ReCharge And The Growth Of Subscription Commerce

Everyone knows that e-commerce has accelerated in the past year. The idea that Covid has “accelerated the future” and “pulled forward ten years growth into six months”, by temporarily shutting down offline alternatives, is one of the most-repeated lines about tech and the pandemic. But there’s much more to it than that. E-commerce is not just growing faster, it’s also changing in profound ways and it’s these changes — as much as a growing market — that make us so enthusiastic about partnering with ReCharge Payments.

ReCharge is the leading provider of subscription management software for e-commerce. Today, the company is announcing that it’s raised a total of $277 million across several rounds from Bain Capital Ventures, Iconiq Growth and Summit Partners, most recently at a valuation of $2.1 billion. It’s a remarkable milestone for a company that struggled to raise initial funding and had to bootstrap its way to profitability.

I first met Oisin and the ReCharge team in the summer of 2019 at the introduction of my friend, Kevin Hartz (thank you, Kevin!). 

With Oisin and Kevin at ChargeX in 2019 (Why diapers? You will have to ask them)

Two things were immediately clear: one was the strong groundswell of support from small merchants who count on ReCharge to run their businesses; the other was that Oisin is an exceptional entrepreneur. From spending time with Oisin and ReCharge’s customers, I came to understand the three big shifts which power ReCharge’s business:

1. Consumers want connection and convenience

Consumers have more choice than ever before, thanks to the explosion of makers and merchants online. These vendors don’t just share their products; they also put forward values and ideals and create communities around themselves over social media. Many of these products are repeat purchases and, once consumers make their choices, they often don't want to think about it again. In my own case, I buy more and more things this way, like soap (Native), chocolate (CacaoRunners), hand sanitizer (Curie), granola (Frog Hollow), snacks (Bokksu), biltong (Bull & Cleaver)...the list goes on and on. All of these have moved from occasional, in-store purchases to recurring, online subscriptions.

2. Brands want direct relationships

Every brand -- traditional and digital-native -- has come to two realizations. One is that they cannot rely on off-line retail to sit between them and their end customers. Nor can they trust Amazon, which has a nasty habit of competing through its own-store brands. So every brand is now selling direct online, many using Shopify for their backend, which doubled its GMV in 2020 to $120 billion. The other realization is that in a world of rising CACs (customer acquisition costs) and fragmented demand, you have to make it easy for your most loyal customers to buy. The best way to do that is to shift the default to buying, instead of not. That's where subscriptions come in.

3. The new commerce tech stack

There has never been a richer set of tools available to brands and merchants. Whether choosing a platform like Shopify, or building from APIs up, they can add subscriptions (ReCharge), one-to-one communications (Attentive), fulfillment (ShipBob), cross-border (Flow.io), vertical marketplaces (Mirakl, Material Bank etc) and many other services -- all easily and at low cost. This has leveled the playing field between big and small.

ReCharge sits at the intersection of all these trends. It helps brands turn transactions into relationships; it helps consumers manage their subscriptions; and it fits easily alongside the other components of a modern tech stack. Most importantly, ReCharge removes complexity from the lives of its users. As with notifications, there's a fine line between helping people and annoying them. Every situation is different and ReCharge gives its users control: for example, consumers can change, pause or resume subscriptions, and merchants can adjust discounts and manage inventory.

The Future Of Payments And Commerce

In his excellent newsletter, Alex Taussig talks about payments as the "motor oil" for a marketplace's engine. I don't love that analogy, but agree with his point that a virtuous cycle gets created when a marketplace like Shopify meets a payments solution like ReCharge. The marketplace incubates the payment solution, which then grows far beyond it. There are many examples: Paypal and EBay in the US, AliPay and Taobao in China, Mercado Libre and Mercado Pago in the Latin America. We see ReCharge as being on a similar path: it started on Shopify, but is increasingly managing subscriptions across platforms or for brands building from the ground up.

We are excited to work with Oisin and the entire ReCharge team, and grateful for the partnership with our friends at Summit and Iconiq Growth. Despite what the size of this round may suggest, it feels like very early days in ReCharge's journey.