Elevate Brands, one of a growing group of aggregators acquiring successful Amazon businesses and layering on economies of scale, has raised $250 million in new funding, bringing its 2021 hoard to $317 million as the category continues to superheat.
The new funding comes from a diverse group of existing investors in technology, fintech and ecommerce, as well as new investors Novel TMT, FJ Labs, the chairman of SEA (owner of Southeast Asia’s largest ecommerce platform), the former CEO of The Iconic, board members of Yieldstreet and Advantia Health, co-founders of Intermix and Quadpay and Ted Zagat, co-founder of Rimeto.
Ryan Gnesin, CEO of Elevate Brands, said the company is profitable, has 25 brands in its stable and is underwriting seven more.
“Our categories are fairly diverse, and we’re agnostic to that,” Gnesin said. “We’re looking for businesses with more than $500 million in EBITDA, with a great quality product that has lots of strong reviews on Amazon. Typically, we look for something that’s a category leader, a business we can grow significantly through optimization levers.”
While a number of the brands come in with patents on their successful products, Gnesin that’s a huge plus but so are the reviews and having strong digital shelf space on Amazon.
Commenting on the size of the opportunity with Amazon 3P sellers, Gnesin said he estimates the current value at $300 billion in annual sales, expecting it to double in five years. According to eDesk, there are 5 million 3P sellers on Amazon, with 1 million added in 2020 alone, while Elevate Brands competitor Thrasio estimates 50,000 of them are at $1 million or more in annual sales, according to TechCrunch.
All the money pouring into the space, an estimated $6 billion just since March 2020 according to Marketplace Pulse, and competitors like Thrasio, Heyday, Berlin Brands and Perch all angling for top brands, has led to frequent bidding wars. This “expanding pie” has proven to be a boon for sellers, Gnesin said, with 2.5x EBITDA multiples from two years ago increasing by an estimated 70% or more.
“It’s to the point now where there are forces going in both directions,” he said. “On the one hand, there’s all the money being raised, while at the same time, many more sellers are entering the space, seeing how attractive it is to launch and sell an Amazon business a couple years later with a multi-billion-dollar exit. One seller we bought from, it was their fifth Amazon exit – they have a formula for it.”
As do its competitors, Elevate Brands has a lineup of experts from a variety of disciplines focused on helping optimize and grow acquired brands and products. Gnesin said it’s difficult for an entrepreneur or a small team to be world class at supply chain, branding, customer service, logistics, launching new SKUs and omnichannel expansion.
“Because of the strength of our team and the capital we’ve raised and our experience, we have experts in all those respective areas,” he said. “Our CMO spent 20 years in brand-building, and others previously managed global brands. Our head of supply chain ran that business at Lenovo, and we have M&A people from top accounting firms and investment banks.”
Gnesin said some thought he and his partners were crazy for starting Elevate Brands in 2016 – but now they’re picking up the phone. “Those same people are calling me to ask about launching an Amazon business,” he said.