Redbubble

ETSY INC

Seek Ltd

Operator: In the absence of a Silicon Valley-type VC community, we believe there are many interesting technology mid-cap opportunities in Australia of which Redbubble and Adore Beauty are top of the list. If there are any others that you think are high quality then please reach out. 

Redbubble is yet to release cohort data - is there any reason it can’t match Etsy’s cohort performance over time? Redbubble trades at 6.5x GP after marketing expenses (GPAM) and expects FY2022 marketplace revenue to be slightly ahead of 2021. Last quarter, Etsy grew non-mask GMS at a remarkable rate of over 30% and trades at closer to 30x GPAM. The scale and opportunity of the two companies are slightly different but the core problem looks similar: improve brand recall and drive repeat buying. 

Redbubble, SEEK, Etsy, & Scaling a Three-Sided Marketplace

Swedish Match AB

Philip Morris International Inc

British American Tobacco PLC

Fredrik Laurell: I do not understand cigars although there are distribution efficiencies in the US. Lighters goes back to tradition and it is in the name of the company. Swedish Match is a fabulous story going back to the late 1800s to one of Sweden's richest men at the time, Ivar Kreuger, who consolidated the match business in Sweden. Only two Swedish Match factories remain. There is a lot of heritage, there are a lot of traditions and there is a lot of history. It is not a very profitable business compared to everything else in the portfolio, but there is a palace in central Stockholm called the Match Palace, which was built in the 1930s. It is part of the core and the heart of the culture, so I think it is very, very difficult to get rid of. Again, it’s just over 10% of the revenue so that, I think, will be kept forever.

Fredrik Laurell

Former Managing Director at Swedish Match

Swedish Match, Snus, & Smokefree Tobacco Products

Michael Ilczynski: Then to make sure that team is functioning as a team because, in all marketplaces, you all work together. You can’t be off in your silos; we all affect each other. My job is to make sure that the team works as a team.

Michael Ilczynski

Current Chief Executive Officer at Redbubble

From SEEK to Redbubble: Scaling Two & Three-Sided Marketplaces

BROWN & BROWN INC

Operator: They made some significant acquisitions over the time that I was there, with the Beecher Carlsons of the world and the Hays Companies. Things like that would certainly give them a big push in terms of a national ranking and the ability to provide a return on the investment.

Former VP of Business Development at Brown & Brown

Brown & Brown Insurance: Competition & Culture

Diageo

Constellation Brands Inc

Fever Tree

Naked Wines

Pernod Ricard SA

Operator: Without the regulatory protection, it's unclear just how aligned distributors are with end customers in the long-term. If the power of distributors decreases over time, due to regulatory and DTC pressure, this also potentially reduces the moat of scaled suppliers. However, until we see large regulatory changes, it's likely the industry will continue to operate in the same antiquated system as it has over the last 50 years!

Diageo, Fever Tree, Naked Wines & A History of US Alcohol Distribution

Richard Cawsey: Yes, that is throwing buckets of sand with some concrete and cement to go with it, just to see whether you can really seize it up.

Richard Cawsey

Former Chairman at Redbubble and Director at Stockford

Redbubble: A Three-Sided Marketplace

Fred Reno: Right; and they know who their consumers and their customers are.

Fred Reno

Former CEO of The Henry Wine Group

A History of US Wine & Spirits Distribution

Cardlytics

Michael Vincent: I am not sure, because it is that fundamental dichotomy of how much a bank wants advertising and different brands operating in their app. How much real estate do they give Nike over Santander? There will always be that back and forth, but that is an issue that Cardlytics needs to solve to get to that 10X.

Michael Vincent

Former Account Director at Cardlytics

Cardlytics: Santander, Lloyds, & The Bank Side

Adore Beauty

Operator: I think the fact that James and Kate empower their staff and will never not listen to staff that come up with an idea as to how they can improve or better things, which has been great for the business. I can’t say if it’s the same now because I haven’t had any dealings with or met the existing managing director. But certainly, that’s the culture that was always there at Adore. If you’ve got something to say or you’ve got some potential way to improve or better things, come forward and say it.

Former CFO at Adore Beauty

Adore Beauty's History, Management Team, & Growth Opportunities

eBay

Operator: The step-change in Etsy’s scale from COVID has fundamentally changed the business; over the last 12 months, 40m new buyers have been introduced to Etsy and the market value has increased 2x in 1 year and 4x in 2 years. By our rough numbers, at a 20% take rate and 30% FCF margin, the market prices Etsy reaching $30bn GMS in 2026 and $48bn in 2030. At such scale, Etsy would generate $1.8bn and $2.8bn in FCF in 2026 and 2030, respectively.

Etsy has a great management team rolling out many incremental improvements to search, brand marketing, and the overall shopping experience that could potentially drive growth beyond $48bn in 2030. However, in 2026, even if growth is flat and the multiple derates, the underlying FCF generation means Etsy can optimise the capital structure to squeeze out a healthy return with little growth. We will continue to follow Etsy closely and plan to cover eBay soon.

Etsy, Amazon Handmade, eBay, & Limitations to Scale

Amazon

Jay Bergesen: It would be more testing on things to drive awareness, relevancy, and purchase intent across categories. The tried and true, the bread and butter, is performance marketing. Continuing to optimize that and realize efficiencies drives the day-to-day. But also continuing to do experiments to find out where and what levers you have to increase awareness again, increase relevancy, and increase purchase intent across categories to find out what’s working and double down on that.

Jay Bergesen

Former Vice President at Etsy

Etsy, Amazon Handmade, & Potential Limitations to Scale

In Practise: Thank you so much. I'm likely to take you up on that.

Vice President at Breakthru Beverage Group

Q Mixers: US Distribution

Operator: Goosehead, I’ll have to look at that one. I think it's a great industry. I'll give you one last thing: I do think the industry will change. I think the industry has changed dramatically over the last three years. I think you're going to see significant changes. The question is, who's going to be the ones that really are going to be the risk takers? Who are going to say, I think I can change this business by doing this? I keep trying to change what we're doing and I think we're successful in what we're doing but we'll see.

Former EVP Operations & Chief Global Broking Officer at Aon Risk Solutions

Brown & Brown: Mid-Market Broking

Ste. Michelle Wine Estates

Russell Joy: That was actually our formula there. James Hall and Anne Moses were the winemakers. Donald Patz and his wife, Heather, at the time, had other skillsets, including sales, but they didn’t have the business piece of it. That was a heartache for them. You’re right; that’s a great proposition for a winemaker. I can just employ my craft and I can let somebody else worry about the business and all the logistics behind the scenes. I’m surprised that there aren’t others who have copied their business model. That is the ultimate compliment, when someone sees your success and tries to copy it.

Russell Joy

Former Director at Ste. Michelle Wine Estates

Napa Wine & The Winemaking Process

Operator: Either way, this doesn’t mean CDLX isn't an interesting opportunity. If management solves the issues laid out above, there is no doubt CDLX annual billings should be a multiple of the current $300m. On the other hand, maybe CDLX’s purchase data asset isn't so unique after all? Could Plaid or another fintech upstart leverage similar capabilities in an open banking world? We will be exploring such questions in weeks to come.

Cardlytics: Barriers to Advertiser Adoption

Illumina Inc

In Practise: Thank you for your time. This was wonderful.

General Manager, QIAGEN Waltham

Illumina & Gene Sequencing

Randall Beard: Counterintuitively, the more banks on the platform the better for your customers, but that is not the initial reaction that a typical bank would have. I would not call it a monopoly but once you have that scale, no bank will do a second program. The more banks there are on the platform, the more valuable it becomes to the marketer. Once you get to scale and it works, it is hard to imagine a competitor with the same model. There may be a different model where they have their own website like Ibotta, but even that is challenging. Ibotta does cashback offers on their own website, but it is all direct to consumer. They get consumers to sign up and have been super successful. The last time I checked, they might have had 30 or 40 million, which is great, but it is not 160 million.

Randall Beard

Former President at Cardlytics

Cardlytics: Scaling the Advertiser Side of the Network

Former Product Manager at Redbubble

Redbubble: Market Size, Product Quality and Customer Acquisition

Evolution Gaming

Playtech PLC

In Practise: I’ll take a look at that. I appreciate your time.

Former Director at Red Tiger

Evolution Gaming, Red Tiger, & Online Casino Gaming Regulation

Kelly Partners Group

Operator: Kelly has a long runway of over 10,000 acquisition targets to choose from with a potential outsider CEO who has modelled his life’s work on the greatest capital allocator of all time. We will be following KPG closely in the years to come.

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