🦄 The DART Weekly #9 ~ The Frenzy of FBA Businesses

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December 19, 2020

Entrepreneurship Chronicles

We often think about entrepreneurs and venture capitalists as two different species playing around in the same ecosystem. It turns out that more often than not, we are talking about the same species. And if the lion is the king of the savanna, Peter Thiel is the king of the entrepreneurs turned VCs.
Born in Frankfurt on the 11th of October 1967, he moved to the United States when his father, a chemical engineer, started working for an American mining company. Brilliant in mathematics, passionate about philosophy, he earned his Doctor of Jurisprudence degree from Stanford University in 1992. Seven years later, he founds PayPal, In 2004, he is the first outside investor in TheFacebook, betting $500,000 on the company. In 2020, he is on the billionaire list. What’s in between? The launch of Palantir and few other outrun investments in tech companies.

A contrarian investor, Peter understood something on how to launch or back successful tech companies. What could his secret be? As he stated in his book Zero to One “Never invest in a tech CEO that wears a suit!”

Ventures 101

🐟 FBA Businesses - A Shark and its Remoras

The lockdown took ecommerce to 40% of total addressable retail (Benedict Evans). Amazon is the obvious winner, but also many small businesses earned millions. Investors saw the opportunity and committed nearly $1B in startups purchasing Amazon sellers and brands (Marketplace Pulse).
So the FBA frenzy began.

The Hunters

Thrasio, Heroes, Heyday and SellerX are some of the startups specialized in the acquisition of Fulfillment by Amazon businesses (tech.eu). Most of them came out of stealth after summer, one has already reached unicorn status after targeting Top Amazon Sellers for 2 years.

The Preys

The targeted businesses are often private-label sellers that use Amazon as their primary distribution sources. Better if top-reviewed. Perfect if they are selling products that are evergreen and not hyped by a specific trend (sifted). Resellers and other marketplaces are out of scope.

The Bait

Are they run by a team of investors? Or rather by a group of e-commerce specialists? It does not matter. They have all adopted the motto “We buy Amazon businesses, we close quickly, we have a smooth process”. It is ideal for amateur small entrepreneurs lacking resources and expertise, who now have the opportunity to exit their business (Forbes).

The Banquet

Once the Fulfilled by Amazon brand is part of the portfolio, the magic happens. At Thrasio, for example, a core team of a half-dozen employees works through a 503-point checklist of best practices in an average of 34 days (Forbes). The result? Operations are streamlined, branding and search are optimized, revenues are boosted.

When Facebook provided game developers with a platform, Zynga emerged. After the launch of App Store and Google Play, dozens of new multi-billion businesses rose. The same network flywheel has now started spinning faster with Amazon. Some questions remain.
Will the multiple of FBA businesses balloon?
Can the businesses consolidate while piggybacking on the behemoth?
Or will they be sentenced to death by AmazonBasics?

Of Unicorns and Cowboys

🦄 The Rounds

The deals worth knowing in Europe and beyond - ordered from coolest to coolio

🇪🇪 Frugal: €150M to become the biggest provider of electric scooters in EU (and Africa). Bolt chose a growth path without splurging.

🇵🇱 Homework: Brainly hits 350M users and raises $80M. Since 2019, 200 million new students joined the platform where they study together with peers.

🇩🇪 Boring: ... yet fundamental. Taxdoo raised $21M Series A. Its tax compliance platform facilitates cross-border e-commerce (25% of e-transactions and growing).

🌈 The Pots

The exits you should follow in Europe and beyond - IPO, direct listing, SPAC, bankruptcy ... all awesome stuff

🇷🇴 RPA: The ten times unicorn UiPath is going public at a yet unknown valuation. The Romanian scale-up backed by Accel and Sequoia has chosen Wall Street.

🇬🇧 Car-as-a-Service: In July Drover raised £20.5M, now it got acquired by Cazoo. The online used car retailer and the car subscription startup join forces.

🇳🇱 All round: MessageBird acquired push notification startup Pusher for $35M. It wants to become the single B2B communication tool used by its customers.

🤠 The Funds

The tales of unicorns' hunters you should know about - particularly relevant if you are a founder looking for backing

🇬🇧 Gap: Only 21% of all Series B rounds occur in Europe. Powered by $180M, LocalGlobe's Latitude fund will coinvest and improve the stats.

🇫🇷 Trio: Here's New Wave, a brand EU VC firm with a $56M first fund. It is brought to you by Pia d'Iribarne, Jean de La Rochebrochard and Xavier Niel.

🇳🇱 Consistency: ABN Amro CVC started in 2015 in order to accelerate its digital transformation. 15 portfolio companies later it adds €50M to its €100M fund.

🧑‍🎤 ... and The Quirky Ones

The crazy stuff we gossip about while sipping our chai latte - it's like others, but better

🇩🇪 Freshness: 10-minute delivery. Flat €1.80 fee. $44M Series A. Unit economics? This is Gorillas, the "emergency" grocery delivery startup operating in Berlin.

🇺🇸 Sneakerheads: Verification and pricing transparency, the ingredients that made StockX the stock market of sneakers. It raised $275M at $2.8B valuation.

🇬🇧 Snatch: Racing game developer Codemasters was promised to Take-Two until EA crashed the wedding. The UK company got acquired for $1.2B.
🌌 Wanna know more about the social and economic factors driving huge transformations in finance, startups, government regulations and economic policy? Take a look at the weekly newsletter by our friends at Reshaped!

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