Since April 2020, more than $7B has been raised by at least 69 companies that have purchased third-party online sellers.
D1 Brands, a New York City-based Amazon aggregator, announced Wednesday that it had raised $123 Million in Series A funding. The latest investment in the ever-growing field of startups seeking to capitalize on third-party sellers’ success in online marketplaces is less than a year since the company was founded.
CoVenture Venture Partners and Crossbeam Venture Partners led this round. ID8 also invested. D1 Brands refused to reveal its sales or value, but Yaz Malas (co-CEO) said his company is financially sound and expects to generate $100 million annually by the end of 2019. Pitchbook reports that Thrasio is valued at $4 billion based on 2020 revenues of $500m and has raised $2B to date.
D1 is one small group of companies that purchases third-party brands and directs them to consumers. These brands are then sold on large-scale online marketplaces such as Amazon and eBay. D1 currently holds 20 brands. They include Mozart, which sells arts and craft supplies, to Equinox, a flagship brand created by Mohammad Usman.
Malas, who co-founded D1 in September last year with Usman, said, “The pandemic struck, and you had all these Amazon businesses that [doubled] their sales, and at the same moment, this Amazon aggregator ecosystem was taking off.” It was a perfect storm. We had the advantage of being an aggregator and seeing many opportunities.
D1 is late to the party that has grown fast during the pandemic. Since April 2020, at least 69 companies have acquired successful brands from Amazon. According to Marketplace Pulse, these companies have raised more than $7B in capital. According to Jungle Scout (Amazon growth agency), more than 54% came from third parties for the $386 billion worth of net Amazon sales in 2020.
Thrasio is undoubtedly the most significant player in space. The company had raised more than $2 billion since its inception in 2018 when it was founded. Bloomberg reported June that the company was in talks to go public via a merger with Churchill Capital V (blank-check company Churchill Capital V), founded by Michael Klein, an ex-executive at Citigroup.
Crunchbase reported that Perch, a Boston-based roll-up, received $775 million from investors in May. It was the largest ever Series A by a consumer-packaged-goods company. Amazon aggregator and Miami’s Unybrands closed $300M in growth capital in July, while Suma Brands was funded with $150 million earlier this month.
Crossbeam’s Sakib Jamal, an investment banker, says, “There is a lot of potentials for multiple unicorns to emerge in this space.”
Malas & Usman, founders of D1, believe their unique experience in the Amazon trenches sets them apart from other entrepreneurs in this crowded field. Usman recalled buying a whole rack of cashews from his CVS in the early days of his career to sell on Amazon. He says that while the price of packaging and labels kept him from any profits, this experience taught him how to create an online-only, private-label product.
Capital raised will be a mix of equity and debt. The cofounders say that the majority is debt. D1 plans on expanding into new markets, hiring more people, and acquiring more brands.
