Thrasio, the company that perfected the model of rolling up successful Amazon brands and driving operational economies of scale to supercharge their growth, has landed another $500 million in funding, pushing it over the $1 billion mark in less than two years.
The latest round featured a virtual who’s who in finance, including JPMorgan Chase, Goldman Sachs, RBC Capital Markets, Oaktree Capital Management, Bain Capital Credit, Barclays, BlackRock, BofA Securities, Credit Suisse, Monroe Capital, Morgan Stanley and UBS Securities.
The funding will be used to pursue larger targets, including up to $200 million dollar sellers on Amazon, and to step up its own product development to a couple hundred new items in 2021, from a few dozen last year.
Thrasio’s success has spurred a massive land rush of investment — $1 billion in 2020 alone — into startups that are rolling up Amazon sellers, including Perch, Heydey, SellerX, Boosted Commerce, Heroes, Razor Group and several others. In 2019, Amazon 3P sellers, representing 60% of marketplace sales, had over $200 billion in revenue, with tens of thousands north of $1 million.
Josh Silberstein, a founder and co-CEO of Thrasio, said he and his partners realized two and a half years ago that Amazon sellers making between $1 million and $10 million found themselves “stuck in a trap,” growing revenue but getting squeezed on margin. They were responsible for managing their own supply chain, marketing, operations, legal and more, a task that became more onerous as sales increased.
“Why not sell?” Silberstein asked rhetorically. “Well, the M&A market is tough, there’s a lot uncertainty. We said, we can solve both problems at the same time. We got into M&A as an institutional buyer, fast and definitive, with due diligence in 35 days in 98% of the cases. And by buying them up we create an entity large enough to get them out of the conundrum of being a $3 million business that can’t afford to hire a head of supply chain. The inefficiencies they’re facing and can’t afford, we fix by getting to scale.”
To date, Thrasio has acquired 93 Amazon sellers in consumer goods, generating $500 million in revenue and throwing off $100 million in profit, an impressive track record. Silberstein said the company has developed a “flywheel” of acquiring, integrating, managing and growing successful Amazon sellers. For instance, it has established “pods” of operations staff across disciplines, each responsible for brands representing about $100 million in revenue. And acquisition targets are vetted in a focus group approach, with a team that hasn’t been told who the targets are sorting through the top 100 sellers in a category, ranking them good to great.
“We identify the top four, and if the product has also been well reviewed and ranks well, that’s the center of the strike zone for us,” Silberstein said. “What we don’t do is invest or buy a business that’s subject to whim. No Fidget Spinners or drones, because someone will come up with a better drone. We stay away from obsolescence. At the end of the day, we want a great product with good reviews, that’s ranked well and is in a market that’s boring and unlikely to change. A spatula will still be a spatula in five years.”
Other items on the roadmap for Thrasio, Silberstein said, are establishing advertising partnerships with major publishers, launching a DTC site, getting into the retail channel and expanding beyond Amazon in the U.S to other markets.
“There are 20 different things we have in our digital ecosystem we think are synergistic with our Amazon business,” he said. “As we continue to grow that core, we’re also able do more with other channels surrounding Amazon. Retail is an obvious big one, and we have some retail presence. The opportunity is there in a very large way, but that requires different supply chain expertise. It’s not necessarily a step we take lightly, but it’s possibly multiple tens of millions of dollars. We’re starting to look at all of that.”