Here is our Q2 2019 summary report on the retail technology startup sector. The following report includes a sector overview and recent activity.
How has investor appetite in retail technology evolved throughout the years? In this blog post we examine the total investments by year into this sector to help answer that question. The graph below shows the total number of investors in all deals stacked by quarters.
As the graphic demonstrates, investor activity in retail technology has been steadily decreasing in recent years. The 5-Year CAGR of retail tech investor activity from 2013 to 2018 is almost zero. In addition, the sector has seen a total of 584 investors in all deals through Q2 of this year. This represents 53% of the total investor activity in 2018, and 104% of the investor activity through Q2 in 2018. Taking all these data points together, we can see that investor appetite for retail technology deals has shown consistent declines in recent years.
How is the funding environment shaping up for retail technology in 2019? As we pass the mid-year mark, let’s see how the year-to-date metrics compare to the historical trends. The graph below shows retail technology total funding by year, stacked by quarters.
As the graphic demonstrates, retail technology has amassed $13.3B through Q1 and Q2 of this year. This amount represents 75% of the total funding in 2018, and 174% of the funding through Q2 in 2018. The top three funding events in Q2 2019 include a $1B round into Rappi, a $600M round into DoorDash, and a $575M round into Deliveroo.
A straight-line projection of the completed funding this year would result in $26.5B, which is 150% of the total 2018 funding. By the same token, a weighted quarterly average projection of 2019 funding would result in $30.6B, which exceeds the total 2018 funding by a whopping 74%. Therefore, based on the mid-year data, retail technology funding in 2019 is projected to significantly overtake the funding in 2018.
How has the exit activity for retail technology developed in the first half of 2019? This blog post explores retail technology exit metrics through Q2 2019 and compares them to previous years. The graph below shows the number of retail technology exits by year, stacked by quarters.
As the graphic demonstrates, retail technology has seen a total of 33 exit events through Q2 of this year. This represents 53% of the total exits in 2018, and 92% of the exits through Q2 in 2018. In addition, some of the exit events in Q2 2019 include Shopkick’s acquisition by Trax, iyzico’s acquisition by PayU, and Pinterest’s IPO.
A straight-line projection of the completed exit activity this year would come out to 66 exit events, which exceeds the total exits in 2018 by 6%. On the other hand, a weighted quarterly average projection of 2019 exit activity would come out to 57 exit events, which falls short of the total exits in 2018 by 8%. Therefore, based on the mid-year data, retail technology exit activity in 2019 is projected to be relatively on par with the exit activity in 2018.
This blog post examines the different components of the retail technology ecosystem. We will illustrate what the categories of innovation are and which categories have the most companies. We will also compare the categories in terms of their funding and maturity.
Marketing Platforms Is The Largest Retail Technology Category
Let’s start off by looking at the Sector Map. We have classified 1873 retail technology startups into 21 categories. They have raised $85B from 3189 investors. The Sector Map highlights the number of companies in each category. It also shows a random sampling of companies in each category.
We see that Marketing Platforms is the largest category with 271 companies. This category includes companies that enable merchants to execute and manage marketing campaigns. It also contains customer relationship management tools used to improve customer engagement. Some example companies in this category include Showpad, Sprinklr, Gainsight, and Medallia.
Let’s now look at our Innovation Quadrant to find out the funding and maturity of these categories in relation to one another.
The Established Quadrant Has the Most Retail Technology Categories
Our Innovation Quadrant divides the retail technology categories into four different quadrants.
We see that the Established quadrant has the most number of retail technology categories at 13, accounting for 62% of all retail technology categories. The Made-to-Measure Customization category has the highest average age, and the Last Mile Logistics category has the highest average funding. On the other hand, the In-Store Management category is low on both average funding and age.
For this quarter’s funding analysis, let’s examine how average funding in the retail technology sector is evolving. The graphic below shows the retail technology average funding across all deals over time by quarter.
As the graphic demonstrates, retail technology average funding deal size in Q1 2019 was at $84M, which increased by 18% from the $71M last quarter. The average funding deal size has skyrocketed in recent years, with the average funding last quarter around 11 times larger than it was 5 years ago. The top three funding events in Q1 2019 include a $1B round into Flexport, a $775M round into Takeaway.com, and a $413M round into Delhivery.