FBA Acquirers Haven't Slowed Down
$1.63B Raised by Boston Tech Companies
I chose an insane week to skip an update for my graduation. In the last two weeks, 29+ tech companies raised over $1.63 billion in the Boston ecosystem.
What’s Next for Amazon Acquirers?
If you’re a frequent reader, you know I’m fascinated with the rise of FBA acquisition companies — “Roll Up” firms that aggregate brands on the Amazon Third Party Marketplace to improve operations and margins. It’s now become nearly impossible to keep up with the funding rounds for these companies. Driving the news: Boston-based Perch raised a $775M Series A led by SoftBank’s Vision Fund (the largest CPG company Series A of all time). Together, Perch and Thrasio have three of Boston’s top 20 funding rounds so far this year. Some other recent fundraises:
That’s just a few of the aggregators that have raised so far this year. Even Keith Rabois is in on it with his latest company OpenStore (yes, very clever naming from the founder of OpenDoor). These are highly leveraged companies, with some estimates as high as 45% of all FBA acquirer capital being debt. It’s pretty cool that the two largest players that essentially defined the category are out of Boston, but I also have questions on the industry as a whole that I’ve touched on a bit before:
Platform Risks Ahead
Will we reach a point when Amazon gets concerned about customer concentration on the Marketplace, when most of their top businesses are owned by the same few players? Especially when these players are incentivized to diversify off of the Amazon marketplace to reduce their own platform risk. Thrasio and others have already spoke publicly about building systems to help Amazon brands launch on Shopify, in retail stores, and as their own standalone DTC brand.
In D.C. last week, the Attorney General just sued Amazon over antitrust allegations, arguing that their restrictive agreements for third party sellers make it impossible to sell those products for less on other sites. Up until 2019, Amazon flat out banned sellers from offering products for cheaper on other sites. Now they frame it more lightly, saying “Sellers set their own prices for the products they offer in our store...and like any store we reserve the right not to highlight offers to customers that are not priced competitively.”
I’m curious how acquirers are thinking about this issue. Diversifying off of the platform while lowering prices could essentially get them shadow banned on Amazon, but keeping all of their business on Amazon is just as risky because the company steals seller data to launch competitive offerings. Do they decide to opt out of diversifying completely and risk being copied?
A New Investor Class?
My last thought is on what will emerge from this new growing source of liquidity for DTC founders. There is now a multi-billion-dollar market ready to purchase early-stage ecommerce companies. Much like in VC today, that capital is becoming increasingly competitive and commoditized. These buyers have admitted that there may only be ~50K businesses on the Amazon marketplace doing more than $1M in revenue that fit their profile. My guess is that this will force aggregators to start buying much younger/riskier businesses with far more aggressive terms before they’ve reached product-market-fit. Sound familiar?
I think this will have a interesting impact on the ecommerce industry as whole. You essentially have an exit strategy that was nonexistent three years ago that now has billions of capital in search of deployment. This is a huge opportunity for not only founders interested in launching an ecommerce business, but also an opportunity to become a seed investor in DTC businesses.
These buyers want a $1M+ revenue business, and they’ll buy them at a hefty multiple. That’s only 10K customers buying a $100 product. I think in the last year alone, plenty of independent sellers have done this with a 1-2 person team. It sounds like a great time to start an incubator that launches hundreds of brands a year, or an investment group that funds niche ecommerce ideas for an equity stake.
Stuff I’m Reading:
NEW: Gregory Raiz Joins Techstars Boston as New Managing Director
Growth firms, not VCs, are the most active investors in unicorns this year
The Architecture of Tomorrow: An Interview With Ben Horowitz
Square takes aim at JPMorgan with checking, savings accounts
UNH analysis says angel investor market bounced back in 2020
Acquisitions:
Boston Tech Financing Rounds:
Circle 🟢
Circle, the eight-year-old crypto payments company that created USDC, just announced a $440M fundraise ahead of a possible SPAC deal — targeting a $4B valuation. Investors included Fidelity, FTX, Digital Currency Group, Marshall Wace, Valor Capital Group, Pillar VC, Intersection Fintech Ventures, Atlas Merchant Capital and Willett Advisors.
Klaviyo 📧
Marketing automation company Klaviyo just raised a new $320M Series D led by Sands Capital, with support from investors including Counterpoint Global, Whale Rock Capital Management, ClearBridge Investments, Lone Pine Capital, Owl Rock Capital, Glynn Capital, Accel, and Summit Partners. The deal values the nine-year-old company at a $9.5B post-money.
PathAI 🔍
Digital pathology startup PathAI has raised a new $165 million in Series C co-led by D1 Capital Partners and Kaiser Permanente, with additional participation from General Atlantic, LabCorp, Bristol-Myers Squibb and Merck.
Formlabs 🖨️
SoftBank’s Vision Fund just led a $150M round into Formlabs, valuing the 3D printing company at $2B. They make software, hardware, and materials for high-resolution 3D printing across various fields including manufacturing and medical.
Akili Interactive 🎮
After receiving FDA approval last June for the first ever videogame-based ADHD treatment, Akili Interactive has raised $110M in Series D funding led by Neuberger Berman Funds. In addition, they raised closed a $50M credit facility from SVB.
More: A deep dive on prescription-only apps from Scott Alexander
Medically Home 🏥
Mayo Clinic and Kaiser Permanente just made a $100M investment into at-home acute level care company Medically Home. The company transforms patients’ homes into temporarily hospitals to drive down the fixed costs and overhead that hospital profits are dragged down by.
Immuta 💽
Cloud data access control company Immuta just raised $90M in Series D funding from new investors Greenspring Associates, March Capital, NGP Capital, and Wipro Ventures. They automate data governance by providing a single interface to manage and monitor data across any system.
24M Technologies 🔋
24M Technologies, which makes semi-solid high energy density lithium-ion cells, just raised $56.8M. The round was led by ITOCHU, with additional participation from Fujifilm, Mirai Creation Fund, Kyocera Corporation, Global Power Synergy Public Company Ltd (GPSC) and North Bridge Venture Partners. The electrodes they produce require no binder — they just mix electrolytes with active materials into a clay-like slurry with fewer additional steps.
Uptycs 📊
Uptycs, which provides cloud-native security analytics, just raised a new $50M Series C led by Norwest Venture Partners, with participation from Sapphire Ventures and ServiceNow Ventures.
Stavvy 🏘️
FinTech startup Stavvy just raised a $40M Series A led by Morningside Technology Ventures. They focus on end-to-end paperless solutions for digital banking and lending in the mortgage industry.
Indigo Technologies ⚡
Indigo Technologies, which is working on the first robotic wheel with integrated suspension and propulsion for EVs, just announced a $34M funding round led by FM Capital. They’re also working on a full-scale mobility platform for managing electric vehicle fleets.
Merlin Labs ✈️
Autonomous plane company Merlin Labs just exited stealth and raised $25M in a round co-led by GV and First Round Capital. As part of the round, they also announced a strategic partnership with Dynamic Aviation, providing them with 55 automated King Air planes.
Wasabi 💾
After raising $112M in late April, cloud storage company Wasabi just raised an additional $25M from Western Digital and Prosperity7 Ventures. The company’s product uses a “hot storage” technique that eliminates the need for tiered storage.
Prismic 🖥️
Web building platform Prismic just raised $20M in new funding co-led by Algae Ventures and Eurazeo. The Paris and Boston-based company is developing a “headless CMS” that lets your whole content team build together on any framework with a highly customized interface.
Eleanor Health 👨⚕️
Outpatient mental health and addiction treatment provider Eleanor Health just secured $20M in Series B funding from Warburg Pincus and insiders Town Hall Ventures, Echo Health Ventures and Mosaic Health.
Corvus Insurance 🛡️
AI-driven commercial IT insurance company Corvus Insurance just closed a new $15M Series C Extension led by FinTLV and Aquiline Technology Growth. They previously raised a $100M Series C in March led by Insight Partners.
Reach 🏗️
Reach, which is building a platform to simplify the process of building and deploying blockchain applications, just raised $12M at a $48M valuation. No word on backers, but likely some capital from Algorand, as they’re currently in partnership and were previously the recipient of a grant from the Boston-based company.
PartsTech 🚗
According to a new filing, web based auto parts ordering software PartsTech just raised $10M in Series B funding. They previously raised a $3.5M Series A led by BP Ventures in 2019.
Acuity MD 🤝
AcuityMD just raised a $7M round led by Benchmark. They’re developing a CRM to help medical device companies maintain relationships with users across the entire product lifecycle.
Boston Materials 🛠️
Advanced lightweight materials maker Boston Materials just closed an $8M Series A led by AccelR8 and Valo Ventures, with Clean Energy Ventures also participating. They make carbon fiber through a patented called ZRT used in EVs, electronics, and aerospace.
Filtered.ai 💼
Technical hiring startup Filtered.ai just raised $7M from Silicon Valley Data Capital and the AI Fund. The six-year old company was previously bootstrapped while operating in an internal consultancy before spinning out in 2019. They’re building a hiring platform for technical roles like data scientists that focuses on skill-based assessments.
Viken Detection 🔭
Handheld vehicle X-Ray scanner producer Viken Detection just raised $6.4M according to a new filing. The Burlington, MA-based company sells several devices to law enforcement and military for scanning vehicles to seize contraband.
Sublime Systems 🏭
Somerville-based Sublime Systemsjust raised $5.9M in Seed-1 and Seed-2 funding from The Engine, PRIME Impact Fund, and Lowercarbon Capital. The Greentown Labs company is developing technology for producing cement in a way that eliminates C02 emissions.
Wysa 🧠
Mental health platform Wysajust raised a $5.5M Series A led by W Health Venture, with support from Google Assistant Investments, pi Ventures, and Kae Capital. It’s a chatbot tool that helps users manage stressors anonymously, alongside mindfulness exercises and other features.
UFA ✈️
Air traffic control simulation system developer UFA just raised $5.4M, according to a new filing. Pitchbook shows it’s from The Argentum Group, and is notably their first public financing since founding in 1979.
Torii 🏡
“Tinder for Real Estate” brokerage app Torii just raised a $3.2M Seed Round from Lookout founder Kevin Maheffey, Dan Matuszewski, and Jason Calacanis’ LAUNCH. Users can swipe left or right on available homes, and if they find one they like, Torii streamlines the buying process.
Breach Insurance ₿
Breach, which provides insurance for cryptocurrency products, just raised a $2.5M Seed Round co-led by Global Founders Capital and Ted Rogers (Xapo), with participation from Goodwater Capital and Thomas Bailey.
MyMentor 🎓
College application support app Hindsight Advice(MyMentor)just raised $527K, according to a new filing. They offer video calls, text chat, and essay evaluations from current college members to help applicants through the process.
BondLink 💵
The Intercontintial Exchange (ICE) just invested in municipal bond issuer assistance software BondLink. They provide software to governments financing infrastructure, allowing a way to easily manage investor relations.
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