Economy
24 October 2022
Q3 retail tech funding falls globally, while ecommerce rises
In this week's deal activity: A SKU network raises Series A and Instacart reportedly postpones IPO plans.

In this week's deal activity: A SKU network raises Series A and Instacart reportedly postpones IPO plans.
Welcome to Dealboard. In this weekly feature, The Current is providing a look at the mergers, acquisitions and venture capital deals making waves in ecommerce, CPG and retail.
This week, we dig into the data on retail tech funding for the third quarter. Plus, Amazon is getting some bigger planes, Instacart is reportedly backing off 2022 IPO plans, and a SKU data network raised $43 million.
Every week, Dealboard provides a look at the startups receiving funding and returning capital to investors as they build retail tech platforms powering ecommerce, marketing, logistics and more. This week, we’re kicking things off by taking a step back to review the overall funding results for the most recent quarter, courtesy of the Q3 2022 State of Retail Tech report from tech market intelligence firm CB Insights.
Here’s a look at the highlights for third-quarter VC funding and M&A activity.
Funding fell to a five-year low globally, CB Insights reported. Collectively, retail tech companies raised $8.5 billion, which was a 33% quarter-over-quarter decline and the lowest total since 2018. The number of deals, however, increased by 5% to 776. For the year, 45% YoY
Top equity deals included funding rounds for payments company Klarna, digital experience platform ContentSquare and European payment network Satispay.
In the US, 261 companies in this sector raised a collective $3.4 billion. The number of deals was up 28% quarter-over-quarter, even as funding fell. The US share of deals also rose to 34% from 28% in Q2. Top US funding rounds were for live shopping marketplace Whatnot, and fresh food-focused platforms Grubmarket and Afresh.
Ecommerce companies far outpaced all subcategories in funding, with $4.6 billion invested across 372 deals. The funding total was up 10% quarter-over-quarter. The US led global share in this category, with $1.7 billion across 21 deals.
Megarounds are declining. Funding for deals over $100 million, which are called megarounds in venture capital circles, was down 38%. Eighteen deals of this size were recorded. From Q4 2020 through Q1 2022, there were more than 50 of these deals each quarter.
Unicorns are also becoming rarer. There were three companies that were newly valued over $1 billion, called unicorns in VC circles, and none were minted in the US. That's down 77% quarter-over-quarter, and was the fewest since Q1 of 2018. In Q4 of 2021 alone, there were 30 such companies that cross the milestone.
M&A exits were down 31% in the third quarter, to 111. Top North American deals included Essity’s $400 million acquisition of intimate apparel brand Knix and eBay’s $295 million acquisition of trading card platform TCGPlayer.
The Current’s view: The retail tech sector is seeing the same pullback that is being felt across venture capital as a whole. As markets become more volatile at a time of economy uncertainty, funding rounds haven't been as large as they were during the frothy days of the last two years, and there’s less appetite for exits. However, opportunity still exists for companies that are still new to the scene. Lower-dollar early stage deals have accounted for a higher share so far in 2022 than they did in 2021 (64% vs. 60%), and median funding was up 9%. It’s a reminder that strong products that solve real problems will continue to receive funding in any market.
Returning to the present, here’s a look at this week’s key deal activity:
Amazon has a new agreement that will enable it to fly goods as part of its logistics operation.
The company announced announced a new agreement to lease 10 Airbus A330-300 freighter planes from Altavair. These planes will be converted from passenger planes. In turn, the aircraft will be operated and maintained by Hawaiian Airlines on flights between Amazon facilities and airports.
“These A330-300s will not only be the first of their kind in our fleet, they’ll also be the newest, largest aircraft for Amazon Air, allowing us to deliver more customer packages with each flight," said Philippe Karam, director of Amazon Global Air Fleet & Sourcing, in a statement.
The planes will come online in 2023 and 2024, and the deal includes an option to expand based on Amazon's needs. Hawaiian Airlines also intends to stand up a pilot base in the continental US, expand existing facilities, and hire team members.
There is an investment component to the agreement, as well: Hawaiian Airlines will issue warrants that allow Amazon to acquire a stake of up to 15%, exercisable over nine years.
Banyan, a fintech company focused on item-level receipt data, raised $43 million in a Series A round.
Fin Capital and M13 led the financing, which consisted of $28 million in equity and $15 million in venture debt. Participants included FIS Impact Ventures, Bridge Bank, Interplay and TTV Capital. Additional investors in Banyan include More than Capital, Manifold, Motivate Venture Capital, Elizabeth Street Ventures and Gaingels, along with angel investors Jonathan Weiner, David Chubak and Kush Saxena.
Along with the funding, former Walmart EVP & Chief Customer Officer Janey Whiteside joined the company’s board.
The company said it will use the funding to build out its technology and infrastructure, which allows retailers and financial institutions to access data capabilities at the SKU level. Among myriad uses, the capabilities can enable merchants to offer deals and loyalty programs through banking channels. Hotels, fintechs and financial institutions are also among potential beneficiaries.
Frasers Group, the British retail group founded by entrepreneur Mike Ashley that started as Sports Direct, disclosed a series of investment updates in statements to investors:
Asos: Frasers Group increased its stake in the fast fashion company, and now owns 5.1% of Asos’ issued share capital, according to a filing. Based on the company’s Friday closing price, the share is worth about 26 million pounds, according to Marketwatch. This comes after recently-hired Asos CEO Jose Antonio Ramos Calamonte laid out a restructuring plan that will reduce stock and spending at a time of elevated inflation and rising costs, Bloomberg reported.
Hugo Boss: Frasers Group also upped its stake in the luxury fashion label, according to a filing. It now owns 4.3% of direct common stock, and another 28.5% of total share capital through put options.
MySale: Frasers Group now owns a 59.85% stake in the Australian fashion marketplace, according to a filing. This followed the issuing of a mandatory offer for the company, which became unconditional last week. The offer closes on Nov. 1. Frasers has been making a bid for the flash sale site since August.
Food tech company Nourish Ingredients raised $28.6 million in a Series A round, Techcrunch reported.
The financing was led by Horizons Ventures, with participation from Main Sequence Ventures and Hostplus.
The company employs synthetic biology to create fats and oils without animals. These are key to making alternative proteins smell and taste like meat, which is necessary to improve their overall quality, the company contends. Nourish will use the funding for R&D and scaling activities, with a goal of bringing its first fats to product lines next year, Techcrunch reported.
Credit Key secured $115 million in venture and debt funding as it works to expand a Buy Now, Pay Later solution for B2B ecommerce.
The funding include $100 million debt facility from funds managed by affiliates of Fortress Investment Group LLC, and a $15 million equity raise led by RedBird Capital, Bonfire Ventures and Greycroft.
“While we’re seeing a slowdown across the tech sector, there is still a huge untapped opportunity in B2B e-commerce payments. This e-commerce market is 10-15 years behind B2C on the digital maturity curve but is rapidly catching up,” said John Tomich, CEO of Credit Key, in a statement.
Consumer goods conglomerate Nestlé has entered a deal with coffee company Starbucks to acquire the brand Seattle’s Best Coffee.
Acquired by Starbucks in 2003 for $72 million, Seattle’s Best makes whole bean, roast and ground packaged coffee, as well as K-Cup pods. Products are available in foodservice and grocery channels. In bringing on the brand, Nestlé is aiming to bolster its coffee business in the US, where Seattle’s Best will join labels including Nescafé, Nespresso and Blue Bottle. Terms of the deal, which is expected to close by the end of 2022, were not disclosed.
The companies were already working together. Nestlé distributes Starbucks products across more than 80 markets. That was the result of a $7 billion deal signed between the companies in 2018 to create what is known as the Global Coffee Alliance.
One of the year’s most anticipated stock market debuts in ecommerce is apparently on hold.
Grocery delivery platform Instacart is “likely” to postpone plans for a 2022 initial public offering, Reuters reported. Citing two sources, the wire service reported that market conditions led the food delivery company to hit pause on plans for a Q4 entrance into the stock market. As a caveat, the sources allowed that the move is not completely off the table this year, just “extremely unlikely.”
Instacart confidentially filed to go public in May, and has since been making changes to its leadership ranks, adding new companies via acquisition and rolling out new offerings for retailers, brands and consumers as it positions itself as a technology provider for the grocery industry under CEO Fidji Simo. A spokesperson told the New York Times that the company saw revenue growth of more than 40% year-over-year in the third quarter. But the company has also cut its internal valuation, with the latest reduction bringing the figure to $13 billion, The Information reported.
As it sought to go public, Instacart was not immune from the slowdown in the public markets observed in the CB Insights report above. Still, there are indications that the company may still begin trading if market forces improve.
Data helps Nike answer, "Who are the consumers we want to serve and what are they looking for?" said CEO John Donahoe.
Nike posted strong results in digital sales in its most recent quarter, as the apparel and footwear brand recorded 24% growth across apps and mobile.
At Nike, digital is a key part of the direct-to-consumer strategy that has become a priority for the brand in recent years as it exited or scaled back several important longtime wholesale partners.
“Looking ahead, [our Consumer Direct Acceleration strategy] continues to unlock our future growth potential by powering up our holistic offense across innovation, brand engagement and marketplace, all fueled by consumer insight,” CEO John Donahoe told analysts on the company’s recent earnings call. “As we know, consumers today have rising expectations and changing behaviors. What creates separation for Nike in this dynamic environment is our innovative product, brand scale and direct connections we have with our consumers.”
A key piece of this is customer data. This information is not only being harnessed to drive sales. Consumer insights play a growing role in the innovation process that creates new products. Talking to customers is nothing new among brands, but Nike's membership programs and other outreach efforts give it unique scale in identifying the next trends.
“Thanks to our consumers' love of our brand, we enjoy a high rate of engagement, fueling richer, deeper understanding,” Donahoe said. “Across the company, our insights model creates confidence in growth in ways that are uniquely Nike as we make the entire enterprise faster, more efficient and more targeted in the growth opportunities that we go after.”
Nike’s approach offers a window into how brands can leverage data that is gathered directly from customers. Known as first or zero-party data, this type of data is gaining increasing importance as third-party cookies and identity-based tracking tools fall out of favor due to privacy concerns.
Donahoe offered a look at three areas where Nike is using consumer insights:
In running, Nike is applying insight from the Nike Run Club app, as well as consumer feedback across brand touchpoints and marketplaces. When it found that Invincible wearers were putting more mileage on their shoes, it rolled out a new edition that was designed to provide more cushioning and comfort.
“Consumer response to the Invincible 3 was strong across our geos and throughout Nike Direct, strategic wholesale partners and running specialty doors,” Donahoe said. “And what really sets Invincible 3 apart is how we executed across the marketplace, driving consistent storytelling across channels, working closely with our partners to elevate our own retail presentation and theirs, all with a sharp focus on helping consumers find the right shoe for them.”
Runner feedback also led to the launch of a new shoe in complementary categories, such as the fast-growing trail running segment. This led to the launch of the Pegasus Trail 4, which is proving to be particularly popular among women.
In basketball, Nike is talking directly with athletes. They identified three key aspects of the game: cutting fast, playing long and jumping high. For instance, talking directly with WNBA star Sabrina Ionescu led to a shoe designed for cutting on a dime.
Air Max, which is an iconic Nike line, is “a great example of how we build significantly scaled businesses off our greatest performance innovations."
Using insights, the brand leverages qualitative and quantitative member data science as part of the brief process.
“We're able to ask ourselves, who are the consumers we want to serve and what are they looking for?” Donahoe said.
To create a shoe that is launching next week called Design by Japan Air Max 1 '87, Nike used polling data from the SNKRS app and local member surveys. At launch, the members who participated will be the first customers.
“Members who participated will be the first targeted for the shoe, creating NIKE's first full circle insights-to-shopping experience,” Donahoe said.
That’s how data shows up in what the consumer buys.