Elevate Brands Acquires Amazon Merchants with $250M Funding

The Continuing Amazon Roll-Up Trend and Elevate Brands' New Funding

The practice of Amazon roll-ups – where companies achieve scale by acquiring and merging numerous smaller third-party sellers on the Amazon marketplace – remains a significant trend in e-commerce. A key player in this space has recently announced a substantial capital infusion to bolster its position.

Elevate Brands Secures $250 Million in Funding

Elevate Brands, a startup headquartered in New York and Austin, specializing in the acquisition and management of third-party Amazon merchants, has obtained $250 million in funding. This capital will be allocated to further investment in its technological infrastructure and the acquisition of additional small businesses.

Currently profitable, Elevate Brands boasts a portfolio of 25 brands, many of which possess patents for their products, as stated by CEO and founder Ryan Gnesin. The company intends to refine its systems for evaluating potential mergers and acquisitions, and for analyzing the broader market landscape.

Funding Structure and Backers

Elevate’s funding comprises a combination of debt and equity, a common structure for e-commerce businesses pursuing roll-up strategies. Backers include individuals and investors with established success in fintech and e-commerce.

• FJ Labs
• Novel TMT
• Adam Jacobs (founder of The Iconic in Australia)
• The founders of QuadPay (buy now, pay later)
• Khajak Keledjian (founder of Intermix, acquired by Gap)
• Ron Suber (of YieldStreet and MoneyLion)

The company has not disclosed its current valuation.

The Scale of the Amazon Marketplace

Estimates suggest there are approximately 5 million third-party sellers on Amazon, with 1 million joining the platform in 2020 alone. Thrasio, a major competitor in the consolidation space, believes around 50,000 sellers generate over $1 million in annual sales. Elevate Brands projects the Amazon marketplace, currently valued at $300 billion, will experience a doubling in size within the next five years.

This substantial market opportunity has spurred numerous companies to raise significant capital – through both debt and equity – to pursue consolidation opportunities.

Rationale Behind the Roll-Up Strategy

The underlying rationale for these roll-ups centers on the idea that founders and management of smaller third-party sellers may lack the long-term commitment or capital needed for further scaling. Consolidating these businesses allows for leveraging investments in technology to improve market analytics, marketing, manufacturing, and supply chain efficiencies.

Competitive Landscape

Alongside Elevate Brands and Thrasio, other prominent players in the roll-up arena include:

• Heyday
• The Razor Group (Berlin)
• Branded
• Heroes
• SellerX
• Perch
• Berlin Brands Group (X2)
• Benitago
• Valoreo (Latin America)
• Rainforest and Una Brands (Asia)

Elevate Brands' Unique Approach

Elevate Brands differentiates itself by initially operating as a third-party seller on Amazon. This experience provided valuable insights into supply chain management, manufacturing, and product differentiation.

The company began selling private label products in late 2016, managing approximately 8,000 SKUs by 2017. It then transitioned to a wholesale model in 2018, reselling established brands, but faced temporary suspensions from Amazon due to algorithm-triggered concerns about counterfeit activities.

These experiences allowed Elevate Brands to refine its operational strategies, ultimately leading to the adoption of an acquisition-based growth model in 2019.

Understanding Seller Motivations

According to Ryan Gnesin, many businesses targeted for acquisition were initially established as side projects. Founders often welcome the opportunity to exit for a favorable return rather than continuing long-term operations. This often explains the confidentiality surrounding these deals.

Furthermore, some sellers are approaching retirement and lack a succession plan, while others are simply entrepreneurial and plan to reinvest proceeds into new ventures. A typical scenario involves a seller receiving $5 million, retaining $4 million for personal use, and allocating $1 million to a new business.

Focus on Intellectual Property

Elevate Brands currently prioritizes acquisitions with strong intellectual property, particularly patents, recognizing a potential lack of differentiation among products on Amazon. The company also seeks businesses with established traction and brand recognition.

The ability to maintain a competitive edge through new product variations and expansion into other marketplaces is also a key consideration, as is the development of brand communities.

Acquisition Valuations

Acquisition valuations typically range around four times a company’s EBITDA, but can vary from 2.5x to 5x depending on the level of competition. Elevate Brands generally targets companies generating between $2 million and $3 million in seller’s discretionary earnings.