process with brands or anybody, it is called a sim basically, it's just a very high level piece of information. Here's the summary of our business.

It's usually a slide deck or a couple pages of notes. You know, it's all the key information that we would need to decide if we're interested or not. And I think you absolutely could, if you could get the brands to buy, and you could absolutely recreate that, where you could anonymize it, you know, eight figure pep brand.

Like all these the advisors and the brokers love to come up with like Project Swayze or, you know, project Hardwood and it's like some home goods business that sells like tables or something. And so you definitely could like recreate that. Yeah, the problem is, is you're just gonna disintermediate this massive, very, very you make a lot of money in the advisory and the broker business.

So you, yeah, you definitely have, you definitely disrupt some people if you wanna pursue that

Jay Myers: To, yeah. Well, we, I, I, man, I, I, I think I got maybe a quarter of the way through my list of questions, but I, I, I, I knew it would go this way 'cause I knew we'd get onto something and I Your, your insights would would, would take up more time than I thought, which is amazing. But I don't want to go too far over.

I do want to go end, end on there's so much happening right now in with AI and e-commerce. I think just yesterday the internet was kind of going crazy about chat GPTs, new ability, well, there's some ability to add checkout prompts potentially with Shopify. And we're seeing will agent. Commerce become a thing just so much happening right now.

Like what are some, you know, I used to ask people this a couple years ago on podcasts and it was oh, commerce is gonna be all in the metaverse, you know, that was a few years ago ago. And it just, it changes every couple years. I don't, I think now that it's a little bit safer making some of the bets on AI than maybe the metaverse was.

And when was that? 22, when that was kind of the 21. And everyone thought E-commerce was going all meta Well, and then it was all NFTs and everything was gonna be all digital. And then that kind of changed. So anyways. Where do you see commerce going in the next three to five years? What are, what are some big things you think are gonna change?

Jeremy Horowitz': Yeah. To keep this point straight into the point, 'cause I know I talk a lot I do think AI is gonna be massively helpful at just surfacing information that people don't wanna search for anymore. And that could be on site or offsite. I think just feeding in. I wanna type what the information I want.

I don't wanna scroll up and down a page. I don't wanna click through a bunch of links. Especially with cocoa ai, that's what we find a lot of the end consumers use. For our brands is they're asking questions that candidly live in FAQs, in on product pages, like deep in a website and they just want, I wanna quickly surface it really, really convenient, click through and go and buy.

I think that's gonna like that as a thread and a trend will invade just every part of the stack and every part of the experience.

Jay Myers: Okay. I completely forgot to get into Cocoa ai. Tell me about cocoa AI really quick. 'cause I, that was the main, one of the things, man. See, we're gonna have to do a part B of this episode. Co ai, your latest investment. The one, the reason we didn't do this podcast a month ago. You were finishing that.

What is it and what does it do and why, why were you so interested in it?

Jeremy Horowitz': Yeah. It's basically Klaviyo for WhatsApp. So automations, campaigns, WhatsApp marketing. And then what really drew me to that brand, specifically why we acquired it, is there's an AI sales agent on the backend. So we trained AI based on stores data to, you know, somebody asks a question and somebody responds to a campaign or an automation.

We can then respond, you know, the AI can take over and respond for a brand. It doesn't need to go to a support ticket, it doesn't need to go to a human. And help drive that sale in real time.

Jay Myers: Amazing. So can it so it's basically a, it is a shopping assistant,

Jeremy Horowitz': Exactly. On, on top of WhatsApp. So you have a shopping assistant that can also send marketing messages out

Jay Myers: but it's initiated through a marketing message. So it's not, while they're shopping, it's the initiation is, is Jeremy, there's the sale, or there's something, and then you ask a question, find something else. But it, it starts with an initial engagement, like a marketing campaign of some sort. Whether that is it everything like a abandoned cart winbacks, like the whole spectrum.

But I. But interesting, but specific. How do you know, does someone I, I use WhatsApp, but I have to admittedly say I'm not a huge WhatsApp user. I do use it. But can you message anyone on WhatsApp? Like as long as they have the app installed? 'cause the accounts.

Jeremy Horowitz': they have to give their phone number. So it's the way, the easiest way to describe it. Is it the same way that Americans, north Americans use SMS Europeans and Australians use WhatsApp?

Jay Myers: gotcha. So it's, it's just phone number based. 'cause like a lot of times I'll scan someone's QR code or we share I don't add them by phone number specifically, but there is always a phone number associated to WhatsApp account.

Jeremy Horowitz': Yes. Correct. Yeah. You have to use a phone number when you

Jay Myers: gotcha. Okay. Okay. So as long as, so if I, so could I in use, use cocoa AI where I've got people to opt into SMS and I have 10,000 people subscribed by phone number.

Can I now send it to a WhatsApp push notification instead, or do I have to explicitly get them to opt into a WhatsApp message?

Jeremy Horowitz': Depending where you are in the world, we recommend that you get everybody to opt in. You know, for GD para compliance and all those other things, if you have double opt-in through an active SMS, you can import phone numbers into a WhatsApp list.

Jay Myers: Gotcha. Okay. And I saw you post the other day on LinkedIn, like you're seeing incredible results with this. Like, what was that? You just did some campaign test in your conversion? I don't have it in front of me, but it, it was just a couple days ago you posted this.

Jeremy Horowitz': So brands on our platform, typically, especially from abandoned card automation, see about 20 to 40 XROI. It is all the same similar patterns as SMS was five years ago. Very early channel, 80 to 90% open rates. Very high reactive channel, you know, summary information. I get something, I see it, I click through.

And you also get the push notification from WhatsApp on their home screen. So it's very easy to activate.

Jay Myers: And do you recommend people use an SMS tool and a WhatsApp tool? Because some people use SMS and some people use WhatsApp, or are you seeing this very regional, like in certain countries it's just all WhatsApp and other countries it's all SMS, for example.

Jeremy Horowitz': Mostly regional. So if you're in North America, definitely recommend you stick on SMS if you're in Europe, apac, Australia or the Middle East, definitely WhatsApp. And then we are finding some of our brands actually coordinated where they use both.

Jay Myers: Okay, interesting. Awesome. I'm gonna put some links to the show. Where can people go to learn more about that?

Jeremy Horowitz': So my coco.ai, or if you follow me on, if you follow me on LinkedIn, Jeremy, H-O-R-O-W-I-T-Z. All the links are in my profile.

Jay Myers: I will make sure to add all of that and I definitely highly encourage everyone listening to follow. Jeremy, you're one of my favorite people I follow on LinkedIn, so, and you respond to everyone who makes a comment on your post, which,

Jeremy Horowitz': I do my best.

Jay Myers: yeah. That's awesome. Jeremy, thank you so much. I know we went over time.

This has been extremely insightful. I really appreciate you sharing your time and your insights and would love to have you on again sometime in the future to catch up. Thank you so

Jeremy Horowitz': Yeah, likewise. Appreciate it, Jay.