Austin- and Australia-based online business broker Flippa, which last month raised $11 million in a Series A round, is planning to open an Asia office in Singapore by January 2022 to serve the growing demand for its services in the geography.
The company expects to hire around 10 to 12 people in Asia in the next 12 months, in sales and marketing, and is a few weeks away from making its first hire, a regional manager, Flippa’s chief executive Blake Hutchinson told DealStreetAsia.
Flippa helps online business owners and investors buy and sell companies, with services such as a matching algorithm for buyers, legal counsel, business valuation, and acquisition financing. These businesses are mostly apps, e-commerce stores, and blogs, and are valued from $5,000 to $25 million.
Hutchinson says his company is “democratising M&As for small businesses”.
He said that around 35% of its customers – both buyers and sellers of online businesses – are currently in East Asia with its biggest markets being Singapore, Hong Kong, Malaysia, and South Korea. It also sees a growing number of customers from Indonesia, Thailand, and Vietnam. In Singapore, it made 280 business valuations in September. The company conducts around 4,000 business valuations a month.
“The digital economies are seeing extraordinary fast growth in sales, in Southeast Asia, in particular,” he said.
Among a few such transactions in this region, daily horoscope iOS app iZodiac, owned by a Vietnam-based seller, sold for $35,000 while FootballAdvisor, a seven-year-old sports betting tips site owned by a Philippines-based seller, was purchased for $265,000.
Flippa raised its first external funding in September since the time it was founded in 2009. The round was led by Australian venture capital firm OneVentures. Catch.com.au founders Gabby and Hezi Leibovich, RetailMeNot.com founders Guy King and Bevan Clarke, and Reactive Media founders Tim O’Neill and Tim Fouhy joined the round. Existing investors who participated in the round include former Hitwise chief executive Andrew Walsh, Flippa co-founders Mark Harbottle and Matt Mickiewicz, 99designs.
Flippa’s current customer base is a mix of both individuals, who make up 80% of customers but 20% of sales, and institutional players like e-commerce acquirers such as Thrasio and Una Brands, publishers, and private equity firms, who make up 20% of customers but 80% of sales.
Flippa generates money through listing fees as well as through a commission on successful transactions. According to its website, the company takes between 5% and 15% of the earnings, depending on how much the business was bought for, and whether they used a broker.
The company competes with other online business brokers such as Shopify’s Exchange Marketplace and Empire Flippers.
With an office serving Asia, Hutchinson expects half of its business to come from this region. Declining to disclose the company’s revenue, he said that Flippa has three million customers – about two-thirds of them being buyers – with around 30,000 being added every month, and nearly 5,800 assets available on the website right now.
Despite the region’s diversity in language and culture, Hutchinson said that buyers and sellers tend to come from the same country, given that they have a better understanding of how to navigate that territory.
Explaining the model, Hutchinson said sellers are asked to connect their listings to Stripe, QuickBooks Online, WooCommerce, Google Analytics, and Admob so that buyers are able to evaluate their business performance. They will soon be able to connect information from Shopify and Zero as well. Buyers are then asked to plug in their banking data to check if they can really afford to buy the business.
These data points help in preventing fraud, Hutchinson said, adding the company has reported a zero-fraud record in the last 12 months. Flippa has also implemented a programme that allows the company to check whether the user has been flagged on other marketplaces.
“There are hundreds of millions of online business owners now,” he said, explaining the rationale for the fundraising after more than a decade of bootstrapping.
“We want to be able to tell the world that there is now this opportunity to find a pathway to exit or enable business ownership,” he added. As of August, the previously profitable company was in, industry-speak, ‘growth mode’.
A significant portion of the fresh funds will go towards marketing itself globally, he said. The company plans to hire more than 100 people around the world in the next 12 months. It currently has 38 employees.
The money will also be used to expand its product range and improve current features. Flippa is keen to build a data repository on the performance of the online businesses and also upgrade the matching algorithm and valuation tool.
Flippa is also looking to enter the lending game to allow buyers to acquire bigger or more businesses. Currently, the company relies on Thrasio-owned Yardline Capital to offer buyers financing, but Flippa is planning to offer crowdsourced financing.
Currently, buyers can only purchase a business entirely. Flippa is looking at a model that allows people to invest in businesses as well, Hutchinson said.