A New Wave of Startup Acquisitions in E-commerce

A fresh approach is being adopted by emerging companies, involving the acquisition and expansion of smaller, promising third-party sellers. This strategy focuses on building substantial economies of scale.

While numerous such startups operate in the United States and Europe, the Latin American market previously lacked a comparable presence. This has now changed.

Valoreo Secures $50 Million in Seed Funding

Valoreo, an e-commerce business acquirer based in Mexico City, announced on Tuesday the successful completion of a $50 million seed funding round, comprised of both equity and debt.

The size of this investment is significant for a seed round, and it represents one of the largest amounts ever raised by a Latin American startup. This demonstrates a growing interest from investors in the region’s expanding venture capital landscape.

The funding round saw participation from Upper90, FJ Labs, Angel Ventures, Presight Capital, and a diverse group of angel investors.

Key Investors in Valoreo

• David Geisen, head of Mercado Libre Mexico
• Alfred Chuang, co-founder of BEA Systems
• Tushar Ahluwalia, founder of Razor Group (a European marketplace aggregator)

Established in late 2020, Valoreo is dedicated to investing in, managing, and scaling e-commerce brands. Its stated goal is “to bring better products at more affordable prices” to consumers throughout Latin America.

Co-founder Alex Gruell stated that the company received more investment offers than needed, allowing them to choose investors who could contribute both capital and valuable expertise.

The Roll-Up E-commerce Model

Valoreo is joining a growing trend of startups focused on consolidating e-commerce brands through acquisitions.

The company’s business model shares similarities with those of U.S.-based companies like Thrasio – which recently secured an additional $750 million – and Perch. However, Valoreo emphasizes that its strategy is specifically designed to address “the specific needs of the Latin American market and is specifically focused on the Latin American end customer.”

Branded, another new entrant in this space, recently initiated its own roll-up business with $150 million in funding. Other companies operating in this sector include Berlin Brands Group, SellerX, Heyday, and Heroes.

Potential Market Concerns

As noted by Ingrid Lunden, the rapid increase in fundraising within the FBA roll-up sector may indicate a market bubble. The long-term profitability and viability of this strategy – buying and consolidating sellers – remains to be proven by these relatively young companies.

Understanding Valoreo's Business Model

Valoreo, deriving its name from the Spanish word “valor” signifying the addition of value, focuses on acquiring businesses that maintain their own brands and primarily distribute products through online marketplaces like Mercado Libre, Amazon, and Linio. The company specifically seeks brands offering products considered leaders in their categories and possessing substantial potential for expansion. Furthermore, Valoreo actively develops its own brands to broaden the product range available to consumers.

Similar to Thrasio, Valoreo aims to empower entrepreneurs who may be constrained by limited resources or access to funding, enabling them to scale their operations.

Stefan Florea, co-founder and co-CEO, states that the typical timeframe from initial seller contact to final payment is under five weeks.

The acquired and internally developed brands are then integrated into the company’s overarching portfolio. Leveraging a team of experts in areas like digital marketing and supply chain logistics, Valoreo asserts its ability to facilitate significant growth for these brands. This also provides entrepreneurs with a favorable exit strategy, or in some instances, a partial divestment.

“We tailor our acquisition structures to align with each seller’s individual goals,” Stefan Florea explained.

Typically, Valoreo acquires a controlling interest in the business, with the transaction involving an initial cash payment alongside a profit-sharing arrangement, allowing sellers to continue benefiting from future success.

Future plans for Valoreo center around utilizing newly acquired capital to acquire and nurture promising brands, as well as expanding its current team of ten and bolstering its operational infrastructure.

Currently, the company’s primary focus is on the Mexican and Brazilian markets, with planned expansion into other Latin American nations where it has established local support networks, such as Colombia, according to co-founder Martin Florea.

“Our objective is to establish ourselves as a leading pan-Latin American entity, delivering value throughout the region,” Martin Florea stated. “Latin America, and Mexico in particular, presents a unique landscape with considerable e-commerce opportunities, but also specific challenges.”

Martin Florea identifies these challenges as including restricted access to capital for growth, a shortage of specialized expertise in areas like supply chain management, limited avenues for business sales and new ventures, operational complexities, and difficulties expanding into new territories and marketplaces.

Valoreo emphasizes its intention to collaborate with, rather than compete against, Mercado Libre, Amazon, and other regional marketplaces.

“These platforms are essential to the opportunities we pursue,” Martin Florea noted.

Hernán Fernández, founder and managing partner of Angel Ventures, anticipates that Valoreo “will significantly contribute” to the Latin American e-commerce sector, which is characterized by both growth and fragmentation among sellers.

Ricardo Weder, co-founder and CEO of Jüsto (and a Valoreo investor), highlights that the Latin American e-commerce market is at a pivotal moment. According to eMarketer, the region experienced the fastest rate of e-commerce growth globally in 2020, achieving a 37% year-over-year increase. However, it remains a more fragmented and competitive market compared to regions like the United States.

Valoreo believes this situation creates an opportunity for market consolidation.

“Many consumers are still unaware of the diverse range of exceptional local brands offering innovative products on online marketplaces,” Stefan Florea said. “In the U.S. and Europe, e-commerce has become the preferred shopping method, providing a wider selection of products and brands than traditional retail. We are confident that consumers in Mexico and throughout Latin America will soon recognize the advantages of e-commerce.”