It’s not the size of the dog in the fight, it’s the size of the fight in the dog.

Lightspeed has long been a proponent of investing in digitally native vertical brands. Given the investor enthusaism for companies like Casper, Warby Parker and others, we are not alone. One of the reasons that we’ve seen an increased focus on DNVBs has been a certain level of fear of competing with Amazon. Amazon is a ruthless and powerful competitor and it now controls 44% of all online sales. Retailers both online and offline fear the “Amazon effect”. Conventional wisdom holds that you can’t beat Amazon and hence multi-brand e-commerce startups will be hard.

Sometimes though, it helps to check theory against reality to see if the predictions from theory are valid. So we took a look at all of the e-commerce outcomes in the US and Europe that were over $1bn. We did not include China, India and other geographies, not because there isn’t a ton of value being created there, but because Amazon is not as significant a factor in those geographies. Here they are, ordered from largest to smallest:

· Zalando (public at $6.8B, current market cap of $12.93B)

· Wayfair (public at $2.2B market cap, current market cap of $5.8B)

· Chewy (acquired by PetSmart for $3.35B)

· Jet (acquired by Walmart for $3.3B)

· Yoox/Net a Porter (public at $0.5B, current market cap of $3B)

· Zulily (public at $2.6B market cap, acquired by QVC for $2.4B)

· Dollar Shave Club (acquired by Unilever for $1B)

It’s also worth noting that Stitch Fix has become the leader in delivering a personalized shopping experience, and that Farfetch did over $800M in GMV in 2016 and is rumored to be on track to a $5bn IPO. Both of these are also multi-brand retailers.

Many will be quick to point out that some of these companies are anomalies. Jet had the remarkable Marc Lore as a founder. Chewy was an unusual strategic acquisition in that it constituted over 30% of the value of the combined entity. Zalando and Yoox/NaP are European companies. It’s easy to point at any one company and say that it doesn’t generalize. But at some level, the data is clear. Multi-brand e-commerce retailers CAN be built into incredibly valuable companies. Which means that Amazon can be beaten.

In my partner Nicole’s three part post on e-commerce investing, she gives more detail on other major players in e-commerce and how Lightspeed approaches this space. Nicole points out that e-commerce sales are currently a small (8.5%) but rapidly growing share of U.S. retail. While Amazon is by far the leader, the rapid growth of e-commerce sales (estimated to be 20% in 10 years) provides significant opportunity for e-commerce startups. We’re still in the early innings and there is plenty of time for new winners to emerge.

To be clear, we continue to be enthusiastic about DVNBs and continue to do so (e.g. Rothys). But we are also open to investing in multibrand retailers (e.g. Hollar).

If you’re looking to beat Amazon and you’re having success, call us. We’re happy to help.

UPDATE: I’ve added some thoughts on why I believe startups can beat Amazon, Facebook and Google here.