The FBA Acquirer Saga Continues

Plus Eight Boston Companies that Raised $117M+ Last Week

Nov 16, 2020

Europe Joins the “Digital Rollup” Trend

Last month I wrote about the Two Boston Startups that Have Raised $530M to Become PE Firms for eCommerce. Similar to the “rollup” strategy common in the private equity world, these companies are eating up third-party businesses that sell exclusively on Amazon’s FBA marketplace with the goal of generating higher profits by running them all under one entity and tech stack — while giving founders much needed liquidity.

The approach seems to be working, as Boston-based market-leader Thrasio has reportedly been profitable since July 2018, doubled revenue every 73 days, and touts over $300M in pro-forma revenue. This allowed them to become the fastest profitable company to reach unicorn status in the US.

Two European Companies with a Combined Age of Eight Months Have Raised $70M+ to Do the Exact Same Thing

The space is continuing to heat up as London-based Heroes, a five-month-old FBA acquirer startup, raised $65M last week in what GS Magazine is calling “probably the largest seed financing round in Europe.” Meanwhile in Germany, the three-month-old Razor Group recently raised a $5.9M pre-seed round to create the same product for Germany’s market. They’re both self-proclaimed copycats of Thrasio, betting on the fact that European markets are much more fragmented, and many players can coexist.

Both firms are developing custom software to help them identify, purchase, and run successful Amazon brands. The Razor Group says the funding should be enough to make 30 acquisitions and that they’re targeting “eight-digit sales” by January. (If your startup was founded last quarter and is already targeting $10M+ in revenue by next quarter, why raise any VC?)

Are These Appropriate Investments for the VC Model?

My last post on this topic covered some of my concerns around Amazon crushing these acquirers by putting their products ahead in search and also understanding how these acquirers plan to compete against each other.

Another question I’ve been thinking about is what makes these good venture-backed businesses. Clearly if investors like Spark Capital are leading investments into these companies, something is there.

But if you look at their operating models…

Raise a ton of institutional money.
Build a team of analysts to uncover deals with high upside.
Use a “platform approach” to manage investments.
Compete on speed and relationships, because “capital is a commodity.”

…Doesn’t this sound exactly like the operating model of the investors backing them? Venture funds invest in companies with hopes that a few might return ~10x so their funds can return ~3x to LPs. What returns do VCs expect these companies, that are essentially boutique PE shops, to achieve?

Potential Exit Strategy: Other FBA Acquirers?

Texas-based 101 Commerce was a two-year-old, VC-backed FBA acquirer that was quietly purchased in 2019 by another Amazon acquirer called Goja for an undisclosed amount. Interestingly, Goja has been buying and building tech solutions for FBA businesses for eleven years, and only started raising outside money last year.

If anything, these deals have made me more bullish on $AMZN itself. Its mere existence is making billion-dollar companies sprout out of nowhere.

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Stuff I’m Reading:

Boston Tech VC Financing Deals:

Adaptilens 👀

Adaptilens just raised a $1.6M seed round led by Pillar VC, with participation from Accanto Partners. They’re the creator of an injectable, adaptive intraocular lens. These are the same types of lenses injected into the eye for treating cataracts or myopia, but the Adaptilens product allows patients to control the focus of the lens using the eye’s ciliary muscles to adjust for distanced vision and near vision.

Mable 🛒

Mable, a marketplace that makes it easy for grocers to restock wholesale items, raised $8.5M according to a Form D. They previously raised a $3.1M seed round last October led by Accomplice, Founder Collective, and Venrock. The marketplace mostly consists of independent and emerging brands selling to grocers.

Reprise 🤝

Last week, Glasswing Ventures announced their $3.2M seed investment into software demo creation platform Reprise. The company enables software sales teams to create a more engaging demo environment for potential customers — compared to the typical screen share, Loom recording, or semi-functional live trial.

They’re creating a no-code, web-based platform for constructing a product demo environment that customers can interact with on their own. Sort of like a Squarespace for product demos. I’m sure all sales teams have a special pitch for each customer persona, but the idea of having a customizable sandbox environment for any number of personas that can be emailed over prior to a call sounds refreshing.

Eversound 🎧

According to Crunchbase, wireless listening system developer Eversound has raised $2.1M. They’re previously backed by Third Act Ventures, Red Bear Angels, 10x Venture Partners, and Shelter Capital Partners. The company develops wireless headphones for use in senior living facilities to better engage with residents. It’s like a hyper-local radio station that plays interactive content for seniors.

More:
Amazon’s new ‘Care Hub’ lets Alexa owners keep tabs on aging family members

Medically Home 🏥

Medically Home, a Boston-based virtual hospital platform, raised $40.4M earlier this month, according to Crunchbase. The company transforms patients’ homes into temporarily hospitals to drive down the fixed costs and overhead that hospital profits are dragged down by.

Buoy Health 🩺

Buoy Health, a company developing an AI-driven chat bot for checking medical symptoms, just raised a $37.5M Series C led by Cigna Ventures and Humana, with participation from Optum Ventures, WR Hambrecht, and Trustbridge Partners.

I wrote about them back in January when they raised a $20M Series B. Buoy uses a simple AI-powered questionnaire called the Symptom Checker to provide users with options for clinical support. They sell to employers to help employees get quick answers to their health problems and reduce non-emergency ER visits.

doDOC ✍️

Cloud-based collaborative document editing software doDOC just raised $500K from Palm Drive Capital — according to Crunchbase. The Techstars’15 graduate is essentially building Google Docs, but with a focus on selling to medical, scientific, and regulatory customers that need a more secure and robust product.

Lendbuzz 💰

Following a $150M financing last July, online auto loan provider Lendbuzz has raised $23.6M per a Form D. They use AI to quickly assess the creditworthiness of foreign-born nationals and international students looking to purchase a car.

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That’s all from me until next week — If you’d like to connect with me, you can find me on Linkedin and Twitter or check out my website at nickstu.art.

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Tech Deals by Nick Stuart