Wall St. investing billions to scale up Amazon sellers

Some of the biggest names on Wall Street and in Silicon Valley-JPMorgan Chase, Advent International, Khosla Ventures among them-are pumping billions of dollars into mom-and-pops selling everything from tea kettles to jock itch remedies on Amazon.com Inc.

Investment banks, venture firms and private equity shops are backing so-called Amazon aggregators—often led by e-commerce veterans—that are betting they can take upand-coming sellers, who often operate out of their garages, and transform them into global brands.

The aggregators say they have the expertise to select strong products and avoid faddish ones that flame out before they have a chance to grow.

The latest entrant, Branded Group, said on Tuesday it had purchased 20 houseware and leisure brands. Formed last summer and flush with $150 million raised by venture firm Target Global, Branded will be run by Pierre Poignant, who previously led the southeast Asian online marketplace Lazada, and Michael Ronen, who spent almost 20 years in mergers and acquisitions at Goldman Sachs and also worked for SoftBank's Silicon Valley venture division.

About 40 Amazon aggregators have emerged in the past few years, according to people following the trend, with most of them still quietly seeking deals behind the scenes. Eight have announced fundraising rounds totalling more than $2.5 billion since 2019.

Thrasio, launched in 2018, has the deepest pockets and has already purchased 90 companies with $1.75 billion in funding and debt from backers that include the PE firm Advent International. Perch, founded in 2020, has raised $130 million and gobbled up almost 30 brands. Several PE firms have launched websites to court Amazon sellers.

The demand for Amazon mom-and-pops reflects the maturation of the e-commerce giant's third-party marketplace, which accounts for more than half of all products sold on the site. The web store has grown so large that deeppocketed investors can prospect for tomorrow's big hit among the millions of merchants competing on the site. "The emergence of these companies reflects how selling with Amazon offers small businesses powerful opportunities to build their brands and reach millions of customers," an Amazon spokesperson said.

Aggregators look for consistent money-makers with annual sales up to about $10 million; they generally offer three to four times a target's annual profit, including the salary the owners pay themselves. The buyers don't focus on specific categories and are content to jam together a potpourri of brands. Perch, for example, sells maternity belts, auto upholstery tools, peppermint-based athlete's foot cures and virtual-reality headsets.