In the past year, there has been a seismic shift in consumer behavior across industries. One of the industries reaping the benefits of this is e-commerce, which has seen massive growth. Digital Commerce 360 estimates that US e-commerce sales accounted for about 21% of total US retail sales in 2020. Consumers spent a whopping $861.12 billion online; that’s up 44% YoY.
When it comes to the e-commerce landscape, Amazon is a significant beneficiary of this extensive increase. Numbers reported by The New York Times suggest that over the past 12 months, people spent $610 billion on Amazon. And because third-party retailers make up 56% of Amazon’s retail sales, these businesses are benefitting, too. The shift from shopping in brick-and-mortar stores to online is also paving the way for Amazon FBA (Fulfillment by Amazon) aggregators – large companies that are purchasing these smaller third-party Amazon sellers.
Investors are now looking to Amazon to acquire FBA businesses more than ever. New venture capital firms are springing up to get in on the action. But who exactly is funding these aggregators and why?
Why Companies are Backing Amazon FBA Aggregators
The growth of Amazon aggregators makes sense given the history of business aggregation in other markets. The type of consolidation that’s happening in the FBA space has happened in other sectors too. Currently, aggregators with large funds are eager to plunge into the market. This, in turn, delivers a high level of professionalism to the brands they acquire and accelerate growth while generating profit for their investors.
The roll-ups acquiring FBA businesses are essentially looking for companies selling on Amazon that have achieved market fit for their products and have an established network of suppliers and manufacturers. In return, aggregators offer software platforms, distribution relationships, expertise in navigating the market and scaling expertise and strategy.
Raised capital is at an all-time high, while buyers look to diversify their acquisition strategies to include e-commerce businesses on the Shopify and Magento platforms, as well as affiliate sites correlated to their e-commerce brands. Aggregators are fighting to differentiate themselves, either by spending money to woo sellers, offering referral bonuses, or writing thought leadership content. It’s rumored that at least one of the top aggregators is planning to go public via a SPAC in the next 12 months and while most are still cash flow negative, some have focused on profitability rather than revenue growth in the short to medium term.
Why are these acquisitions mainly focused on Amazon and not on any other e-commerce marketplaces? There are several reasons:
- Amazon is the leader in e-commerce sales
In 2020, Amazon had the #1 ranking in US e-commerce with $309.5 billion in sales. That is six times more than its closest rival, Walmart. - Third-party sales on Amazon are consistently growing
Since third-party sales started on Amazon, they have accounted for 58% of Amazon sales and are growing at 52% a year. - Buyer journey starts on Amazon
When making a purchase, 53% of US adults start their product search on Amazon. This trend continues across other countries that have a strong Amazon presence. - Fulfillment by Amazon (FBA) helps build a scalable business
Outsourcing fulfillment to Amazon helps boost sales by providing free shipping to Prime customers, offloading a heavy operational load from the seller and helping deliver a consistent customer experience through timely and accurate shipping. - Formula for success is repeatable
Once a business has figured out how to grow a brand on Amazon, understands the marketplace dynamics and operates in compliance with the policies, these learnings can be applied to develop the next brand.
Source: Celigo
The Strategy Behind the Funding
To grow their portfolio of FBA businesses, significant aggregators such as Thrasio, Heyday, Cap Hill Brands and Perch have received billions of dollars in financing from institutional investors. Many have raised record amounts of funding. In fact, firms acquiring successful brands on Amazon have attracted over $3.5 billion in capital over the past twelve months. $2.5 billion of that raised in just the first four months of 2021, according to Market Pulse. Not all firms have disclosed their funding yet, so the true number is even higher. Capital committed is a combination of equity and debt. In addition, there are hundreds of established sellers, “private equity firms, family offices, and individual investors making acquisitions in this space; thus, the market’s total buying power spans beyond the aggregators,” says Market Pulse.
So, what does it mean for sellers in the space that there are so many aggregators?
Many think this means that multiples will continue to rise without a cap, but this isn’t necessarily true. Many aggregators and funds who have debt facilities will be capped by the lender on what multiple they can offer if they are utilizing debt as part of the transaction. It does however mean that terms and structures may get more advantageous with more cash upfront and more lucrative earnouts.
We’ve also seen aggregators look to new niches they were previously uninterested in as they search for ways to deploy capital. Historically, everyone wanted to acquire businesses with the home, sports, outdoors and baby niches, but now there has been more interest in the health and wellness, topicals, as well as food and beverage niches amongst others.
The following are some of the key aggregators:
One of them is the market-leading, US-based company Thrasio, which has raised a total of $2.4 billion to date, achieving unicorn status. According to Celigo, the aggregator has acquired more than 100 Amazon businesses and has a portfolio of more than 15,000 products. And as the fastest-growing acquirer of FBA businesses, they are spearheading the aggregator space. This summer, news emerged of their plans to go public via a merger with Churchill Capital Corp V.
Another noteworthy player among roll-ups is Europe’s leading aggregator of third-party e-commerce businesses, SellerX. In August, the company announced raising €100 ($118) million in primary equity funding – the most significant sum in a financing round by a Europe-based Amazon FBA aggregator. To date, their total funding lands at $266 million. According to reports, SellerX is now one of the fastest-growing companies in Europe. In their first year of operation, they have impressively gone from zero to 250 employees.
“The investment marks an exciting new strategic partnership for the company being led by the Growth Fund of L Catterton, the world’s largest consumer-focused private equity firm. Additional participants include Belgian investment company Sofina, as well as existing investors Cherry Ventures, Felix Capital, and 83North.”
SellerX co-founder Philipp Triebel is pleased that the money raised is equity instead of the typical debt-based financing. “What’s so exciting about this round is that all of the €100 million is equity. It puts us in an incredibly strong position to raise further debt and to keep building our portfolio by acquiring the best Amazon sellers in Europe, the US, and China,” he says.
The Boston-based technology-driven commerce company Perch acquires and operates top Amazon third-party and other D2C brands at scale. The company has raised a total of $908.8 million in funding over four rounds. Their latest funding was raised on May 26, 2021, from a Series A round. Investors include Spark Capital, Tectonic Venture, Soft Bank and Boston Seed. Perch is one of the largest aggregators in the FBA roll-up space and is recognized as one of the acquirers with a large appetite for more operationally complex businesses.
Unybrands is an e-commerce platform aimed at acquiring successful Fulfillment by Amazon and direct-to-consumer sellers looking to scale. To date, they have raised $325 million in funding with investors like DIA Management, Nathan Blecharczyk, 166 2nd Financial Services, Day One Ventures, Brian McGrath and Benvolio Group
With total funding of $245 million, HeyDay is also one of the larger acquires in terms of funds raised. The aggregator takes a slightly different approach than others in the space. They believe in the importance of brand and seem to be more selective with the businesses they choose to acquire – focusing on brands with the potential of becoming household names. HeyDay is backed by investors such as Level 5 Capital Partners, General Catalyst, Khosla Ventures and Arbor Ventures.
Boosted Commerce is a CPG platform that buys a variety of verticals and business sizes. Their total funding amount is $137 million from Torch Capital, Crosscut Ventures, Spencer Rascoff (75&Sunny), Elie Seidman, Tucker Kain (Elysian Park), Ken Ramberg, Scott Hendrickson, Thomas O. Staggs, Marc Mezvinksy and David Farahi.
The founder of Boosted Commerce, Charlie Chanaratsopon, is also the founder of the Charming Charlie retail chain which he built to 350 stores and $550 million in sales. Boosted is co-founded by serial entrepreneurs, who have scaled several 9-figure businesses between them. According to themselves, “Boosted’s mission is to create life-changing opportunities for thriving entrepreneurs. We are acquiring a select group of Amazon-based brands & private-label FBA businesses that are uniquely positioned for growth in 2021.”
Founded in 2021, with locations in Munich, Germany and Boston, US, Mantaro Brands is helping shape and accelerate a new era of e-commerce growth by acquiring Amazon FBA brands that are sustainable and inclusive. Their goal is to help brands realize their long-term potential and give business owners the freedom to pursue their next big idea. The Mantaro team, full of seasoned experts, prides itself on a transparent and efficient buying process. They typically close deals within 30 days.
The aggregator looks across product categories and seeks purpose-driven and environmentally-conscious brands they think can have long-term impacts. They acquire brands that have a minimum of $500K in annual seller’s earnings, with a sweet spot of $5M.
Who’s Funding Who in the Amazon FBA Aggregator Space?
Buyers vary from large public and private companies that are already brand-holding companies focused on a mix of retail and e-commerce, to companies looking to diversify their own revenue streams in adjacent niches. Individual accredited investors as well as traditional private equity funds are also vying for Amazon and general e-commerce deal flow.
Below is an overview of some of the most significant Amazon FBA aggregators, their total funding and the companies and investors who are funding them.
Beyond the FBA Aggregators
Aside from the FBA aggregators mentioned in this article, there are many other roll-up companies and others interested in acquiring FBA businesses. When working with your M&A advisor, you will discuss your goals to determine who the best buyer for your business is. In some instances, the answer may not be an aggregator. Other types of investors interested in acquiring these businesses include private equity firms, strategic businesses in your market, individuals and public companies that sell similar or adjacent products on a different scale. FE International has a vast array of individuals and businesses in our investor network of 80,000+ vetted buyers.
We have sold Amazon businesses to and received offers on Amazon businesses from multiple different buyer types including aggregators, public companies, Fortune 500 companies and individual investors. Transactions can take on a variety of structures and we’ve worked with sellers to model out future cash flows and shape transactions in a number of ways. Our e-commerce team is active in the e-commerce community attending conferences, meeting with market leaders and even running some of their own e-commerce storefronts. At FE, we specialize in multiple types of digital business models, so we’ve truly seen (close to) it all.
If you are interested in selling or acquiring an Amazon FBA business, please get in touch with us.