Who said miracles don’t happen in ecommerce? Inside Carbon6’s stunning $210M exit to SPS Commerce

Disclaimer: Views and analysis expressed here are the author's own and based on public sources. The article is intended for informational purposes only. This is not financial advice. Please consult a professional for investment decisions.

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Last week, Carbon6, a Canadian / US aggregator of tools for Amazon sellers, reached an agreement to be acquired for $210M. The acquirer is SPS Commerce, a US Electronic Data Interchange (EDI) provider to the retail industry. In plain English, SPS enables ecommerce / retail industry participants to share key documents like purchase orders, invoices, and shipping notifications. 

SPS is publicly listed with a $7B market cap. It is attracted to Carbon6 primarily for the Amazon profit recovery portfolio. In August 2024, SPS acquired a similar business called SupplyPike, for $206M.       

If you are not an ecommerce enthusiast, you may a) have glossed over the news and b) not care.  

However, if you are interested in rollups, you should care. Here are 3 reasons why. 

Number one, Carbon6 is an independent software / services rollup that grew from 0 to $30M+ revenue in just 3 years, off the back of 20-odd acquisitions. In this article, we analyse its M&A strategy; portfolio; and key metrics.

Number two, Carbon6 made mistakes along the way. We understand that most of its acquisitions have turned out to be mediocre/bad. And, millions have been sunk into an expensive but probably unnecessary central team. Having sold the dream of an “all-in-one” software platform, instead it seems to have ended up as a monoline Amazon profit recoverer. 

Luckily for Carbon6, Amazon profit recovery proved to be a gold mine that made them interesting to a motivated strategic buyer: SPS. Based on the acquisition announcement, SPS is only really interested in the profit recovery businesses. The people who had expected Carbon6 to become a unicorn must be disappointed. The more even keeled observers will side with my assessment that exiting at a 100%+ premium to the 2022 fundraise is a solid outcome.     

Number three, the acquisition comes at a turning point for the Amazon profit recovery industry. Recent changes to inventory reimbursement policy threaten business model viability. 

Once again: well done, Carbon6. 

Full disclosure: until the summer of 2023, I was the CFO and Head of M&A of Threecolts, another ecommerce SaaS aggregator and Carbon6’s key peer.       

Random aggregation of ecommerce SaaS = BAD idea

There are millions of merchants that trade on (or with) Amazon, Walmart and Shopify. Thousands of software solutions have sprung up to service these merchants. Logically, there are dozens of aggregators that acquire these apps. For a complete list, see this article.  

Carbon6’s original plan was to aggregate apps servicing third-party sellers on Amazon, or 3P. These merchants sell on marketplaces. The merchants that sell to retailers are known as first-party vendors, or 1P. 

For the first couple of years, Carbon6’s closest competitors were Threecolts; JungleScout (backed by Summit Partners); and Helium10 (part of the Providence owned Assembly).     

All 4 companies had set out to build “all-in-one platforms” for 3P sellers, leveraging acquisitions. All 4 largely failed in that mission, albeit for somewhat different reasons.  

I will share one of these reasons that I do believe applies to them all:

The Amazon app ecosystem can be grouped into 6 broad categories:

1. Dropshipping (aka “arbitrage”) analytics 

2. Advertising optimisation

3. Inventory and demand planning, multi-channel listing  

4. Customer support 

5. Competitor intel and repricing

6. Profit recovery

Do you know what they all have in common?

Nothing. 

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