Heroes Raises $200M to Acquire Amazon Merchants - Roll-Up Strategy

Heroes Secures $200 Million to Expand Amazon Marketplace Acquisitions

Heroes, a relatively new startup focused on acquiring successful third-party merchants on Amazon’s Marketplace, has successfully raised an additional $200 million in funding. This capital injection will primarily facilitate the purchase of more businesses operating within the Amazon ecosystem.

Portfolio and Expansion Strategy

The London-based company’s existing portfolio encompasses a diverse range of product categories, including baby products, pet supplies, sporting goods, personal health items, and home and garden essentials. Brands like PremiumCare dog chews, the Onco baby car mirror, Davaon gardening tools, and Theraflow foot massagers are already category leaders.

The company intends to continue strengthening its presence within these established verticals through further strategic acquisitions.

Funding Details and Structure

Crayhill Capital Management, a New York-based fund, is providing the financing. Riccardo Bruni, co-founder of Heroes alongside his brothers Alessio and Giancarlo, indicated that the funding is structured as debt, earmarked specifically for acquisition purposes.

Debt Financing as a Standard Approach

Opting for debt financing over equity is a common practice for companies in a similar growth phase as Heroes. The startup launched in November 2020 with an initial $65 million in funding, a combination of both equity and debt.

Additional investors in Heroes include 360 Capital, Fuel Ventures, and Upper 90.

A Competitive Landscape

The Rise of Amazon Marketplace Roll-Ups

Heroes is entering an increasingly crowded market. Amazon’s Fulfillment by Amazon (FBA) network has enabled a vast number of businesses to sell goods on the platform, and a growing number of startups are now focused on consolidating these third-party sellers.

These “roll-up” businesses leverage Amazon’s marketplace and fulfillment infrastructure to acquire promising companies. By combining them onto a unified technology platform, they aim to achieve economies of scale, optimize supply chains, and enhance marketing and data analytics capabilities.

Heroes’ Differentiating Factor

What sets Heroes apart is its emphasis on strong relationships with the companies it acquires. The company believes that personal interaction is crucial, particularly as top-performing marketplace sellers are attracting attention from numerous potential acquirers.

Alessio Bruni emphasized that while technology is important for streamlining processes, it cannot replace the value of a robust acquisition process driven by human connection.

Growth and Performance

The three founding brothers bring extensive experience from investment, finance, and operational roles at firms like Merrill Lynch, EQT Ventures, Perella Weinberg Partners, Lazada, Nomura, and Liberty Global. They report significant early success, claiming a five-fold increase in sales across their acquired brands since launching in November.

The Broader Roll-Up Trend

Significant Investment in the Sector

Roll-up startups are collectively attracting substantial investment. Recent funding rounds include Suma Brands ($150 million), Elevate Brands ($250 million), Perch ($775 million), factory14 ($200 million), and Thrasio, currently the largest player in the space.

Other notable companies in this sector are Heyday, The Razor Group, Branded, SellerX, Berlin Brands Group (X2), Benitago, Valoreo (Latin America), Rainforest, and Una Brands (Asia).

Market Dynamics and Opportunity

Many of these companies are adopting similar strategies, recognizing the immense opportunity presented by the nearly 10 million third-party sellers on Amazon globally. The large market size and favorable current conditions suggest ample room for multiple players.

Riccardo Bruni acknowledged the inspiration drawn from companies like Thrasio and highlighted the accelerated growth of e-commerce driven by the COVID-19 pandemic.

Future Plans for Heroes

In addition to funding acquisitions, Heroes plans to double its headcount to 140 employees by the end of the year. The focus will be on recruiting operational experts to support and enhance the performance of its acquired businesses.