A new generation of digital-first companies has emerged, capitalizing on the reduced cost of building minimal viable ventures and advancements in Generative AI. These companies can quickly develop chatbots/companions, education tools, image generation tools, lightweight SaaS apps, and games for a global customer base. However, selling these digital products worldwide is still complex. Founders currently need to integrate various tools for payment processing, customer support, tax calculation, marketing, and retention, to meet the diverse regulatory, currency, and language requirements across different geographies. A simpler alternative is on the rise: the adoption of a Merchant of Record (MOR) platform that simplifies the complexities involved in global sales, allowing founders to concentrate on product development. This post explores the requirements for selling digital products globally, the current entrepreneurial landscape, the benefits of using an MOR platform, and strategies for reaching the right customers and establishing sustainable value. In the 2010s, there was a surge in direct-to-consumer online businesses due to factors like widespread smartphone usage, social media reach, and the ease of selling physical products through platforms such as Shopify. The next wave of digital-first companies has been steadily growing and gained momentum with the advent of Generative AI, particularly with the launch of ChatGPT in November 2022. These companies focus on digital products that can be easily sold worldwide without the need for shipping. Existing e-commerce platforms primarily cater to physical products and cater to a single primary market, lacking the necessary features for digital-first products. This presents an opportunity for new platform companies to emerge and empower digital-first, AI-enabled, global companies. To effectively sell software/digital products globally, founders require the ability to accept payments through various local payment methods, implement usage-based billing and subscription models, handle tax compliance and remittance, prevent fraud, and provide customer support and retention strategies. While larger companies can establish internal processes for these requirements, startups often face challenges in integrating and maintaining multiple vendors, diverting valuable development time away from building their products. A Merchant of Record (MOR) is an entity that accepts payments on behalf of businesses, similar to the Apple App Store for mobile apps. The MOR handles payment processing, fees, refunds, chargebacks, billing-related customer support, and ensures compliance with global tax regulations. MOR platforms also have the potential to create network effects by cross-selling products from multiple merchants during checkout. For instance, Digital River successfully achieved this in the '90s by offering a range of financial services products alongside merchandise. Unlike the physical-product wave, the current digital-product wave is predominantly led by technical founders, creating an opportunity for developer-first platforms and community-driven developer distribution. Point solutions or MORs can become the standard for the "Selling" function in building AI-based applications within the emerging JavaScript stack.

Similar to how Shopify helped startups become well-known brands, the next generation of digital, AI-enabled companies will also require simplified platforms, whether through point solutions or MORs, to expand their global customer base. If you are working in this field, we would love to connect with you. (Github repository here!) The views expressed here are those of individual AH Capital Management, L. L. C. ("a16z") personnel and do not necessarily represent the views of a16z or its affiliates. Some information in this post has been obtained from third-party sources, including portfolio companies of funds managed by a16z. Although deemed reliable, a16z has not independently verified such information and assumes no responsibility for its accuracy or applicability. This post may contain third-party advertisements, which have not been reviewed or endorsed by a16z. The content is provided for informational purposes only and should not be considered as legal, business, investment, or tax advice. Consult your own advisors for guidance in these matters. References to securities or digital assets are for illustrative purposes only and do not constitute investment recommendations or offers to provide investment advisory services. Furthermore, the content is not directed at or intended for use by any investors or prospective investors and should not be relied upon as the sole basis for investment decisions in any a16z-managed fund. Investments or portfolio companies mentioned are not representative of all investments in a16z vehicles and there is no guarantee of profitability or similar results in future investments. A comprehensive list of investments made by funds managed by Andreessen Horowitz, excluding undisclosed investments and unannounced investments in publicly traded digital assets, is available at [https://a16z. com/investments/](https://a16z. com/investments/). Any charts and graphs included are for informational purposes only and should not be the sole basis for investment decisions. Past performance is not indicative of future results. The content reflects the perspective as of the indicated date and is subject to change without notice. Projections, estimates, forecasts, targets, prospects, and opinions expressed in these materials may differ or be contrary to others. Please refer to [https://a16z. com/disclosures](https://a16z. com/disclosures) for additional important information.