Suma Brands Secures $150M for Amazon Brand Acquisitions

Amazon's E-commerce Ecosystem and the Rise of Roll-Up Acquisitions

Over time, Amazon has become central to the e-commerce landscape, functioning as a platform where consumers can purchase a vast array of products – offered by Amazon itself or its extensive network of over 5 million third-party sellers – with convenient home delivery. However, this system isn’t without its inefficiencies, prompting startups to seek greater economies of scale.

Suma Brands Secures $150 Million in Funding

Suma Brands, a company focused on acquiring and consolidating promising brands that sell and fulfill orders through Amazon, has recently raised $150 million in a funding round. Pace Capital and Material led the investment, alongside a credit facility provided by i80 Group.

Funding Structure and Valuation

Like many similar roll-up ventures, the majority of Suma’s funding comes in the form of debt, designated for acquisitions. A smaller portion, $12.5 million, is equity intended to further develop its technology infrastructure and core operations. The company’s current valuation remains undisclosed.

The Growing Trend of Roll-Up Plays

Roll-up acquisitions are gaining momentum, with numerous companies securing funding, including Elevate, Thrasio, Heyday, The Razor Group, Branded, Heroes, SellerX, Perch, Berlin Brands Group (X2), Benitago, Valoreo from Latin America, Rainforest, and Una Brands from Asia.

Addressing Inefficiencies in the Amazon Marketplace

These ventures share a common premise: while Amazon has achieved economies of scale, this efficiency hasn't fully extended to the marketplace level. Many sellers operate as independent entities, facing challenges related to technology, marketing, analytics, supply chains, purchasing power, and talent management.

Providing an Exit Strategy for Marketplace Founders

Roll-up companies offer marketplace founders a potential exit strategy, allowing them to grow their businesses under a larger organization focused on brand development and expansion alongside other acquired companies.

Suma Brands' Leadership and Expertise

Minneapolis-based Suma Brands is led by co-founder Andrew Savage, who brings significant retail experience to the table. His background includes leadership roles at Amazon, where he oversaw categories like toys and spearheaded initiatives targeting university students.

Prior Experience at Target and Best Buy

Prior to Amazon, Savage spent years at Target, contributing to the development of Target.com, and at Best Buy. His experience in these prominent Minneapolis-based companies highlights the city’s growing importance as an e-commerce hub.

Understanding Indie Brands and Large Platforms

Savage also served as an executive at Dolls Kill, providing him with insights into the challenges faced by smaller, independent brands, as well as the dynamics of selling through large platforms like Amazon.

A Strong Founding Team

Savage’s co-founders bring complementary expertise: Matt Salzberg, the founder and former CEO of Blue Apron, and Jon Dussel, the former CFO of Dolls Kill.

Suma's Approach to Bridging the Gap

Savage founded Suma Brands recognizing a need to better connect small merchants with large platforms. While economies of scale and economic opportunity are key motivators, Suma appears to prioritize an operational approach.

Operational Support and Services

This includes managing supply chains, sourcing, performance marketing, brand building, multi-channel sales (including Amazon and other platforms), and providing working capital, according to Savage.

Investor Confidence in Suma's Team

“We vetted a number of potential investments in the space, but hadn’t found the right team until we talked to Suma,” stated Jordan Cooper, general partner at Pace Capital.

Operational Expertise as a Key Differentiator

Asher Hochberg, managing director at i80 Group, added, “Winners are going to be exceptional operators, and the Suma team from the co-founders on down have e-commerce operations in their DNA. They’re a tested team who have proven their ability to rapidly scale e-commerce businesses.”

Suma's Portfolio and Acquisition Strategy

Suma, like its competitors, is discreet about the number of brands it has acquired and the specifics of its acquisition strategy. Current portfolio companies include Lone Cone, a children’s footwear brand, and Turmaquik, a turmeric supplement company.

Flexibility in Founder Involvement and Channel Strategy

Savage emphasizes that Suma’s goal isn’t solely to provide founders with an exit. Some founders may choose to remain involved, and brands may explore direct-to-consumer (D2C) channels alongside Amazon.

A Large and Growing Market Opportunity

“This is a $300 billion space, and growing at double digits,” Savage noted. “It’s an ocean. And there are at least a couple of hundred thousand brands with more than $500,000 in revenues worldwide. It’s easy to get lost in that.”

Focus on Differentiation and Founder Values

Suma distinguishes itself by prioritizing founder values and avoiding “me-too” businesses, unlike the often-homogenous offerings found on Amazon.

The Importance of Unique Value Propositions

Discussions with founders in this space suggest that the market may not be a winner-take-all scenario, as each company brings a unique approach to success.

The Potential for Amazon to Enter the Roll-Up Space

However, the long-term viability of this model remains debatable, as Amazon could potentially become a consolidator itself, leveraging its operational expertise and financial resources.

Monitoring Amazon's Potential Moves

Savage acknowledges the possibility of Amazon entering the roll-up market, suggesting it’s an area to watch. If Amazon were to pursue this strategy, it would validate the potential of the approach.