Luca Cartechini On Raising $140 Million To Support eCommerce Merchants

In a candid interview, Luca Cartechini shares his remarkable journey from the finance world to becoming an entrepreneur in the thriving e-commerce industry. Born in Italy and educated in the UK, Luca’s story is a testament to the changing landscape of venture capital, the challenges of entrepreneurship, and the strategic approach to fundraising and acquisitions.

His venture, Shop Circle, has attracted funding from top-tier investors like QED Investors, 645 Ventures, Founders Factory, and Andrea Rota.

In this episode, you will learn:

• Luca Cartechini’s journey underscores the international perspective shaping his success, transitioning from finance to entrepreneurship.
• Shop Circle’s strategic focus on e-commerce brands operating on Shopify highlights the importance of specialization in the startup landscape.
• The rational approach to fundraising and valuation sets Shop Circle apart, emphasizing team dynamics and a deep understanding of the total addressable market.
• With over 14 acquisitions in three years, Shop Circle’s unique position within the Shopify ecosystem facilitates smoother integration processes.
• Luca envisions Shop Circle as the first global operator of e-commerce tools, with plans to expand to other platforms beyond Shopify.
• Luca’s advice to aspiring entrepreneurs is to start early, embrace failure as a learning opportunity, and persistently engage with a broad spectrum of investors.
• The interview unveils the evolution of venture capital, emphasizing the importance of practical experience, diverse team building, and a relentless pursuit of one’s entrepreneurial vision.

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About Luca Cartechini:

Luca Cartechini, based in London, GB, is currently a CEO and Co-Founder at Shop Circle, bringing experience from previous roles at ESCP Business School, Pretiosum Ventures, and Jefferies.

Luca Cartechini holds an ESCP Europe. With a robust skill set that includes Leadership, PowerPoint, Economics, Sales, International Project Management, and more, Luca Cartechini contributes valuable insights to the industry.

Connect with Luca Cartechini:

• Crunchbase
• LinkedIn
• RocketReach
• MarketScreener

Read the Full Transcription of the Interview:

Alejandro Cremades: Alrighty hello everyone and welcome to the dealmakerr show. So today. We have another episode another founder, another exciting founder with an exciting journey. You know his story is remarkable. You know we’re going to be talking about going from. You know the finance you know world to then family office Vc turning into entrepreneur. Raising you know a bunch of money I think that around one hundred and forty million that they’ve raised and then also fundraising. You know what has happened in this environment acquisitions the way that they go about inorganic growth and really centralizing everything that they do and we have quite a good episode in front of us so without further ado. Let’s welcome our guests today Luca Cartakini welcome to the show.

Luca Cartechini: Thanks a lot telehandra. Thanks for having me I’m a big fan of the podcast. So happy to be here.

Alejandro Cremades: So born in Italy So give us a walkthrough memory lane. How was live growing up there.

Luca Cartechini: Correct. No yeah life in italy is great to be honest, especially to grow up there and then I moved to the Uk for university um, so I did this ah master in management between London and Paris and I always worked in the u k so I never actually worked in italy. Despite being italian I started my career at Jeffries which is an investment bank with operation in Europe as well where I was covering decommerce space. So I was responsible for names such as boohoo acado azos sallando mostly like you know. European internet companies listed in the stock exchange with market cut between one and fifteen billion dollars and then after 4 years there I decided that I wanted to move on the other side. So from providing recommendation to actually execute the recommendation. So like you say they moved to this family office based in London called. Protos on ventures and was convinced pretty much by the quality of the people behind the project. The main founder was jar lopez that was the founder of Mongove Capital Partners thirty years ago so one of the first european venture capital funds first investor into Skype and weeks and stayed there for 2 years closed a bunch of transaction in the range of 1 and $ 10000000 seat and series a and then I decided to start shop circle three years ago

Alejandro Cremades: That’s amazing. So that’s the the thirty Thousand foot view now I want to ask you this you know because being italian you know I’m I’m spanish and they obviously you know it’s a similar way of looking at life and and seeing things you know, very traditional to you know the the type of cultures. So.

Luca Cartechini: Similar ah the similar argument as well.

Alejandro Cremades: What go you? Yeah yes, So obviously we we don’t have the passdown fortunately but we do have the tapas. But I guess the um, the question here that hits me is what got you thinking about wanting to go Abroad. You know wanting to move wanting to explore the world. What was outside of Italy I Guess how did that you know, ah. Come up for you and then how do you think that world view has shaping up things for you.

Luca Cartechini: Yeah, for sure. So um, I’ve always been quite international with my educational experience so during my bachelor degree I did an exchange program in Germany as well and one thing I realized is that immediately was studying a lot but I was not putting into practice that much what I was studying. So. Um, the european let’s call it german and english experience was way more tactical and practical. So I decided to move there for my master degree and also then from a work perspective adejandro you get naturally attracted by the Uk because I always worked either in finance or technology. And the ukmarket is way larger than the italian 1 right I think in terms of like venture capital you’re about 10 years ahead in terms of like amount of capital raised and invested every year in the U K versus italy. And also in terms of finance you know most of the major investment banks are based in London usually they are americans and they have a european branch like Jeff is the one that they work for so um, yeah, it is a great market as well. We have a lot of clients there but in terms of like starting a company and raising capital. The Uk is a much better place at the moment particularly London also because it gives you access to the american market way more and most of our investors so far we closed 4 rounds 3 of them being institutional and all of them were led by american investors and for American Investors usually it’s much easier.

Luca Cartechini: And much more frequent and likely to invest in a Uk -based ltd rather than our italian company so we started our team here. We have ah an office in italy as well relatively small. But yeah I enjoy the life in the uk and italy is pretty close as well.

Alejandro Cremades: So you were alluding to this earlier. You know the experience also of venturing into the venture world right? I mean obviously the the whole venture capital and startups is very different from. What you were doing at Jeffrey’s and from also the traditional you know backgrounds that we have where it’s all about going into becoming a banker a lawyer or a doctor you know so venturing into Vc you know it’s a little bit you know, especially you know in Europe now obviously the industry and the landscape you know has say shaping up. But. You know it’s still quite the shift you know for for for for anyone coming out of italy or or Spain. So I guess in your case, what caught your eye from the venture capital industry that you are like hey you know what maybe makes sense for me to give it a shot at this thing.

Luca Cartechini: Yeah, it’s it’s a good question I guess Luca through I was working banking and working on later stage companies right? usually companies with a lot of revenue ipida and so forth. But I was lucky enough to cover the technology space. Um, so I was let’s say closer to the technology trend and hence venture capital in comparison to someone that was covering industrial utilities or health care. So I was covering names that sometimes were venture picked as well. Um, and it became like a natural transition that there wanted to be more on the buy side and then at that point it was a decision between being in the late-tage private equity growth faculty or venture capital I enjoyed more the early stage side had the hand because at some point like you I wanted to start something of my own. So I told that by um, you know, entering the venture capital space or seed series. A I would be closer to the starting phase um initiating a company hiring the first people raising the capital and then after 2 years I learned a lot about that and decided to start my own company. Ah, you’re right I mean in a certain way. Europe is very different from the us most of the people working venture capital they usually come from institutional background meaning you know banking consulting which is something that hopefully will change at some point because I think the best investor in the venture capital space are former entrepreneurs.

Luca Cartechini: And it’s changing a bit but it’s nowhere close to the us where most of the people that dobc they usually have at least a department level previous entrepreneurial experience. So to be honest I realize now. Um as an entrepreneur. How bad I was as a bc in terms of like I was providing a lot of recommendation to. Our portfolio companies without knowing the daily struggle that entrepreneurs go through so I definitely think that an experience as an entrepreneur make your much better investor and that’s the reason why I’m ah investing a bit as an engineer investor now because you’re closer to the trend. Um, but also like the transition from banking. Especially if you come from the technology space buff in investment banking and equity research to Vc is relatively smooth.

Alejandro Cremades: Now as part of being on the other side of the table. You know, being an investor which is different from where you are now I Guess the yeah the what? what? what kind of exposure and and what did you learn when it comes to Pattern recognition from companies that. Are worthy from companies that maybe are not going to have that big of a shot at making it happen.

Luca Cartechini: Yeah I think at the beginning Alejandro is um I mean everyone speaks about that. But really, the team is the most important thing right? and having a team product feed which means someone that you know has a previous experience in what he’s doing as well. So. For us. It was very important to start a company when we start the ship circle we put together a strong team with people that had relevant experience right? What we do a shop circle and we haven’t mentioned yet. We are the first provider of software for ecommerce brands particularly on Shopify. We have 100000 clients there and we provide everything into one solution. So. Is all in 1 software platform some sort of like Microsoft ofcommerce for brands operating on shopify and so for us it was very important me coming from finance was good I had an experience in ecommerce but it was very important to surround myself but people with specific expertise in certain areas. So my cofounder John Maria comes from Amazon and our Ceo at the time stano was coming directly from shopify on the development side and that is very important at the stage right? Most of the first round at cron when you don’t have a product yet is mostly based on the team and then the other important point is always going to be. The total addressable market and I teach entrepreneurship at university as well or better how to raise capital and that’s usually these are the 2 things that investor obsess and the question that you always receive when you raise the first institutionra how how big is the market.

Luca Cartechini: Um, um, is is there are many competitors in there is it at least $1000000000 how much is it growing. What is your likelihood to capture a good percentage of that market. So these are the 2 most important trends in terms of like you know raising a seed first institution around or not team. And ah, the size of the market for sure.

Alejandro Cremades: So At what point does the um idea of maybe switching sites and building something of your own and I always say in this case, you know what ended up being shop circle. But how does that process of incubation and and thinking and then for you to say hey. Maybe it’s time for me to go to the other side of the table now.

Luca Cartechini: Yeah I guess like at some point you know Vc is a very good job I think but it’s also a bitlimorized so you learn a lot but after 2 years that there was there was feeling okay I always see companies on the seed stage but I never see the next step. So the learning corep is very steep but then is also like taking a lot of time for you to know whether you’re a good investor or not right because sometimes it takes 10 years for a company to exit and they wanted to do something a bit more practical I wanted to build companies from scratch I want it to be um. More involved in the operation whereas as a vc obviously you cover Twenty thirty companies at the same time. So the level of your recommendation are always high-level but you never go in the needyredy details of building a company. As a funder is the opposite right? You became an expert in 1 era in our case software for ecommerce brand and then you must you master operation hiring fundraising um hr development product management customer service and a lot of that which is something that they missed in. Venture capitala right? No matter how operational can acb they will never replace the founder right? The recommendation that they provide is always a bit high level and then some of them. For instance, we have nfx and qd that are extremely helpful in terms of operation but particularly in certain areass.

Luca Cartechini: With certain people from their platform team and so yeah, at some point I was feeling like you know that’s the right time I was twenty seven years old at the time which in europe is considered to be very very young. But I think that age is perfect right? because the tradeoff. Not losing much if it doesn’t go well, you can always go back to your work in my case, equity research or venture capital. But also you have way less commitment right? You don’t have family. You don’t have huge builds so say let’s try now. The market was pretty hot at the time in 21 we came together with myfounder. It was not very difficult for me to convince him to leave Amazon because he was in a similar position as I was at the time and we started. We started for three months just to explore the idea. Um and then very quickly. We started fundraising and in less than three weeks raised more than one point five million dollars from angel investor all over Europe and so we decided to go full time into the idea and I think with hindsight was probably the best decision of my life.

Alejandro Cremades: So just for the people that are listening to get it. What ended up being the business model of shop circle. How are you guys making money.

Luca Cartechini: Sure. So um, we operate muslim shopify at the moment shopify is the largest d two c platform in the world. Alejandro is a $2000000000 company and the second largest competitor in the space of direct to consumer so selling online directly to the consumer. Is big commerce which is ah approximately 100000000000 less so a hundred times smaller than shopify. So shopify is almost like a nature of monopoly for direct-to-cons consumer it’s the equivalent of Amazon but for direct-to-consumer brands is used by approximately 3000000 merchants all over the world. But in my opinion, the real strength of shopify is the partner ecosystem. So for every dollar that shopify makes their partners make 7 times more and by partners I mean agencies so people helping you to set up your source and apps software so you have an app store on shopify of approximately 10000 apps of which 5 of them already reached the unicornvalluation. You might be familiar obviously withlaio. Then there are a bunch of other names postgre gorgeous attentive recharge and a few others and then there are thousands of bustrap developers which are very good at doing from 0 to one but they struggle with the scale up either because they lack the expertisesis. Or the resources and that’s one circle um, came along so either either acquire these apps or we start them from scratch and at the moment we operate 40 solutions so 40 different software in the space of delivery inventory payments digital downloads.

Luca Cartechini: And we centralized everything under one brand the problem that ecommerce brands are facing at the moment. All hungry is that they used to have five ops ten years ago and now this number of apps that they’re using went top 10 times right? So they’re using thirty five forty products and they don’t want to deal with 40 different point of contacts and the swihop circle exists. We centralize all the customer service in boarding experience the partnership experience at the building as well under one solution which is shopsu so we are. All in 1 software platform which serve approximately now 100000 clients all over the world. Um, and yeah, that’s what your circle stand for it’s practically a software provider for ecommerce brand. We want to build an operating system so similar to Microsoft but just for ecommerce.

Alejandro Cremades: Now in this case, you are alluding to it earlier. You guys say went at it and you were very successful. You know, quite early already with fundraising I know that you guys have raised close to 140000000

Luca Cartechini: France.

Alejandro Cremades: In in this case, you know how has it been the fundraising experience. You know going through these different you know rounds that you guys have done.

Luca Cartechini: Yeah, so obviously the market was very different two years ago aleandro than than it is now right? just the amount of capital raised in us and Europe I think went down about 3 times in 3 years on the back of 2021 with interest rates very low. Um, it was much easier. There was much more capital flowing. So the first round were very smooth I remember the first institution around after the engine round that I mentioned before we raised we ended up raising a bit more than seven seven point five million dollars and we initially planned for $3000000 we closed the whole process in one month received something like 6 or 7 term sheets for the lead. So the market was very hot at the time now this time has changed right? It doesn’t exist anymore that you receive a lot of term sheets just with one month of fundraising the funds take way more time. Ah, to assess the opportunity or we still manage to you know, um, over the next two years to raise 2 audition around. We’re very wellcapitalized at the moment and to increase sustainably the valuation. So we never stretched the valuation too much all my friends that raised from you know tiger global or softbank. Very high valuation as struggling at the moment for us. It was never the case. It’s always been very rational. Um and based on fundamentals because also because I come from a very traditional background of equity research where the valuation is very rigorous.

Luca Cartechini: Um, and so yeah, it’s been slightly more difficult on the other round but the traction was there. So once the revenue are there and also like our business is running at about 20% of the margins at the moment. Um, we help to speak with more investors practically because you know. Many investors, especially last year were active but they were not actively investing right? They were saying that they were investing but they were not so the amount of interaction probably doubled in comparison to the first round but at the end we still managed to subscribe both the third and the fourth equity rounds and we’ll probably do something. Later this year but for us personally was not extremely difficult because the traction was there just the process got extended. So from one month we went to let’s say three months um mostly because a lot of investors takes more time to do due diligence and also because now there is. More financial to due diligence right? like we went from 0 to more than 20000000 a are we have twenty Twenty five percent topi the margins. Obviously there are all the software specific metrics to assess so it takes more time to assess an opportunity like this and also the nature of the investor change a lot right. Stage usually the focus more on team and tam so total addressable market as I mentioned before whereas series a series speed tend to focus more on financial model traction net dollar retention um customer acquisition over ltb and all the other software specific metrics. So.

Luca Cartechini: The process is different. It’s more analytical and more based on trash.

Alejandro Cremades: So then obviously you know too on the I mean you were you were talking about the the way to think about valuations and and also the way that you guys have gone about scaling up the operation to the m and a has been a very important component. You guys have done about 14 acquisitions. So. Seems like you know quite the activity and on the on the m and a side on the buy side. So how did you guys come up. You know with the idea of using acquisitions as a way to really build up the infrastructure of the business and the growth of the business and then how have you guys gone about. Also the integration because as they say most acquisitions fail. It’s all on the integration. So talk to us about this.

Luca Cartechini: Yeah that’s that’s correct. We did a more than 10 acquisition over the last three years um reason being so we do both we on one hand we start up from scratch and we are in a unique position to assess the needs of our clients because we sit on 100000 interaction every year with our clients. And on the other hand we alsoportunistically look at um, different solution to complete our tech stock obviously for us we often do acquisitions that are not ah for m and a transaction with 5000 people involved right? certain times you can have and this the beauty. Of the app store and boost drop apps. You can have sometimes Alejandro apps that have 2 3000000 errorar run by 1 or 2 people so with crazy bit the margin but obviously it makes the integration much easier now. In comparison to all the other serial acquires. We took a different approach and for instance, you might be familiar with costerllation software right? which is a canadian company listed for and it’s worth $80000000000 they only do acquisition. They’ve been doing acquisition in the software space for the last thirty years amazing um share price performance over the last five ten years and very much acquisition agreement although they keep all the operations separate or at least in terms of like running these standalone products because they acquire from different verticals as well for us at the common point is that we acquire software within the same framework right.

Luca Cartechini: In our case is shopify so all our apps they operate in the same ecosystem and they serve the same clients as well. So let me give you an example for instance from a product and marketing perspective if 1 of our merchants. Let’s say the big names Patagonian espresso code gate. Utilize an app in the shipping space then they may as well utilize another up from the supply chain space or inventory space that comes from ship circle right? There are clear synergies utilizing multiple apps from the same provider the same way that you utilize Microsoft word and Microsoft Excel from the same provider and so the integration usually it’s easier because the framework is the same which is the shopify one shopify is an amazing ecosystem for developers and it attracts the best developer in the world but has also various 3 um sort of like framework and rules for the apps to be published and so. We are lucky enough now to have centralized team the look after all our products in terms of marketing email automation partnership customer service and once we’re acquired on product then it’s very easy to integrate because we have more than 100 people that are experts in these different ters and then on the other hand product and development is done on an up level basis. So again, the thing. The reason why it’s been relatively easier for us to integrate these products is because they’re all part of the same ecosystem which is the shopify app store.

Luca Cartechini: And they share a lot of common features then um, obviously there is a lot of work to do but we’ve been focused on this from the very beginning so I like to think that m and a is a muscle and if you train it from the very beginning then it comes relatively easier. Although. I still believe that we are a full product software company so out of um, more than 150 people that we have with the team at the moment. The corporate development team is only like 3 or 4% of our total workforce and all the others are operator so people that usually works on development. We’re a software company product management growth and customer service. These 4 areas combine they contribute to approximately eighty eighty five percent and once you have this this strong backbone of people working on operation then it’s relatively easy to add additional products to our current text. And at the moment where at approximately 41 solution all centralize under 1 brand and again this is a mix of acquisition and apps created from scratch.

Alejandro Cremades: So obviously you know like to do the acquisitions to receive investment to get customers to onboard employees vision is a really big one when it comes to vision if you were to go to sleep tonight Luka and you wake up in a world. Where the vision of shop circle is realized what does that world look like.

Luca Cartechini: Yeah, so our goal is always being and the vision as well ale hand there’s always been the same from the very beginning we wanted to create the first operator of ecommerce tool globally. So it means that whatever your needs from our ecommerce brands perspective. You would come to ship circle. And we’ll be able to help so literally helping brands with everything they need from a product technology perspective and at the moment that’s what we’re doing. We are present in approximately nine out of 26 categories on Shopify. So there is a long way to go and then the plan is to expand. To other platforms as well. For instance in the d two c space shopify is by far the winner right? is I mentioned it before is hundred times larger than the second biggest competitor which is big commerce. But then you know there is a common trend where d two c prints. So. They also have a presence in the marketplace which in this case, especially for american clients that contribute to approximately 50% of our client space is Amazon so on 1 hand you want to have a presence in a marketplace because it’s easier to be discovered and there is a lot of traffic on Amazon on the other hand you want to have a brand. Proprietary website where you own the relationship with the client and where you increase the equity value of the brand. So at the moment we have approximately 25% of our clients that also have a presence on Amazon. So next we’re also looking at the Amazon software space.

Luca Cartechini: Ah, the moment we’re extremely happy with shopify and we’re doing an excellent job there shopify as a platform is amazing keeps growing despite covid is not there at extremely high growth rate. It’s going at approximately 20% yearronia so again, the goal is to be the Microsoft of ecommerce. Serving brands with everything they need from a product and technology perspective. It’s more medium enterprise but also large enterprise some of our clients I mentioned them before we have pattagon and espressso coldgate um and a few others but we also have thousands of sole entrepreneurs. Dropshippers small mini enterprise brands and we’re very happy to build for both.

Alejandro Cremades: So we’re talking about the um, the future here but I want to talk about the past and I want to talk about the past with a lens of reflection because you’ve been at it now with shop circle for a couple of years but I want to bring you back in time I want to put you into a time machine and bring you back in time to 2000 maybe 2021 you know when you were thinking about doing something of your own and let’s say you’re ah you’re able to have a chat with that younger Luka and you’re able to tell that younger Luka you know 1 piece of advice before launching a business but would that be and why given what you know now.

Luca Cartechini: Sure so I mean the first one is ah try early alejandro so I hear a lot of people especially in Europe where you know they need to have 1015 years of experience work in a consulting firm or in a bank in order to start their business I think. Starting early is a big advantage right? because you have possibility to fail and the perception of around failure also in europe shifted a lot so people appreciate young funders trying and for us it was ah a huge advantage right? We had very little to lose no bills to pay. Not a lot of commitments and it worked at the first time because we’re building something very cool I like to think but for other people it’s not like this and it’s totally fine, right? You can go back to your job. You can you know, try again. So I think starting early and be persistent right? You also have to get used. To a certain number of rejection that naturally come so venture capital as an asset class is very selective so on average. Also if you are a seed stage fund you invest in one out of maybe between 800 opportunities that you speak with so for the founder. Um, you know you need to get used and comfortable with the idea that you’re going to hear a lot of rejection, not necessarily because your product is not good, but just because you’re playing against the odds. So the only way to navigate and mitigate this.

Luca Cartechini: Just to speak with as many funds as possible, especially at the very beginning where you don’t have a lot of trust and that’s even more true with this um market right? I often hear how a handlero people and founders that speak only with 10 funds and then they say okay, no one invested in us and then they quit. Reality is that it’s not enough you need to speak with as many funds as possible because that’s how the whole industry works and even the best companies go through it especially at the seed stage and especially when you know the market is not great as it is at the moment. So. First of all start early and secondly be persistent and not be discouraged by rejection but actually use them as an opportunity to prove them wrong over time.

Alejandro Cremades: I love it Loca for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.

Luca Cartechini: Yeah, I’m pretty active on Linkedin so they can reach out to me on Linkedin. Um, and not as much active as I like to be on on x or Twitter so I think Linkedin is the best way to do it. Luka Kar the key and otherwise you know if there is someone interested in shop circle. Overall they can also reach out at info at shop circle.seo with any request that you might have.

Alejandro Cremades: Amazing, well easy know hey Luca thank you so much for being on the deal maker show today. It has been an honor to have you with us.

Luca Cartechini: Thanks a lot for having me alejandro and thanks everyone for listening.

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