Big Money Rounds Flood Amazon Aggregator Space

While many of us will spend a fair amount of money on Amazon this holiday season for gifts, venture capitalists and others are instead putting their money into companies that buy up brands on the Goliath’s marketplace.

Subscribe to the Crunchbase Daily

Just on Tuesday, San Francisco-based Heyday announced it locked up a $555 million Series C that reportedly valued the company at more than $1 billion. That round is far from the only big round in the space, as a wave of startups have raised huge sums of both equity and debt in order to buy smaller merchants on large marketplaces such as Amazon, Walmart or a variety of other platforms both domestic and international.

“No question, there’s a tremendous investor appetite for aggregators right now,” said Carlos Cashman, co-founder and CEO of Thrasio—which last month announced the initial closing of a $1 billion Series D at a reported valuation of between $5 billion and $10 billion.

The massive sums of cash are needed to acquire smaller merchants, which are then integrated into these aggregator’s platforms that use data and analytics to help the brands scale up growth they otherwise may not experience.

This year alone more than a dozen huge rounds have inundated the space, including:

• In addition to the round announced last month, Thrasio raised a $750 million round of financing in February and a $650 million debt facility in September.
• Also in February, Paris-based Branded raised a $150 million Series A in a round led by Target Global.
• In May, Berlin’s Razor Group raised a $375 million mix of debt and equity, Boston-based Perch raised $775 million led by the SoftBank Vision Fund 2 and Luxembourg-based factory14 raised $200 million.
• In July, New York-based Elevate Brands raised a $250 million round. The company has raised more than $372 million this year—including another $55 million this month.
• In August, London-based Heroes raised $200 million in debt financing, Minnesota-based Suma Brands raised $150 million in a mix of debt and equity, and Berlin-based SellerX raised approximately $113 million.
• In September, Berlin Brands Group raised a $700 million private equity round from Bain Capital, and London-based Olsam raised a $165 million Series A.
• And earlier this month, Berlin-based Razor Group again closed a large round—this time a $125 million Series B that values the company at more than $1 billion.

Seeing tailwinds

These are just some of the examples of the $100 million-plus rounds aggregators have seen, as investors see significant potential in the business model. Aside from optimizing these brands’ channel and sale opportunities, these platforms also try to provide retail expertise and product development for the brands they acquire to help spur on growth.

In the meantime, these aggregators also provide an exit for the merchants themselves, who may otherwise be too small to sell their brands.

Jake Vachal, managing director at The Raine Group, which co-led Heyday’s recent round, said the sector has been bolstered by several e-commerce tailwinds, including the COVID-19 pandemic accelerating e-commerce growth and penetration, the increasing numbers of third-party sellers on Amazon, and a highly fragmented third-party ecosystem that provides tens of thousands of acquisition opportunities for these platforms.

“As new brands with consumer interest are launched every day, we think there is no limit to Heyday’s ability to find and acquire companies with significant growth potential and sustained brand equity,” he said.

“This is a big sea change,” said Sebastian Rymarz, co-founder and CEO of Heyday. “There has been a massive change in spend behavior and that has required infrastructure changes.”

Investor interest high

Rymarz said Heyday actually increased the size of its recent round while fundraising due to the interest the company saw. He scoffed at the notion the market may be “frothy” right now when it comes to investor interest and value.

“I wouldn’t say it’s ‘frothy’ at all,” he said. “I’m surprised it’s not higher.”

Cashman pointed out that when looking at many of the larger rounds, it is also important to understand that those numbers are usually a combination of debt and equity investment—though both are still indicative of the interest in the space.

He added the sector is also seeing the benefit of what’s happening in the greater economy, where there is a lot of cash available right now and much of it is searching for returns.

Nevertheless, there are trends in buying that seem to bolster the business model these platforms are supporting.

“We are witnessing a massive transformation, as everything is really finally flipping over to digital,” he said. “The groundwork has been laid, and the winners are taking outsize returns very quickly.”

Cashman said while a company like Thrasio could not have existed even 10 years ago, it can now, and has grown to over a billion dollars in revenue in just about three years.

“We have uncovered a space that is huge—the change of consumer hard goods from a physical, locational-driven model to a digital-first, non-locational future,” he said. “We’re talking about at least $4 trillion to $5 trillion in consumer spend that is transitioning in this way and growing every year. This is also why you’re seeing more investment in this space.”

Illustration: Dom Guzman