Why Thrasio Could Be Beating Amazon at Its Own Game
Nov 08, 2021
A new kind of business has emerged profiting from the online shopping boom sparked by the pandemic: Amazon aggregators, who buy up pre-existing third-party companies operating on Amazon and increase their profitability. But how has a Massachusetts-based aggregator managed to outperform almost every seller on Amazon? And what opportunities does this open up for investors?
Opportunities for direct investment access to Amazon aggregators currently in the late-stage and pre-IPO stages are increasingly popping up on investors’ radar screens. Today, that translates into exciting opportunities for private markets investors who prefer to avoid the scramble of an over-subscribed IPO but are attracted to a startup’s late-stage financing (i.e., the growth/profitability stage).
The Amazon landscape changes as third-party sellers come to the fore
When the now-ubiquitous online shopping marketplace was founded, Amazon sold nearly all the products available for consumers to buy. Over time, though, the number of “FBA” (fulfilled by Amazon) entries has skyrocketed as third-party companies started using Amazon’s platform as a vehicle through which to sell their wares – five million of them, in fact. Now, these third-party sellers have nearly outstripped Amazon, selling more products than Amazon itself, in percentage terms. In turn, this has given rise to a new kind of enterprise: aggregators.
Thrasio leads the pack, with a high-profile executive team and a wide-ranging portfolio
Leading the way is Thrasio, founded in 2018 by Carlos Cashman, an MIT graduate, and Joshua Silverstein, a Wharton Business School alum. Since its establishment three years ago, the company has exploded and is now home to more than 1,000 employees worldwide. To date, it has made 43 acquisitions in total – and all in cash, to boot. Speaking of boots, Thrasio’s product range spans a dizzying spectrum, from fitness equipment through to pet-care supplies and, indeed, hiking paraphernalia. With such a diverse range of products on offer, Thrasio’s broad-based positioning leaves it less vulnerable to market whims than firms specializing in one type of product or niche.
Buying up companies, improving their business models and boosting profits
In principle, Thrasio’s business model (followed by other aggregators) is simple: it pursues the “acquisition entrepreneurship” strategy. The entrepreneur buys a pre-existing company rather than starting one from the ground up. In practice, the team at Thrasio scans through Amazon’s bestseller list to identify companies that have made it big but might have reached their limits with their products. Aggregators like Thrasio buy these companies out and then use their marketing expertise, synergies and other insights to push profitability skyward. Rolled out across thousands of brands (Thrasio has evaluated no fewer than 6,000 companies since its inception), the economies of scale can offer spectacular gains at every stage of the process, from marketing and production to shipping and logistics.
A win-win for small businesses, consumers, and Thrasio alike
Part of the success of these aggregators lies in the fact that their work is beneficial for all parties involved. Small-business owners whose enterprises have reached their natural limits in terms of the time and expertise available have an easy (and profitable!) exit. It guarantees ongoing cash-flows, thanks to Thrasio’s earn-out strategy that pays them a steady income. At the same time, aggregators can step into an established business with a ready-made following that they can build up and build better: Thrasio themselves put the year-on-year increase in revenue for brands under their management at a hefty 233%. If that weren’t enough, consumers could benefit, too, from gaining a greater choice of products at a better value.
USD 1.5 million in revenue per day, a valuation in the billions, and 9-figure raises
This all adds up: the firm just closed an all-equity Series D round of over USD 1 billion, led by Silver Lake and Advent International, and previous backers Oaktree Capital Management, LP, PEAK6 Investments and Corner Capital again being on board. Moreover, as confirmed to TechCrunch without going into specifics, Thrasio put its valuation anywhere between a whopping USD 5 billion and 10 billion . In contrast, a recent Financial Times article put Thrasio at 6 billion US dollars. And investors are taking notice, too. Before the latest round, the company had raised 2 billion US dollars in capital in just three years, courtesy of elite investors such as Goldman Sachs and Bain Capital, to name just two of the major firms who’ve seen the value in their business model. With acquisitions of 1.5 million US dollars in revenue each day and two or three deals being closed each week, Thrasio is experiencing real momentum that shows no sign of slowing down.
What’s in store for the future: a SPAC or an IPO?
Thrasio had allegedly been considering going public via a special-purpose acquisition company (SPAC), with a CNBC article reporting that the company’s president explained a SPAC was “not the right choice at this time.” TechCrunch suggests a traditional IPO might be on the table, but one thing is for sure: now is the time to get involved.
Contact Stableton or sign up to explore our investment opportunities
In the past, accessing a high-potential segment like Amazon aggregators meant seeking early access through venture capital funds (which, once well-established, might not even be interested in your commitment). In addition, it involved high investment minimums, cumbersome paperwork, scarce information (often not even knowing what you will be investing in), and long holding periods.
Today, there is an alternative. Accessing promising businesses via late-stage investment and pre-IPO investments is increasingly popular. For one, investors know the name of the company they are investing in. Secondly, as in the case of Thrasio and other Amazon Aggregators, the product-market fit has already been established, and the path to profitability is clear.
To hop on an investment at this stage means a lot of upside potential, while the risk level stays relatively moderate.
Stableton is Switzerland’s leading provider for access to late-stage venture capital & pre-IPO Investments to smaller qualified investors. Our mission is to help investors get access to the otherwise secluded private investment market. With a minimum of CHF 10’000, this type of investing should be considered as part of a portfolio. This article only scratches the surface of the possibilities late-stage VC and pre-IPO investing present. Contact your Stableton representative to learn more and find out about opportunities that exist right now.
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*Disclaimer: The above article is for educational purposes only and does neither constitute investment advice nor should it be considered to be an invitation or recommendation to buy securities or any other investment products. Please consult your financial advisor about the risks and opportunities prior to making investment decisions. By clicking on that link you confirm that you are a resident of Switzerland and a Qualified Investor according to the new Swiss legislation on collective investment schemes (CISA and CISO).
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