Rainforest Raises $36M to Consolidate APAC Amazon Brands

Rainforest Secures $36 Million Seed Funding to Aggregate Amazon Sellers

Singapore-based Rainforest is a recent addition to the growing number of startups focused on acquiring and scaling small e-commerce businesses. Founded in January by former employees of leading Southeast Asian companies like Carousell, OVO, and Fave, Rainforest specializes in acquiring sellers on the Amazon marketplace.

A Regional Focus on E-commerce Aggregation

This strategy mirrors that of prominent e-commerce aggregators such as Thrasio, Branded Group, and Berlin Brands Group, which primarily concentrate on Amazon sellers. However, Rainforest distinguishes itself as one of the first companies to originate in Asia and specifically target brands within the region.

Strategic Investment and Funding Details

Rainforest recently announced a $36 million seed funding round, spearheaded by Nordstar, with additional investment from Insignia Venture Partners. The funding comprises $6.5 million in equity and a $30 million debt facility from an unnamed American fund.

Leveraging Debt Financing for Acquisitions

According to co-founder and CEO J.J. Chai, the debt financing was strategically chosen for its non-dilutive nature. These funds will be utilized to acquire approximately eight to twelve brands currently selling through Amazon’s Fulfillment by Amazon (FBA) service.

Experienced Leadership Team

The Rainforest team boasts significant experience in the e-commerce and technology sectors. Alongside J.J. Chai, the company is led by chief financial officer Jason Tan, previously of OVO and Fave, and chief technology officer Per-Ola Röst, founder of Amazon analytics tool Seller Metrix and a successful FBA brand operator.

Current Portfolio and Expansion Plans

Currently, Rainforest’s portfolio consists of three acquired brands, each purchased for around $1 million. While the company intends to expand its portfolio before publicly disclosing brand names, Chai revealed they include a top-selling mattress brand, a cereal manufacturer, and a kitchenware company.

Streamlining Operations Through Vertical Focus

By concentrating on specific product categories – namely home goods, personal care, and pet supplies – Rainforest aims to optimize supply chains, product development, and marketing efforts as its brands grow.

The Scale of Amazon’s Third-Party Marketplace

In 2020, Amazon’s total gross merchandise volume reached approximately $490 billion, with $300 billion attributed to third-party sellers. While companies like Thrasio and Branded Group, founded by former Lazada CEO Pierre Poignant, also acquire Asian brands, most aggregators have historically focused on sellers in North America, Europe, and Latin America.

Targeting the Asia-Pacific Seller Base

Rainforest will concentrate on sellers located in the Asia-Pacific region, including China, Southeast Asia, and Australia. Approximately 30% of Amazon’s third-party sellers are based in Asia, and Chai anticipates a surge in e-commerce aggregators establishing a presence in the region.

Identifying Acquisition Opportunities

Rainforest seeks FBA sellers in the specified verticals generating between $5 million and $10 million in annual sales, with a minimum profit margin of 15%. The majority of potential acquisition leads are initiated by the brands themselves.

Rapid Valuation and Due Diligence Process

Rainforest can provide a brand valuation within two days. If an offer is accepted, the due diligence process typically takes about a month, with sellers receiving an initial payment within approximately 40 days.

Focus on Brand Potential and Global Reach

While the company plans to explore other marketplaces in the future, Amazon is the initial focus due to its robust analytics capabilities, which facilitate quicker valuations. Rainforest evaluates sellers based on the “Three R’s”: product reviews, ratings, and ranking.

Seeking Brands with Scalability and Intellectual Property

Rainforest prioritizes brands with the potential to expand beyond Amazon and possess unique intellectual property with broad appeal. “We’re looking for products that can traverse global markets,” Chai explained, emphasizing a preference for items with international relevance.

Addressing the Needs of Microbrand Entrepreneurs

Many of the brands in Rainforest’s pipeline are currently managed by sole proprietors who have reached a stage where they require a team to sustain growth, but prefer an exit strategy to pursue new ventures.

The Rise of the Microbrand Ecosystem

Chai notes that the ability to establish and grow a physical goods brand has become increasingly accessible. “The combination of online advertising, marketplaces and supply chains being disrupted has created an opportunity where individuals can create brands,” he stated, drawing a parallel to the App Store’s impact on software distribution.

Providing an Exit Strategy for Entrepreneurs

Rainforest aims to provide a viable exit option for microbrand entrepreneurs and unlock the full potential of their brands. “Where we play into that trend is that there are a lot of microbrands and many will get stuck, so we can give the entrepreneurs a way to exit and bring a brand to its full potential.”