Ecommerce Rollups, Acquisition Criteria, and Autonomy with WeCommerce

December 21, 2021
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min read

Elise DeCamp is the VP of Acquisitions at WeCommerce, a team of Shopify veterans buying, building, and operating ecommerce SaaS companies. As a founder, operator, and investor, Elise shares her learnings from scaling and selling her own marketplace while diving deep into WeCommerce’s evolving growth and acquisition strategy.

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Ecommerce Rollups, Acquisition Criteria, and Autonomy with WeCommerce

Elise DeCamp is the VP of Acquisitions at WeCommerce, a team of Shopify veterans buying, building, and operating ecommerce SaaS companies. Previously, Elise spent time at Bloomberg Beta, Hawkfish, and Yotpo, and in 2017, she founded Ocelot, a marketplace for artisan products.

As a founder, operator, and investor, Elise shares her learnings from scaling and selling her own marketplace while diving deep into WeCommerce’s evolving growth and acquisition strategy.

Launching, Scaling, and Selling a Marketplace

The marketplace operating model is complex, and most investors aren’t huge believers.  

When she launched Ocelot, Elise took the curated marketplace route. For her, user acquisition proved to be one of the most difficult parts of running her business. Scaling Ocelot month over month and reaching a consistent growth rate wasn’t easy, especially when only 5% of SKUs drive real revenue on marketplaces.

From her experience as a founder and an investor, she has empathy for both sides of the table. As a founder, she struggled to receive no’s, and now as an investor, she struggles to deliver no’s. The key is transparency from both viewpoints.

“As a founder, you need to be upfront with the challenges of your industry. Clearly communicate that you’re aware of why someone might not want to invest in the company, and then address those pain points head-on.”

Evaluation Criteria: Profitability, Retention, and Growth

WeCommerce looks at both qualitative and quantitative factors when evaluating companies. 

On the quantitative side, future retention, growth, and profitability are key to getting an understanding of a business’s viability. Additionally, Elise points out that their internal criteria isn’t solely based on quantitative data. 

Her team also evaluates the opportunity’s potential growth trajectory depending on the competitiveness and maturity of its vertical at large.

In terms of metrics, the WeCommerce team ensures revenue retention is strong and average revenue per user (ARPU) increases in a healthy way. Then, they evaluate the trial to paid conversion rate and the distribution of users. Notably, Elise doesn’t put too much weight on LTV or CAC to LTV ratios. As she points out, they’re only a small part of a larger narrative.

“As we analyze acquisitions, it’s critical that a company’s price matches customer value in a scalable way. We rigorously prioritize pricing models and how a company can grow alongside the success of its customers.”

Behind the Scenes: End-to-End Diligence Workflows

WeCommerce’s acquisition flow starts with a combination of inbound interest and active cold outbound. Regarding verticals, the team is currently focusing on personalization, AI, and on-site merchandising. Plus, they go out of their way to invest in or acquire potential leaders in attractive categories.

Regarding process, Elise first hops on a call with the founding team to understand their core business model. She leans into a three opening questions:
  1. Why did they start the business?
  2. What growth stage are they at?
  3. Where is the business headed?

Then, to get a better understanding of their growth, retention, and churn, Elise digs into the past few years of financials, preferably back-end data from their Shopify or Stripe accounts. 

Based on that initial diligence, the team moves into modeling to gauge how quickly the business will grow over the next handful of years. At this point, they work on valuation ranges or an offer.

Once both parties reach a point of alignment, they’ll move forward with a LOI, which leans into a deeper diligence process. Elise’s team runs through the backend of the ecommerce platform, conducts customer interviews, meets with key team members, and digs into the org chart with the hopes of reaching a place where they feel deeply ingrained in the business. While that’s happening, there’s a parallel process of legal and tax structuring.

If and when the deal ultimately closes, WeCommerce will then start to transition key accounts and payroll over.

“At WeCommerce, we dive deep into the core team dynamics and what the future of the team might look like. Moving forward, this helps inform our projections and operating expenses around the potential acquisition.”

Post-Acquisition: Autonomy, Flexibility, and Capital

Autonomy—both in terms of how they operate and how they want their portfolio companies to operate—is key for the WeCommerce term. 

They’re flexible about deal structure and how they work with founders.

Elise also points out that there’s a ton of value in the WeCommerce platform. The team has access to markets and can fund new opportunities in a way that’s similar to venture but even more transparent.

She also notes that post-acquisition, founders have access to the larger WeCommerce network and resources, especially in any areas that aren’t in their wheelhouse.

“We structure acquisitions by reverse engineering what the founder wants. For example, if they want to leave the business or prefer to stay but need strategic help, we’ll take those inputs and work backwards from there.”

Tactical Advice for Founders

For ecommerce SaaS founders, one of the biggest challenges is that they’re often making decisions without access to complete and transparent data. Instead, Elise recommends using different metric sources including data leads to make smarter strategy decisions across all functions.

More specifically, Store Leads and PipeCandy have helped the WeCommerce team enrich and benchmark new opportunities and gain actionable, data-driven insight into their portfolio companies’ customer bases. 

As they acquire and operate businesses that are both sub $1M and over $10M in ARR, she notes that benchmarking data is useful in both revenue stages.

When Elise was scaling Ocelot, data tools weren’t readily available for her team. Now, the tools are available. 

It’s not about spending endless capital on paid advertising. Instead, WeCommerce prioritizes working with founders who focus their energy on deeply understanding their customers using data.

“Ultimately, we advise founders to focus on making a few great decisions based on the data they have. That’s a much better strategy than spreading their focus across all parts of the business to pursue growth at all costs.”

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