- Thrasio, a startup that buys and grows Amazon third-party sellers, just raised $260 million at a valuation of over $1 billion.
- It's another sign of growing interest in investing companies like Thrasio or outright acquiring Amazon third-party sellers, as e-commerce continues to own a larger share of US retail market.
- Thrasio's co-CEO Josh Silberstein says he typically looks to buy sellers with revenues of $1 million to $10 million, and those that sell products with a "commodity element."
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The latest startup to reach the vaunted $1 billion "unicorn" valuation status is a company that buys and runs a portfolio of Amazon third-party sellers.
Thrasio announced on Wednesday that it raised $260 million at a valuation of more than $1 billion. The company, founded in 2018, simply rolls up a bunch of Amazon sellers and scales them under a unified operating model.
With the new funding round, led by the private-equity firm Advent International, Thrasio has nearly doubled its valuation from just three months ago, when its $110 million funding round valued it at about $600 million, according to PitchBook.
"We want to be the best buyer in this space," Josh Silberstein, a co-CEO of Thrasio, told Business Insider. "Our business model, at its core, is easy to understand but shockingly hard to replicate."
The funding signifies the growing appetite for investing in Amazon third-party sellers, which account for over half the products sold on the e-commerce site. As e-commerce continues to own a larger share of shopping — with Amazon expected to be the biggest winner in the US — companies like Thrasio are drawing unprecedented investor interest.
The demand for investing in seller holding companies or outright acquiring Amazon third-party sellers has been accelerated by the COVID-19 pandemic, which pushed more people to buy online while staying at home. Sellers in certain categories, like toys and health, are thriving, leading to higher deal prices and frequencies.
'No shortage of opportunities'Silberstein said Thrasio recorded over $300 million in revenue over the past 12 months, based on the combined sales of all the sellers in its portfolio. Thrasio has acquired almost 60 sellers since 2018 and sells over 6,000 products on Amazon's marketplace.
With the new funding, Thrasio is planning to double down on its acquisitions, Silberstein said. That means it could buy larger sellers and expand to other marketplaces. Recently, it launched a team that specializes in helping Shopify sellers.
Still, almost all of Thrasio's business comes from Amazon merchants that sell their own private-label brands. The bulk of its operating expertise is focused on Amazon's marketplace, with a team of over 300 employees that cover everything from supply-chain management, advertising, and content creation.
Silberstein declined to share the average deal size, but he typically looks at sellers with annual revenue of $1 million to $10 million, he said. Some of his recent acquisitions have grown to the $20 million to $25 million revenue range, with one seller under consideration having recorded over $100 million in sales, he said.
It's hard to give a cut-and-dried profile of sellers that Thrasio buys, but most of them have a "commodity element" to the products they sell, Silberstein said. In other words, about 75% of all Amazon businesses are a fit for Thrasio, he said, including products in categories like home, kitchen, sports, outdoor, and health.
The key component is having longevity with a core value that doesn't change, which means sellers of faddish products, like iPad covers, are unlikely to land on his radar.
"There's no shortage of opportunities — our deal pipeline is the biggest it's ever been," Silberstein said.
'Not as easy'While investor demand has gone through the roof, those looking to get in the space should move with caution, according to James Thomson, a partner at BuyBox Experts, an agency that helps Amazon sellers.
Thomson said in the past three months, as COVID-19 has spread across the country, he's received inquiries from seven investment firms asking him how to build the next Thrasio. His answer has been the same: "It's hard."
On the surface, it may seem easy to raise a lot of money to simply roll up a bunch of sellers and grow them at scale. But the key to success is operating the individual seller businesses with specific expertise for different marketplaces. In Amazon's case, you need people with highly specialized skill sets covering everything from inventory management, logistics, and advertising, he said.
"You need specialists in all these different areas in order to handle the variance of running an Amazon seller business," he said. "It's not as easy as it looks."
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