Fintech & e-commerce Retail and Direct To Consumer

Acquco Secures $160M Series A To Help Amazon Third-Party Sellers Exit Their Businesses

E-commerce platform Acquco raised $160 million in Series A funding to acquire and scale Amazon third-party sellers to be the next generation of retail brands.

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After working at Amazon, Raunak Nirmal and his co-founder Wiley Zhang, who has a background in finance and consulting, launched the New York-based company in 2020. Nirmal and Zhang have worked together for seven years, building brands such as RefundLabs, which automates the inventory claims process for third-party e-commerce merchants, and consulting for companies. That led them to Acquco. They stepped down from RefundLabs to run Acquco, which acquires brands and takes them to the next level.

“We were building tools, and were told to go out and build a brand on Amazon to figure out the pain points,” Nirmal told Crunchbase News. “Three months later, we came up with an idea that could mean billions. I was promoted to product manager to execute the idea, but a few months later, I left Amazon to pursue that business I started that sold $7 million in the first year.”

The funding round included CoVenture, Singh Capital Partners and Crossbeam, as well as individual investors such as Aman Bhutani. Previously, Acquco raised less than $2 million, Nirmal said.

“Acquco’s unique position versus its competitors, driven by the deep Amazon experience and strong vision of its founders, has created an unparalleled investment opportunity in a massive, growing market,” said Ali Hamed, founder of CoVenture, in a written statement. “We are incredibly excited to partner and work alongside their team to take the next step and drive growth at scale.”

Investor attention

Acquco is the latest acquirer of third-party sellers, also known as e-commerce aggregators, to raise a significant amount of capital this year. Last week, Germany-based Razor Group announced $400 million in equity and debt funding, while Berlin Brands Group, also from Germany, announced $240 million debt financing. All three join a long string of aggregators attracting capital.

Taliesen Hollywood, director of mergers and acquisitions at London-based Hahnbeck Business Systems, an e-commerce M&A firm that tracks funding to FBA (fulfillment by Amazon) acquirers, said it is a seller’s market, but isn’t ready to call this a bubble yet.

“The most attractive FBA businesses — the largest ones, with the strongest net profit margins, simplest operations and most defensible positions — will continue to be sought after by all of the buyers, resulting in very high valuations for these companies,” Hollywood said via email. “Many of these acquiring firms are going to make a lot of money out of this, even if they have to overpay slightly on the more competitive deals, paying perhaps a 5x to 6x multiple rather than their objective of buying at a 3x multiple.”

While the acquirers are improving the businesses they are acquiring, a few of the biggest challenges that have emerged are deal flow, especially for the newer acquirers, and being able to scale the team and operations fast enough to actually deliver on their promise to improve the business, Hollywood said. If they are unable to do that, they will struggle to manage the businesses better than the entrepreneurs they’ve acquired them from, at least in the short term, he added.

Building a business

Meanwhile, Nirmal intends to use the new funds to scale Acquco’s portfolio to more than $500 million of revenue by 2022 and continue developing its technology. It has already made it to $100 million, he said. The company also plans to grow its headcount to more than 100 by the end of the year from its current 35 employees.

As to the market and if it can handle the numerous competitors, Nirmal said the market is large enough. Within Amazon’s 2020 total gross merchandise volume of nearly $490 billion, its Marketplace accounted for $300 billion in sales, up from $200 billion in 2019, according to Marketplace Pulse estimates based on Amazon disclosures. Where Nirmal said Acquco differentiates itself is in the founders’ expertise and a set of play books they’ve written to address a host of situations.

“We didn’t initially plan to get this sum of money, but we have grown so rapidly and have a competitive advantage given our expertise,” Nirmal said. “We want to build the largest portfolio of brands in the world, and in order to achieve this, we have to raise capital and continue to acquire brands. We have a unique perspective to automate the entire brand, not only on Amazon, but across all retail channels.”

Illustration: Dom Guzman

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