Aussie startup Flippa, an online marketplace for buying and selling digital businesses, has secured $15 million in Series A funding, as the COVID-19 pandemic leads to an uptick in small-scale acquisition activity.
The round was led by OneVentures, and also included investment from existing backer Andrew Walsh, former chief executive of Hitwise, which was acquired by Experian.
New investors included Catch.com.au founders Gabby and Hezi Leibovich; RetailMeNot.com founders Guy King and Bevan Clarke; and Reactive Media founders Tim O’Neill and Tim Fouhy.
Flippa was founded in 2009 by Mark Harbottle and Matt Mickiewicz, who also co-founded 99designs.
The platform uses an algorithm to accurately value businesses and match them with qualified and suitable buyers. It also offers due diligence and acquisition finance tools, as well as a Legal-as-a-Service product.
The idea is that owners of small online businesses, such as Amazon sellers, owners of Shopify stores, bloggers, app developers, and even Software-as-a-Service entrepreneurs, can sell their company quickly and easily, without having to engage with a broker or M&A adviser.
Flippa has been bootstrapped for 12 years, with the founders bringing chief executive Blake Hutchison on board in 2018.
The business now has about 3 million registered users, 300,000 of whom have joined within the past 12 months.
Total transaction value is up 100%, year-on-year, and between 3,500 and 4,000 valuations are typically processed each month, totalling a value of $340 million, on average.
“We’re not talking about unicorns, we’re not doing that fast growth startups that are backed by venture capital,” Hutchison tells SmartCompany.
“We’re talking about true, small business owners who have built something of value.”
“Just the beginning”
The COVID-19 crisis has seen an uptick in M&A activity, as well as more people taking the plunge to launch their own side hustle or small business.
Many of these businesses are built on the digital economy, underpinned by platforms such as Amazon or Spotify. These are the kinds of businesses Flippa is designed to serve, and Hutchison has seen activity shift accordingly.
On the buy-side, about 1,000 new prospective buyers are signing up to the platform each day, he says.
“Savvy investors” are recognising that buying something with good traction and a financial history means they can see what has worked and what hasn’t, therefore starting out on the front foot themselves.
“There’s lots of intent in the marketplace,” he explains.
On the sell side, Flippa is not necessarily seeing more businesses listing, Hutchison says, but the average value of a sale is going up.
Sales on the platform can range from $1,000 all the way up to $25 million, he explains, with more falling on the smaller side.
Over the past 12 to 18 months, however, the number of $100,000-plus deals have more than tripled.
“The pandemic has obviously stimulated online business ownership, but it tends to be that buyers are interested in mature assets,” Hutchison explains.
“We think that the inflection point on the sell side will come in a couple of years’ time when all those businesses … will realise this opportunity,” he adds.
“It’s just the beginning.”