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E-commerce Market Experiences Significant Deal Increase; Pre-purchase Segment Shows Promising Growth

3 Min Read

By Stephanie Merchant - Client Services Manager

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Rising Deal Value Signals Optimism and Opportunity

In 2023, the e-commerce VC space witnessed a sharp decline in total deal value compared to the unprecedented highs of 2021 and 2022. Last year, $8.9 billion in total deal value was raised across 461 deals, a steep decline compared to 2022, with $31.8 billion in total deal value across 972 deals1. However, Q4 2023 saw a more than 100% increase in deal value quarter-over-quarter, with $3.8 billion generated from 116 e-commerce deals. 

Savvy investors are turning to pre-purchase startups, a small but trending segment of the e-commerce market, to stimulate investment growth in e-commerce. Pre-purchase startups are companies that are creating technologies to connect consumers to new offerings and personalized experiences in the early stages of their online purchasing journey. Many of these companies are using generative AI, hoping to increase customer engagement through technology, experience, and services, ultimately leading to greater sales conversions. Pre-purchase startups raised $135.3 million across 21 deals in Q4 20232.

The pre-purchase segment includes advancement in technologies specific to:

  1. Product customization and display: The demand for customized products is high. In 2023, more than 25% of all furniture sold online was custom-made, with other categories like customized luggage, bags, and home and garden products close behind3. The rise in customization is due in part to interactive product displays that include 3D imagery, interactive videos, augmented reality, and real-time online customization design tools.
  1. Dynamic pricing and inventory management: Generative AI and real-time inventory management are ensuring that customers are being served products and pricing that stimulate purchase. With the rise in data centralization and automated infrastructure, pricing and product on demand is becoming increasingly normalized.
  1. Personalization and automation: Nearly 3 in 4 consumers are more likely to purchase from brands that deliver personalized experiences—and they spend 37% more with those brands4. Customers are willing to provide personal information for improved experiences which include personalized messaging on the right channels at the right times. Marketing automation and data centralization are key to this success.
  1. Direct engagement and customer service: Direct-to-consumer sites were the third most popular online purchase channels in 2023, after marketplaces and supermarkets6. Spurred by social media as a key sales tool, along with chatbots, automated responders, contactless shipping and return processes, and more, continued growth is expected for Direct-to-Consumer brands.

Business Services Investor Insights in E-commerce and Pre-purchase Startups

  • Generative AI: GenAI is forecasted to have an average annual growth rate of 36% up to 2030, capturing 55% of the AI software market7. Online retailers like Amazon and Alibaba use AI during the pre-purchase journey to suggest products based on real-time data like trending items and customer preferences. OfferFit, a Boston-based promotional analytics company, uses machine learning to determine the most suitable promotions to offer customer segments. In 2023, OfferFit raised $25 million in Series B funding led by Menlo Ventures.8
  • Market Landscape: Although the e-commerce market as a whole is dominated by industry giants like Amazon, Alibaba, ASOS, Costco, eBay, and others; the pre-purchase segment itself is small and gaining traction through startups. In March 2024, an AI-generated promotional video startup called Tavus raised $18 million in Series A funding, led by Scale Venture Partners.
  • Risks and Restraints: Data privacy and security remain the large risk factors to any company that is producing new technologies. Additionally, human capital is becoming an increased risk due to the complex skills that software engineers must possess to develop advanced capabilities such as AI.9

Procuring Investment Success

Recent deal activity in the e-commerce space shows strong investor interest, particularly in the pre-purchase segment. With a rebound in exit values and notable deal-making momentum, the e-commerce investment landscape is set for a resurgence. As the market and technologies evolve, new opportunities emerge for investors to capitalize on this shifting landscape.

We connect private equity clients with experienced investment advisors who provide strategic guidance. Contact us today to find out more.

1 Market Map: Ecommerce plots a comeback with ‘prepurchase’ startups
2 Ibid.
3 Statista: Share of custom-made products in online offerings worldwide in 2023, by category
4 Deloitte Digital: Personalization: It’s a value exchange between brands and customers
5 Forbes: Top Customer Experience Trends In 2025
6 Statista: D2C e-commerce – statistics and facts
7 Forrester: Spend On Generative AI Will Grow 36% Annually To 2030
8 Market Map: Ecommerce plots a comeback with ‘prepurchase’ startups
9 Morningstar: Software Industry Outlook: Growth Drivers and Risks in 2024