First image source: TechCrunch
When domestic investors regretted missing an Internet celebrity consumer brand, overseas investors have turned to “believe” in consumer product integration companies.
The company began to make money from the first day of its establishment, and within a year, it turned into a unicorn, and the investment opportunity that VC dreamed of appeared.
Starting from November 2020, 5 companies receive investment on average every month. Half of the projects have raised more than 100 million U.S. dollars in a single fundraising. The most exaggerated project’s valuation has increased by 32 times in one year, and revenue has doubled every 73 days. The debt financing adds up to nearly 2 billion U.S. dollars.
These crazy fundraising and wild growth companies are doing one thing-integrating the big sellers on the Amazon platform, and developing the big sellers from 1 to 100 through a unified middle-stage operation and management.
65+ companies rush to Amazon
The United States, Mexico, India, France, Britain, Germany, Spain… Many Amazon seller integration companies have sprung up all over the world, as many as 67.
(Data source: Marketplace Pulse, public information)
Entrepreneurs pushed Quanyue Capital’s favor on this track. Since the beginning of this year, in just six months, more than 5 billion U.S. dollars has flowed to the Amazon seller integration company. 👇
Thrasio, founded in 2018, has so far acquired more than 100 Amazon brands. In February and April this year, it completed two consecutive rounds of financing, raising US$850 million, with a valuation locked in the range of US$3-40 billion;
Perch, established in 2019, completed its Series A financing two months ago. The second phase of the SoftBank Vision Fund led the investment of 775 million U.S. dollars, with a total financing of more than 900 million U.S. dollars;
Razor Group, a Berlin company established in August last year, raised 400 million US dollars in May of this year. The company expanded to 107 employees in just one year, entered Germany, the United Kingdom, the United States, India, and China, and completed the acquisition of 30+ brands ；
Moonshot Brands, which appeared on YC Winter Roadshow Day this year, was scrambled for shares by major Silicon Valley VCs and eventually raised $160 million, except for YC, Victory Park Capital, Liquid 2 Ventures, Garage Capital, FoundersX Ventures, Outbound Ventures, N49P, KSK The founders of Group, Soma Capital, UpHonest Capital, and Hippo, Lambda School, and Shift participated in the investment.
When the domestic investor is missed when a consumer brand network red regret, overseas investment capital people have turned to “faith” to integrate consumer goods company.
Today, Amazon occupies 40% of online shopping traffic in the United States. For every US dollar spent online, 40 cents flow to Amazon. In 2020, Amazon created $475 billion GMV, of which 5 million third-party sellers contributed 63%, and 1 million of these 5 million sellers were newly added last year.
An example that has been repeatedly used by overseas media to demonstrate that the Thrasio model is feasible is China’s Anke. This is a typical successful case of Amazon’s big sellers. Anke, founded in 2011, started by selling mobile phone chargers on Amazon. It has been with Amazon for 10 years. The development of the three-party seller market has grown into a 3C electronic brand worth tens of billions of dollars, with revenue of 1 billion U.S. dollars in 2019 and listing in August 2020. The current market value is 66.59 billion yuan.
In the same period, the consumer brand company, Internet celebrity mattress brand Casper, went public in early 2020, and its stock price has not performed well. Now its market value is only 340 million U.S. dollars; glasses e-commerce company Warby Parker expects to IPO this year, with a post-investment valuation of 3 billion U.S. dollars in 2020; sports shoes Allbirds The listing plan was finalized this year, with a target valuation of US$2 billion; Away, a light luxury suitcase, will have a 55% decline in sales in 2020 due to the impact of the epidemic.
In contrast, is Anke not fragrant?
At present, about 50,000 of Amazon’s top 5 million sellers have annual sales of more than one million US dollars. If sellers at this stage want to grow their company to tens of millions of income, they usually encounter bottlenecks-funding problems, team problems, strategic problems…
Brand integration companies represented by Thrasio, the founding team generally has a wealth of e-commerce, mergers and acquisitions, and brand operation capabilities. Their goal is to strengthen the deficiencies of the acquired brands through unified middle-office operations and management Income increased to tens of millions of dollars.
Image source: thrasio
As for the feasibility of this business model, Thrasio founder Josh Silberstein is full of confidence: “If we exit with 10 billion US dollars, I will call myself C-; 25 billion US dollars exit, B+; 50 billion to 100 billion US dollars exit, A-.”
$1.4 million investment in exchange for $16.5 million output
“This boom is very exaggerated. One or two years ago, Amazon sellers received about 50 inquiries after listing their selling intentions. Now they can attract two to three hundred buyers within one hour.” Jason Guerrettaz said. His company WebsiteClosers.com connects sellers with buyers.
This also makes the purchase price soar. Thrasio founder Josh Silberstein has a personal experience. Initially, they set a price for Amazon’s big sellers, and 2 times EBITDA is enough. However, with the frantic influx of competitors, the purchase price was fired to 2.7 to 2.8 times EBITDA.
Nevertheless, the profit margin is still considerable. The cost of acquiring a major Amazon seller is much lower than that of acquiring a DTC consumer brand. Moreover, after the acquisition, through refined operations, it can generally help its revenue grow rapidly, and finally get a return of about 6 times EBITDA.
Take the pet deodorant brand Angry Orange as an example. Thrasio only paid 1.4 million US dollars when it was acquired three years ago. At that time, Angry Orange’s annual revenue had reached 2 million US dollars. Of course, 1.4 million US dollars is a huge sum of money for the founder, but not worth mentioning for Thrasio. A mere million dollars in exchange for a brand with great growth potential. After the completion of the acquisition, the brand’s annual revenue has doubled by 8 times, reaching 16.5 million dollars.
“Very few institutional investors are willing to buy brands with less than US$5 million in profits. It is difficult for these founders to exit. We stepped in at this time and paid them directly (US$1 million) so that they could become millions in an instant. Rich people, they can do new things.” Josh Silberstein said.
How does Thrasio work?
The first is to select the acquisition target. Brands with annual sales of US$10 million to US$10 million and well-received brands are included in the scope of Thrasio’s acquisition. To be more detailed, the standard for praise is at least 500 positive reviews, and the product has a score of 4 stars or more. At the product selection level, try to avoid renewal of high-frequency electronic products, fashion brands, food, daily groceries, and brands that rely heavily on the founders to operate.
Based on accurate product selection, the TS issued by Thrasio has a high probability of being accepted by the seller. About 98% of the TS is accepted, and a single acquisition can be completed within 30-40 days.
After the completion of the acquisition, the brand enters Thrasio’s “maintenance system”. A small team of 6 people spends about a month to “renovate” the brand according to more than 500 guidelines, and if necessary, it will also seek help from external supply chain experts and lawyers, etc. . For example, in the task of enhancing brand image, the Thrasio team must ensure that the product display page has at least 7 high-definition large images (occupying 80% to 90% of the display space), because large images will attract more clicks.
Thrasio’s branded maintenance upgrade system covers these aspects:
Taking Angry Orange as an example, Thrasio changed its product packaging, looked for online celebrities in the pet field, increased search terms on Amazon, improved search rankings, and finally expanded its category.
So far, Thrasio has acquired more than 100 brands, including air beds, trekking poles, outdoor sports equipment, in-car vacuum cleaners, foot massagers, etc., forming a complete set of brand trading strategies, from brand upgrades, play styles, and supply chains. The capital budget can be skillfully copied to the growth of the brand, and sales can increase significantly in about 2 months.
Thrasio Team Source: Thrasio
This style of play is also very labor intensive. At the beginning of 2020, Thrasio had only 150 employees, but now it has expanded to 700. At the same time, Thrasio’s 2020 profit reached 100 million U.S. dollars.
What does the Amazon title mean to Thrasio?
Relying on the Amazon platform, consumer product integration companies such as Thrasio took off quickly. Through mergers and acquisitions, most companies are profitable at the beginning of their establishment. However, relying too much on Amazon’s single platform will also cause the company’s foundation to be unstable, and even a little disturbance may trigger an earthquake.
Once a brand has established a moat on Amazon, it is difficult to lose. “Amazon’s algorithm makes the strong stronger.” Of course, this also means risk. The Amazon platform has set up hundreds of business rules. There can be no shortage of goods, no delay in responding to consumers, no control and evaluation… Once violated, it is lighter. Relegation is about title.
Just like the Amazon account ban event that occurred in the past two months, a large number of Chinese sellers have been affected, and the possibility of blocked accounts being restored is almost zero. According to the estimation of the US e-commerce data company Marketplace Pulse, the total sales of suspended sellers exceed 1 billion US dollars. Many companies that rely on Amazon’s single-channel sales were forced to declare bankruptcy.
Amazon’s attitude in this action is very clear, resolutely creating a true, honest, fair and healthy trading platform. The era of barbaric growth has passed. In the future, sellers must be more cautious and adopt reasonable and compliant competitive methods. At this time, the value of brand integration companies such as Thrasio is more worth thinking about.
On the other hand, this also shows the cruelty of Amazon. The rules of the game are set by it. Although third-party sellers are an important pillar of Amazon, they are not irreplaceable. Once Amazon believes that the brand integration company threatens its interests, the Thrasio will not know.
Currently, brand integration companies are still optimistic. Thrasio co-founder Carlos Cashman compared Amazon’s relationship with them to the relationship between landlord and tenant, ” Simón Property Group (landlord) does not want to drive out Foot Locker (chain shoe store).”
Carlos Cashman source: twitter
The founder of Heyday, who has received 175 million US dollars of investment from General Catalyst, Khosla Ventures and other institutions, believes that “If Amazon becomes unfriendly, sellers will choose other platforms, then Amazon can provide consumers with fewer product categories, lower quality, and higher prices. This is inconsistent with Amazon’s 25-year consistent strategy.”
The founder of Perch is more realistic. He does not believe that relying on Amazon is a long-term solution. “In 2 to 3 years, 25% to 50% of Perch’s revenue will come from channels other than Amazon.”
Thrasio has put the SPAC listing plan on the agenda. The integration of Amazon’s big sellers is indeed a very fast-growing and very profitable business. It is no wonder that entrepreneurs from all over the world have poured in.
Before the ban event, 42% of Amazon’s top sellers came from China. After this reshuffle, I don’t know how many sellers will stay, but this also frees up a place for new sellers to join. Currently, Thrasio has settled in Shenzhen, China. I don’t know if and when a brand integration company born in China will appear.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/in-half-a-year-it-sucked-5-billion-the-valuation-of-the-project-increased-32-times-in-one-year-and-the-new-us-consumer-giant-swam-into-china/
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