Heroes, one of the new waves of startups aiming to build large ecommerce businesses by buying out smaller third-party merchants in Amazon’s marketplace, has raised another big funding to double that strategy. The London-based startup has raised $ 200 million, money it will mainly use to attract more traders. The existing brands in its portfolio cover categories such as baby, pets, sports, personal health, and home and garden categories – some of them, like PremiumCare dog chewing It co baby car mirror, gardening tool brand Davaon and wooden foot massage roller Theraflow, category bestsellers – and the plan is to continue to develop all of these verticals.
Crayhill Capital Management, a New York-based fund, is providing the funding, and Riccardo Bruni – who co-founded the company with his twin brother Alessio and third brother Giancarlo – said the bulk of it will go to acquisitions, and therefore comes in the form of debt.
Raising debt rather than equity at this point is pretty standard for companies like Heroes. Heroes itself is quite young: it launched less than a year ago, in November 2020, with funding of $ 65 million, a round made up of both equity and debt. The startup’s other investors include 360 Capital, Fuel Ventures, and Upper 90.
Heroes plays in what quickly becomes a very crowded field. Not only are there tens of thousands of businesses taking advantage of Amazon’s vast distribution network to sell merchandise in the e-commerce giant’s marketplace; but some days it seems like we’re also quickly approaching a state where almost as many startups are going out to consolidate these third-party vendors.
Many roll-up games follow a similar playbook, which goes like this: Amazon provides the marketplace to sell goods to consumers and the infrastructure to fulfill those orders, through Fulfillment By Amazon and its Prime service. Meanwhile, the roll-up business – in this case Heroes – is buying out a number of the strongest companies by leveraging FBA and the marketplace. Then, by consolidating them into a single technology platform that they built, Heroes creates better economies of scale around better and more efficient supply chains, machine learning technology and marketing and business development. sharper data analysis, and new growth strategies.
What’s remarkable about Heroes, however – other than the fact that it’s the first roll-up player to come out of the UK and continues to be one of the biggest players in Europe – it’s is that he doesn’t believe that technology plays such a big role as having a strong relationship with the companies he targets, key given that now the best sellers in the market are probably being celebrated by a number of companies. as acquisition targets.
“Technology is very important,” Alessio said in an interview. “It helps us create robust processes that connect all systems across multiple brands and markets. But what we have is very different from a SaaS business. We don’t build an app, and technology isn’t at the heart of what we do. On the acquisition side, we believe that human interactions are ultimately winning. We don’t believe that technology can replace a solid acquisition process.
The three founding brothers of Heroes (two of them, Riccardo and Alessio, pictured above) have held multiple investment, finance and operations roles (CVs include Merrill Lynch, EQT Ventures, Perella Weinberg Partners, Lazada, Nomura and Liberty Global) and they say there have been strong signs so far that its strategy is working: Among the brands it has acquired since its launch in November, they say that the activity ( sales) quintupled.
Collectively, roll-up startups are raising hundreds of millions of dollars to fuel these efforts. Other recent hopefuls that announced funding this year included Suma Brands ($ 150 million); Raise the brands ($ 250 million); Perch ($ 775 million); factory14 ($ 200 million); Thrasio (currently probably the biggest of them in terms of reach, money raised and ambitions), Heyday, The Razor Group, Branded, SellerX, Berlin Brands Group (X2), Benitago, Valoreo from Latin America and Rainforest and Una Brands outside Asia.
The image that emerges from many of these operations is that many of these companies, Heroes included, do not try to make their particular approaches particularly more distinctive than those of their competitors, simply because – with nearly 10 million from third-party sellers today on Amazon around the world – the opportunity is probably big enough for everyone, and more, especially given the current market dynamics.
“It’s no secret that we were inspired by Thrasio and others,” said Riccardo. “Combined with Covid-19, there has been a massive acceleration in e-commerce across the continent. It was this, plus the realization that the three brothers had the right e-commerce, fundraising and investing skills between them, which made them see what was a “perfect storm” to grab hold of. opportunity, he continued. “That’s why we got into it. “
In the case of Heroes, while the majority of the funding will be used for acquisitions, it also plans to double the headcount of its current 70 employees before the end of this year with a focus on operational experts to help manage operations. acquired businesses.