Commercetools Secures $140M Funding at $1.9B Valuation

The Rise of Commercetools in the E-commerce API Landscape

Modern e-commerce is now central to most retail strategies. Consequently, companies developing technologies and platforms to enhance digital competitiveness are experiencing significant growth. Commercetools, a provider of e-commerce APIs designed for large retailers to create bespoke payment, checkout, social commerce, and marketplace solutions, has recently secured $140 million in Series C funding.

Funding Details and Company History

This funding round was spearheaded by Accel, with participation from existing investors Insight Partners and REWE Group. CEO Dirk Hoerig confirmed the investment values Commercetools at $1.9 billion.

Commercetools originated as a spin-off from REWE, a prominent German retailer and current client, and previously raised $145 million in funding led by Insight in October 2019.

The current valuation marks a substantial increase compared to its approximate $300 million valuation in 2019.

The E-commerce Boom and Commercetools' Position

The surge in digital transaction interest, driven by online shopping, is a key factor behind this valuation increase. E-commerce was already demonstrating consistent growth prior to 2020, accounting for over half of all commerce transactions by some estimates.

The COVID-19 pandemic dramatically accelerated this trend, forcing many retailers to transition to online-only sales while consumers readily embraced digital shopping.

While platforms like Shopify cater to smaller retailers, offering alternatives to marketplaces like Amazon, Commercetools focuses on the unique, large-scale requirements and substantial investment capabilities of larger retail enterprises.

Commercetools' Offerings and Impact

The company currently offers around 300 APIs across nine service categories. It also maintains an extensive network of integration partners.

Commercetools facilitates approximately $10 billion in annual sales for its clientele, which includes notable brands such as Audi, AT&T, Danone, Tiffany & Co., and John Lewis.

“Our primary target is the retailer exceeding $100 million in gross merchandise value,” Hoerig stated. However, he also noted that rapid growth is driving demand from smaller companies needing enhanced functionality.

“We are also seeing customers begin at $5 million in GMV and quickly reach $50 million. At that scale, they have specific needs, blurring the lines.” This market expansion explains investor interest, as capturing growing smaller retailers translates to increased scale for Commercetools.

The Concept of "Headless Commerce"

Hoerig is often credited with popularizing the term “headless commerce,” referring to APIs that empower companies to build customized checkout and purchasing experiences. This contrasts with relying on pre-defined templates from technology providers.

As the API economy matures and more non-tech companies adopt technology, this approach has gained widespread appeal. Consequently, Commercetools is no longer the sole player in this field.

Competition in the E-commerce API Space

Alongside Shopify Plus, which targets larger businesses, competitors include Spryker, Swell, Fabric, Chord, and Shogun.

Future Plans and Market Consolidation

Commercetools intends to utilize the funding for organic business expansion and strategic acquisitions. The goal is to integrate new customers and technologies, capitalizing on the ongoing scaling and consolidation within the broader e-commerce sector.

The direction of consolidation and which startups will secure funding for independent growth remain to be seen. Currently, the market’s buoyancy fuels enthusiasm and attracts further investment.

Notably, Commercetools was previously in negotiations to acquire a company, but the target ultimately chose to pursue independent growth with additional funding. Hoerig indicated they are now pursuing another acquisition target.

This illustrates the broader forces driving Commercetools’ success.

“The opportunity to invest in a rapidly expanding, innovative commerce platform was too significant to overlook,” stated Ping Li, partner at Accel, who led the investment. “Commercetools equips e-commerce enterprises with the technology needed to capitalize on revenue within the rapidly evolving global e-commerce market.”