“A lot of startups in the last 18 months have had to avoid the elephant in the room - profit. We are that elephant.” - Karl O’Brien and Thomas Gleeson on Storehero’s “infinite opportunity”
An interview with Karl O’Brien & Thomas Gleeson, Co-founders of StoreHero, by Joe Gorman NDRC Programme Manager.
Karl O’Brien (CEO) and Thomas Gleeson (COO) of StoreHero
Thomas Gleeson and Karl O’Brien, the founders of e-commerce analytics startup Storehero, don’t look tired. There are no circles under the eyes and neither is yawning, despite balancing round-the-clock shifts supporting customers on four continents with preparing for a pitch to four hundred people at NDRC Demo Day. Both of them laugh, almost maniacally, when I ask what a restful day looks like.
Neither founder is especially good at being idle. O’Brien started digital marketing agency Effector straight out of college and still juggles working there with building a high-growth tech startup. Gleeson met his chronically busy other half while balancing a nighttime degree at Griffith College with a full-time job managing major merchant accounts at Shopify.
(Right to left) Mark Cummins with O’Brien & Gleeson
“We were connected on LinkedIn but didn’t know each other. It was two or three days before I presented my final project in college when Karl messaged me out of the blue, asking if I’d take a look at this e-commerce thing he was working on because I worked at Shopify. Lo and behold, he presented 90% of what my final project was. I thought my lecturers had been chatting to him!”
The two subsequently connected on several Zoom calls, and the rest is recent history. “Managing a team, you don’t have an opportunity to talk to anybody about your problems. Basically, I can burden Thomas with problems and Thomas can burden me with problems,” O’Brien says. Gleeson interjects: “It’s a weird relationship. My girlfriend calls Karl my boyfriend.”
What drew the two together? Both had an interest in e-commerce: Gleeson grew up with his family operating a brand, while Effector’s work had gravitated towards online brands over the course of the pandemic. For O’Brien, the link between the two is the same reason that brands gravitate towards Storehero:
“We both had a principled approach to e-commerce. The fundamentals of finance are being left aside by brands that don’t have a profit-first view of their business. The years of cheap customer acquisition costs meant that businesses didn’t need to focus on those fundamentals.”
Gleeson agrees: “Years of cheap customer acquisition costs on Google and Meta allowed e-commerce to flourish, but it actually bred terrible habits in the industry. If you pumped more money into those channels, you drove more sales and the whole thing just worked. But if you asked the business owner if they understood the unit economics and how it all knitted together? Anyone who's been truthful with you will probably say they didn't.”
O’Brien & Gleeson during NDRC Accelerator mentoring session with Michelle Fogarty
Both co-founders could see that the lack of understanding around unit economics created a lot of business owners who had no idea how much profit they were making with every order. The economic winds have shifted since those heady days when ad spend reigned. For O’Brien: “The margin of error for businesses has tightened.”
Previously, brands relied on gross profit as a bellwether of their fortunes, but gross profit doesn’t take ad spend into account. This resulted in plenty of experimentation with ad campaigns, as brands did not really know how much they could afford to spend in order to grow. Storehero’s secret sauce, by contrast, is structured around the concept of contribution margin, or profit after marketing:
“Storehero, ultimately empowers brands with confidence and clarity in how much they can spend to reach maximum profitability. We give specific insight into how much profit you’re making per order so that you know whether to spend more or spend less. Previously, it was a guessing game where you were making a decision based on revenue-based metrics. People were taking shots in the dark on a daily basis.”
The founders wanted to help the e-commerce brands that were left ashore as the tides of cheap customer acquisition pulled away. Both have run businesses themselves and clearly want to help entrepreneurs squeeze more value out of the effort it takes to market, sell, and ship physical products. Their growth as a business started as an analytics dashboard, but is now focused on educating brands on the business fundamentals and unit economics that will effectively drive profitability:
“People don’t have a methodology for how to grow their business based on profit. It doesn’t exist in e-commerce. Storehero doesn’t just offer profitability analytics, we provide education and create a framework for growth. Prospective customers in the US and Australia share their screen and show us screenshots of all the manual work and spreadsheets they use to get to the same place that StoreHero gets to in real-time, every day.”
Gleeson and O’Brien both have impressive backgrounds, but their star power lies in their understated prudence. The first e-commerce brand that Gleeson helped on this journey was his mother’s, as he encouraged her to apply the same profit-first principles that he saw the most successful brands using in his day-to-day work at Shopify.
Throughout the conversation, both founders speak zealously about profit as the driving force behind e-commerce brands. Rationality and sustainable growth are prized. You get the sense that the company culture they’re building won’t include Nerf guns and unlimited beer taps. It’s similar to the tone that VCs are adopting in the post ‘grow or die’ world. I’m curious to ask the founders - who raised €600k last year from a combination of angel investors and Enterprise Ireland - do investors appreciate Storehero’s respect for rock-solid business fundamentals?
O’Brien laughs, “A lot of startups in the last 18 months have had to avoid the elephant in the room - profit. We are that elephant. By building a product specifically focused on profitability, we’re confronting that rather than putting it to the side.”
Do any of them ask why haven’t Shopify built this? To Gleeson, it’s the same reason why Meta or Google haven’t built an engine that indicates which ads perform best:
“If all businesses truly knew how they were performing from a financial standpoint, the amount of Shopify stores would halve by the morning. A lot of them should not be in business. There are tonnes of unprofitable e-commerce businesses operating because of a lack of clarity on the numbers. They don’t know how much they are making - or should I say, losing.”
O’Brien jumps in: “At Google or Meta there are hundreds of billions spent on paid advertising that is incredibly unprofitable. That’s a huge opportunity for us. If businesses become more profitable and have a clearer view of their profits, we grow quicker. We have the same incentives as brands and agencies.”
There are over 4.6 million Shopify stores, though a second, compelling opportunity lies with the agencies supporting brands with Shopify operations. Shifting the conversation into an outline of their longer-term strategy, O’Brien explains how these agencies can have a multiplier effect on Storehero’s growth:
“If agencies integrate Storehero on a white-label basis, they are part of the profitability conversation, which is a huge strength when they’re talking to brands. They can retain more customers. They can charge more. They can educate brands. It’s ultimately what HubSpot did to grow so dramatically. They created an ecosystem of people who understood B2B marketing and could monetise that with HubSpot agencies. We see a similar opportunity for Storehero on the e-commerce side.”
The founders have made impressive progress since the cold blue glow of a pandemic-era Zoom call brought them together. Can they grow into a global business to topple some of the world’s e-commerce giants? O’Brien gets the last word:
“We see ourselves at the intersection between marketing and finance. Storehero has the opportunity to link these two functions to give brands the playbook for growth. With a combination of a framework for e-commerce based on profit-first marketing, a tool to facilitate that within brands, and an ecosystem of agencies and partners to help brands do that on a weekly business, the opportunity is infinite.”