Opontia Secures $20M Funding for E-commerce Brand Acquisition

The Rise of E-commerce Brand Aggregators in Emerging Markets

Razor Group, Branded, and Thrasio represent a new generation of e-commerce enterprises that are rapidly gaining prominence globally. Their core strategy involves the acquisition and consolidation of promising, smaller e-commerce brands, a practice that has become increasingly widespread in both the United States and Europe.

Expansion into Latin America, Asia, and Now, the Middle East & Africa

This business model has extended beyond its initial reach, penetrating markets in Latin America and Asia. Companies such as Una Brands and Valoreo have successfully secured substantial investment to facilitate the acquisition and development of these brands. Now, the trend has arrived in the Middle East and Africa, with Opontia recently completing a $20 million funding round to acquire and expand e-commerce businesses throughout these regions.

Financing Details of Opontia’s Seed Round

This seed funding represents one of the largest of its kind in the Middle East and Africa, comprising a combination of debt and equity. While the precise allocation between debt and equity remains undisclosed, Opontia has confirmed that debt constitutes the majority of the financing, and will be primarily utilized for making acquisitions.

Key Investors and Advisors

The investment round included participation from Global Founders Capital, Presight Capital, Raed Ventures, and Kingsway Capital. Notably, several prominent e-commerce figures across the EMEA region also contributed as angel investors. These include Tushar Ahluwalia, CEO of Razor Group; Jonathan Doerr, former CEO of Daraz and co-founder of Jumia; and Hosam Arab, CEO of Tabby and previously CEO of Namshi.

Opontia’s Founding and Team

Opontia was established in March 2021 by co-CEOs Philip Johnston and Manfred Meyer. The company currently maintains teams in Dubai and Riyadh, staffed by professionals with experience from leading organizations such as Amazon, Zomato, Noon.com, Namshi, McKinsey, and Uber Eats. Plans are underway to establish operations in Cairo, Istanbul, and Lagos in the coming months.

Addressing Challenges Faced by Small E-commerce Businesses

Small e-commerce brands often flourish initially, driven by the founder’s passion for their products and customer base. However, they frequently encounter obstacles to sustained growth, stemming from limitations in working capital, operational inefficiencies, logistical complexities, and challenges in e-commerce commercial management.

Opontia’s Value Proposition

Johnston and Meyer founded Opontia to alleviate these burdens, offering to acquire brands and assume responsibility for all aspects of their operations. Importantly, similar to other e-commerce brand rollup companies, the original owners will remain actively involved in the ongoing development of their brands.

A Vision for E-commerce Entrepreneurship

“We started Opontia to enable e-commerce entrepreneurs to realize the full potential of their brands,” Johnston explained to TechCrunch. “We aim to achieve this by providing both an immediate exit opportunity and the chance to benefit from future growth. Furthermore, we are dedicated to fostering and strengthening the entrepreneurial e-commerce ecosystem in the Middle East and Africa.”

Profit Sharing for Brand Owners

Johnston added that when Opontia acquires a brand, the original owners will participate in the subsequent increase in profits over a defined period. “This ensures they continue to reap the rewards of their dedication and hard work.”

Acquisition Criteria

The company, only two months old at the time of reporting, is primarily targeting brands generating at least $10,000 in monthly revenue and $5,000 in net monthly profit. Opontia demonstrates a preference for products with consistent demand, less susceptible to seasonal fluctuations, including items for the kitchen, bathroom, sports, home and living spaces, cosmetics, and toys.

A Competitive Landscape

While numerous startups worldwide are pursuing similar e-commerce brand rollup strategies – including Razor Group, Branded, and Thrasio – none have yet focused specifically on the Middle East and Africa, considering these markets to be less mature than their primary targets.

Market Size and Growth Potential

China currently holds the position of the world’s largest e-commerce market, exhibiting an annual growth rate exceeding 30% and surpassing $850 billion in annual online sales. The United States represents the second-largest market, with sales exceeding $350 billion. Brazil’s annual sales reach $36 billion, representing 32% of Latin America’s e-commerce market. In comparison, the Middle East and Africa currently generate $30 billion and $25 billion in annual sales, respectively.

Significant Opportunities in Emerging Regions

These figures highlight the substantial opportunities available to Opontia in both regions. However, mirroring experiences in other markets, the company anticipates the emergence of new competition as the sector matures. The founders believe that the successful models employed in other regions can be adapted to the Middle East and Africa, despite differences in scale and operational approaches.

Rapid Growth in the Middle East and Africa

“The market in the Middle East and Africa is currently less mature than in the West, but is growing faster than any other market globally, with the number of sellers on marketplaces increasing by over 50% annually,” Meyer stated. “The business model will succeed here because of the surge in innovative entrepreneurs in the Middle East over the past few years. It presents a valuable opportunity for sellers to capitalize on their hard work and potentially pursue new ventures.”

A Favorable Environment for Acquisition

Two years prior, the limited number of sellers in these regions would have posed a concern for Opontia or a similar company. However, the recent and ongoing expansion of marketplace sellers has created a sufficient pool of brands for acquisition. Currently, Amazon hosts approximately 5 million third-party sellers, with 1 million joining in the last year alone. Opontia identifies a significant opportunity within the 30,000 sellers on Amazon and Noon marketplaces in Africa and the Middle East.

Scaling Acquired Brands Globally

Opontia intends to scale the brands it acquires across their respective regions and into international markets. The company is currently engaged in discussions with over 100 small e-commerce brands and reports having signed “several term sheets” with potential acquisition targets.

Founders’ Complementary Expertise

Johnston and Meyer bring distinct yet complementary backgrounds to Opontia. Johnston, a former McKinsey consultant, possesses expertise in e-commerce strategy, private equity, and post-merger integration, alongside experience in venture capital and banking across Southern Africa, London, New York, and Singapore. Meyer, on the other hand, previously served as the chief marketplace officer for Lazada and CEO of Next Commerce, an e-commerce enabler in the Middle East. In addition to brand acquisition, the founders are focused on recruiting talent with relevant industry experience to manage and grow these brands post-acquisition.