How Lightspeed Has Acquired its way to Cloud Point of Sale Retail Dominance

Montreal based Lightspeed has a unique opportunity in the 2021-2025 period, become a technology company. The Cloud POS leader has essentially bought out two of its biggest rivals in an unprecedented move to increase in global POS footprint just at a time when new restaurants and independent retailers are forming. What an opportunity!

Lightspeed acquired NY based Shopkeep late last year, and now New Zealand based Vend. That's what happens when you list on the public markets, you get access to a lot of new capital. While Canadian startups have for years struggled to go global, the case could be made Lightspeed is now a global point-of-sale monopoly in the making. To really thrive it needs to pivot to payments, AI and diversify its business model.

With Shopkeep it acquired 20,000 retail and restaurant customer locations and with Vend, another 135,000 customer locations globally. Just as Shopify became the Amazon of the North, Lightspeed now can elevate its corporate future investing in real innovation and not just growing its already aggressive rocket ship of Cloud POS. But can it do it? Montreal struggles to retain top talent, as Quebec has prioritized the French language, creating a significant brain drain.

In the E-commerce boom of the pandemic, Lightspeed managed to prosper and in the economic recovery after the Third wave of the variant pandemic of 2021, it should do very well in 2022 especially. It's stock on the NYSE at $70, sure looks like a bargain now. Lightspeed has over 1,200 employees, not counting the Shopkeep and Vend acquisitions.

Lightspeed can be one of the big winners of the retail recovery, but it's still not clear if Lightspeed can become a technology company that's truly innovative. They will be bringing cities and communities to life by powering independent businesses and fostering a renaissance of restaurants but they will need to start to think of how to add more value to their customers and diversify their business model.

The consolidation in the Cloud POS industry will mean a lot of lost jobs and the growth of this Canadian startup to the big stage. Lightspeed already have offices in Montréal, London, Amsterdam, Ghent, Toronto, Ottawa, Olympia, Paris, Zurich, Geneva, Lausanne and now likely Auckland, New Zealand as well.

Lightspeed in the point-of-sale world is becoming a big fish that's eating the little fish where Dax Dasilva looked gleeful in his recent CNBC interview. The PR behind Dax and Lightspeed is all bling and no analysis typical of the Canadian startup scene and POS community.

There's no question Lightspeed is a sales machine and fosters a culture of driving its employees to work harder. But if Shopify was lead by geniuses and created ecosystems of E-commerce innovation, it remains to be seen what Lightspeed will actually do with this incredible opportunity on a technological level to empower small businesses. It's not as if Lightspeed is in the same category as Square in its genuine empowerment of small businesses, who have the ability to give them loans as a chartered bank.

Lightspeed's acquisitions of Shopkeep and Vend you might say is even a bit cutthroat. Since the onset of COVID-19, the American economy has experienced unprecedented digital acceleration, with independent businesses in retail and hospitality increasingly pivoting their operations, abandoning legacy point of sale systems and adopting omnichannel commerce platforms. Lightspeed HQ was all too willing to pounce on the opportunity and buy out its rivals who were less adaptive to the times. Vend in particular had a much more genuine brand.

In the future of technology however, it's more fierce corporations that seem to survive. Lightspeed has been supported by Quebec's local culture and banks. They managed to raise $347 million to date. During the third quarter, revenue was up 79% year over year. With the Vend acquisition in particular, revenue will accelerate in the second half of 2021 and 2022. Lightspeed's acquisition heavy approach to dominating the POS world for small businesses has been monopolistic as it has been effective in line with their sales-first culture.

They have made 11 acquisitions essentially buying out direct competitors. The pandemic with its K-shaped recovery has actually accelerated monopolistic consolidation and sped up this process in 2020. It's not that Shopkeep or Vend were bad at what they did, just not as aggressive or big enough to be sustainable. Lightspeed's acquisitions in Europe enabled them to look so attractive to investors.

So how is Lightspeed a Global Cloud POS monopoly you ask? The $350 million acquisition of Vend boosts their Asia-Pacific presence and eliminates one of their most-direct and formidable rivals. Meanwhile Square is innovating at much more rapid pace with Bitcoin and Tidal, it's not clear how Lightspeed learns to innovate outside of its point-of-sales niche.

While over 400,000 small businesses failed in 2020 in the U.S., many new ones took their place and the same is occurring all over the world. If Shopify managed to become the Amazon of the North for small-businesses and E-commerce, can Lightspeed become the Square of the North? That is entirely not clear and seems in doubt, even amid Lightspeed reaching new maturity and dominance as a business.

Vend generated revenue of approximately US$34 million over the past year and this gives Lightspeed even more momentum. Lightspeed's stock I'd say is a buy under $100 as it stands to be one of the major Cloud POS beneficiaries of the retail renaissance 2021-2024.

The reality is Lightspeed got significant help from the Quebec funds like Caisse de Depot et Placement du Quebec, giving them an unfair advantage to be able to buy up their competitors. Montreal has so few legitimate growing global businesses, you might even say the real fuel in Lightspeed's rocket ship are those hand-outs and a sales-driven culture that enabled Lightspeed to acquire Shopkeep and Vend.

It's bizarre but the Caisse de dép?t et placement du Québec was founded by an act of the National Assembly and is essentially a pension fund. They along with Inovia Capital were the key investors that made Lightspeed HQ possible. Quebec hands-outs gave them an edge.

When you can simply buy out your competitors to expand your sales footprint one wonders what is at the heart of your company? Quebec has a history of bailing out its local companies who are good for the local economy. While at one side we have to admire the Montreal based company's ambitions to go global, in a way it's just more evidence how consolidation meets the K-shaped recovery are a winner-takes-all end game.

Whatever the morality of corporate growth amid a vulnerable SMB and restaurant sector, analysts expect revenue to grow by 45% in the next quarter. As for sales, analysts expect growth of 55% in 2020 and 2021 and up to 69% growth in 2022. When you acquire so many new stores and restaurants who have subscriptions, your revenue is going to keep rising.