SA国际传媒

听肠辞-蹿辞耻苍诲别谤蝉 and Sarah Walker felt it was time to look for a buyer for their brand after spending 18 months selling the company鈥檚 outdoor decor products on .

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The entrepreneurs always talked of selling their 4-year-old Australian brand, but were getting nowhere with traditional business brokers. Then they found digital consumer goods acquirer in 2019.

鈥淚t felt like we weren鈥檛 going to tell brokers what they wanted to hear,鈥� Sherman told SA国际传媒 News. 鈥淲e thought we were building something good on our hands, and the purchase orders were getting bigger, which meant the investment from us was going to be bigger. We wanted to feel Thrasio out, and their answer was 鈥榶es.鈥欌��

They ultimately sold their business last September and it is now one of 100 brands under Thrasio鈥檚 umbrella.

Founders like Sherman and Walker are seeing value in selling to companies like Thrasio and others. Often called rollup companies or aggregators, such companies purchase thriving private labels and direct-to-consumer e-commerce brands that sell on marketplaces such as Amazon and , and then use their expertise and capital to take the brand to the next level.

Walpole, Massachusetts-based Thrasio, founded in 2018, is one of the earliest companies to figure out the secret sauce behind Amazon鈥檚 Marketplace data. It鈥檚 also been successful in attracting venture backing and other capital, touching off a wave of competitors and investors eager to get a piece of the action.

Since the beginning of the year, at least six marketplace aggregators, including Thrasio, announced new fundraising deals:

• Thrasio raised $750 million of financing from a group of existing investors including and.
• raised $150 million in a round led by .
• , which uses a data-driven approach to acquire and operate Amazon third-party businesses, announced more than $55 million in committed funds from a group that includes.
• , which raised a $25 million seed round, launched an e-commerce platform aimed at acquiring successful fulfillment by Amazon and direct-to-consumer sellers looking to scale.
• , providing predictive value analysis and financial performance of online stores for e-commerce aggregators, $28 million in pre-IPO equity and debt from undisclosed backers.
• , which also acquires brands from marketplaces, said it raised $50 million from and funds managed by to grow its platform of consumer brands.

Last September, , a consumer packaged goods platform that buys a variety of verticals and business sizes, raised in a venture round. Shortly after, , a startup that acquires direct-to-consumer businesses that are selling on Amazon and growing their operations, $123.5 million in a new funding round led by. Then , a digital marketplace space built for sellers to accelerate consumer product brands emerged as a new player with funding.

In total, these companies raised just over $2.3 billion in known venture capital funding, with Thrasio leading the group with $1.6 billion, according to SA国际传媒 data.

Attractive enough to acquire

One of the fastest ways to go to market is to open a store on one of the marketplaces, said , business strategist and adjunct professor at .

Successful businesses end up gaining market traction with paying customers, and then get on the radar of dashboards that measure visits, sales, upsell and cross-sell, Nour said via email.

That鈥檚 when the rollup or aggregator companies, which have assembled deep domain expertise in merchandising, branding, packaging, scale, supply chain and logistics, come in and offer them either an investment or outright buy that small business, Nour said. Their strategy is to create a portfolio of small businesses around similar market segments or target customer segment audiences.

The portfolio, which could include anywhere from 10 to 20 brands, will create a critical mass, something like $50 million to $100 million in sales, and then sell that to a bigger player looking for that online sales presence, he added.

鈥淭hink of the mom-and-pop stores on Amazon or Shopify as undervalued assets. They’ve tapped into a niche and have grown their business as far as they can take it,鈥� Nour said. 鈥淲hen 鈥榖rand aggregators鈥� come calling with a sweet offer, they gladly cash out or earn out.”

Author and entrepreneur , a former Amazon third-party seller, sold one of his brands a few years ago, though not to an aggregator.

鈥淚 wish I had hung in there because the valuations now are insane,鈥� he said in an interview. 鈥淭hrasio has a strict formula, and their valuation is insane. Competitors are coming in thinking they can do something better.鈥�

Boyce is now founder and CEO of and helps entrepreneurs do what he did. He also consults with many of the aggregators and sits on the board of unybrands.

He also recently wrote a book titled, .

Not all businesses will be attractive to an aggregator, but if a founder can sell their business for three to 10 times EBITDA (or Earnings Before Interest, Taxes, Depreciation and Amortization), Boyce said to go for it.

鈥淚f you can get a 7-figure brand going and are clearing $100,000 or $150,000 EBITDA, consider selling to aggregators,鈥� he added.

The Thrasio model

Boyce believes much of the capital pouring into aggregators now is because of Thrasio, although it was not the first company to break into this space.

That credit goes to in 2018, experts say. The Austin-based company has raised in known venture-backed funding, according to SA国际传媒 data. In 2019, with Florida e-commerce software developer after not attracting enough investor interest, according to , co-founder of Los Angeles-based Boosted Commerce.

鈥淭hrasio鈥檚 success comes from the ability to take that marketplace data and do something smart with it where there was no ability to to that before,鈥� said , a former Thrasio executive and now co-founder and CEO of New York-based , a fintech startup providing funds to professional Amazon sellers. 鈥淭he genius was recognizing the data was there, as well as their ability to apply a layer of operations expertise to accelerate the business.鈥�

Although there are a number of companies on his heels, Thrasio co-founder and co-CEO doesn鈥檛 see many of them as competition because his business is unique, he said.

鈥淭here is no company like ours,鈥� Silberstein added. 鈥淭here are lots of people who only understand a third of our business plan and are trying to execute against it.鈥�

The statistics speak for themselves: The company set a record for fastest profitable unicorn, Silberstein said. The company also closed a record number of deals in 2020, and there are enough potential deals in the pipeline to more than triple that, he said.

Silberstein expects more aggregators will enter the market, but predicts that in the next few years the existing group of companies will self-separate into the 10 percent to 15 percent that have a chance to create value and the 85 percent that may not succeed. And, to further differentiate, any new entrants will have to figure out a new way to do it, rather than just replicate Thrasio鈥檚 business model, he said.

In addition, Thrasio is focused on following its terms of service and operating ethically, even turning down potential acquisitions if it doesn鈥檛 seem right, something some other companies aren鈥檛 as prudent about, according to Silberstein.

鈥淚 can guarantee you that people are finding a way into the market that are not coming at it with being the white hat as the core of their business,鈥� he added. 鈥淚 can see it in the companies they bought that we wouldn鈥檛 touch. There are lawsuits out there already from people who have experienced horrific things.鈥�

He also believes many of the companies are receiving funding because of his efforts: Between March and July 2020, he and co-founder spoke to nearly 50 different private-equity and venture capital investors, Silberstein said. The vast majority of them wanted to do business and, in fact, he received seven or eight term sheets, he said.

The thing that changed was 46 other large investment firms were now educated about the space and Thrasio didn鈥檛 take their money.

鈥淣ow there was a significant group of investors who bought into the thesis and wanted to place money,鈥� Silberstein added. 鈥淭he net result was a world where they wanted to invest and were looking for people in which to do that.鈥�

Broader ecosystem

Other companies take a different approach. , co-founder and CEO of digital marketplace Heyday, doesn鈥檛 think of the company he founded with in August 2020 as an investor, aggregator or a rollup.

Rather, he sees San Francisco-based Heyday as a company that is part of a broader ecosystem, not just acquiring businesses, but helping founders get off of the ground.

鈥淟ong-term, we want Heyday to be known as the platform to accelerate brands on digital platforms,鈥� Rymarz said in an interview. 鈥淥ur focus is on entrepreneurs. That starts with capital and forming relationships, but then adding technology.鈥�

As for other competition, Rymarz said the barriers to entry as an aggregator are not high. Anyone can raise a little money and buy businesses. He estimates there are between 50 and 75 aggregators in the space now, but predicts that within two or three years, obvious leaders will separate from the pack.

Now that much of the shopping world is direct-to-consumer, where brands have direct relationships with customers, many brands have emerged, custom built for that channel.

Some companies, such as Shopify, build tools for direct-to-consumer retailers. But, what鈥檚 been missing is a tech stack for marketplaces, and Rymarz said that is where Heyday comes in and is putting its to work.

鈥淲e are investing in technology, and though we are later to the game, we are the best capitalized behind Thrasio, and we are using it to our advantage,鈥� he added. 鈥淲e have already deployed most of our capital. When I look at Thrasio, it is impressive, but long-term, we will be bigger.鈥�

鈥楢 large pond and a lot of fish鈥�

The Amazon third-party seller Marketplace appears to be a treasure trove of successful businesses. Within Amazon鈥檚 2020 total gross merchandise volume of nearly $490 billion, the Marketplace accounted for $300 billion in sales, up from $200 billion in 2019, estimates based on Amazon disclosures.

鈥淎mazon鈥檚 ecosystem was suddenly an interesting thing that everybody I talked to was doing,鈥� Boosted鈥檚 Richman said. 鈥淭he entrepreneurs have done the hardest part: creating and sourcing their products and getting them into the hands of consumers.鈥�

He found the aggregator concept while trying to achieve product market fit for the company, which is a consumer packaged goods platform that buys a variety of verticals and business sizes. Richman started Boosted in 2019, and it acquired its first business by the end of that year. Boosted now owns 17 brands.

鈥淚t鈥檚 easy to find companies that want to be bought,鈥� Richman said. 鈥淭here is a large pond and a lot of fish in the pond, and an incredible number of sellers available for acquisition.鈥�

For Richman, the most rewarding part of the job is talking to founders who have achieved product market fit on Amazon.

One of those founders is . In 2015, he created the, a bathtub organizer for children鈥檚 toys. By that time, he was a serial entrepreneur with several successful e-commerce brands under his wing, including a women鈥檚 fashion brand that he operated from 1998 to 2007.

Early on, it was easy to have market share online, and the clothing brand consistently ranked No. 1 on searches, DiPadova said. Then in 2005, major clothing stores began pouring money into Google Ad words, making it all but impossible to rank near the top of search results, he said.

鈥淭his was before social media, so there was no way to launch a business and drive customers to your website,鈥� DiPadova added. 鈥淎mazon came to us to sell on its platform, but at the time, they wanted 38 percent of the margin, and the numbers didn鈥檛 add up, so we declined.鈥�

In 2015, he heard that Amazon had reinvented its Marketplace and decided to give it a go. Over the next five years, Tub Cubby became a hot seller and amassed more than 7,000 reviews on Amazon.

Five years later, DiPadova received another call, this time from Boosted Commerce asking if he wanted to sell his company. And, it wasn’t the only aggregator that came calling.

It鈥檚 been interesting to watch aggregators make 鈥渢he land grab鈥� for sellers, DiPadova said.

鈥淭hree of the top aggregators called us,鈥� he said. 鈥淏ut Boosted made an offer I couldn鈥檛 refuse. They have a real content-driven strategy and the best story on how to grow our brand.鈥�

His deal with Boosted closed in February, and now DiPadova has plans to move on with new products.

Investor interest

Third-party seller acquirers will continue to be popular because many of the large consumer packaged goods companies aren鈥檛 as good at selling online, according to , general partner at , a venture capital firm investing in consumer products and services.

鈥淭hese aggregator companies are good at the online perspective with distribution, marketing and supply chain,鈥� he said in an interview. 鈥淪mall sellers will want to have liquidity opportunities, so this is a win.鈥�

In addition, with the shift to online accelerating, largely catalyzed by the global pandemic, generated $80 billion in 2020, where it had been $12 billion in 2014, a growth rate Stoffer said is interesting to investors.

The enormity of the e-commerce market size was what attracted Vice President to co-lead the investment in Heyday last November. Data shows global, with revenue expected to grow to $6.54 trillion.

鈥淭his is one of the largest markets we can think of outside of infrastructure, software and health care,鈥� Crane said in an interview. 鈥淎nd we think there is more to go.鈥�

There is also plenty of capital yet to flow into companies in this space, and the companies that can innovate and move quickly will rise to the top, though Crane said it won鈥檛 be 鈥渙ne winner take all.鈥�

This area is still maturing and will evolve into bigger operations, perhaps adding manufacturing and fulfillment capabilities, said Crane.

Stoffer also sees a maturing of the ecosystem and consolidation of companies over time.

鈥淚t is still very early,鈥� Stoffer said. 鈥淲e see Thrasio is so big, which is immaterial of the Amazon Marketplace at large. My gut is that in four or five years, these companies will not be immaterial 鈥� they will be meaningful players.鈥�

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Editor’s note: The story was changed to reflect that Thrasio has 100 brands.