Wonder Brands Secures $20M to Build Latin American E-commerce Marketplace

Wonder Brands Secures $20 Million to Build a Latin American E-commerce Roll-Up

Mirroring the success of e-commerce roll-up strategies in the United States, Wonder Brands is aiming to replicate this model within the Latin American market.

Seed Funding and Investors

The Mexico City-based firm recently finalized a $20 million seed funding round. This investment was jointly led by ALLVP and Mountain Nazca, and included contributions from CoVenture, Victory Park Capital, GFC, QED (Fontes), Korify Capital, and Endeavor Catalyst.

Company Origins and Focus

Wonder Brands was founded in January 2021 by Nicolás Gonzalez Luna and Federico Malek. Their initial objective was to acquire established digital brands operating within the MercadoLibre and Amazon ecosystems.

The company then utilizes proprietary technology to enhance operational efficiency and drive sales growth for these acquired businesses. This is achieved through comprehensive support in areas like marketing, data analytics, supply chain management, and working capital provision.

Their focus is primarily on businesses specializing in home and garden products, sports and fitness equipment, and beauty and personal care items.

Market Dynamics in Latin America

“While MercadoLibre currently holds a significant market share, Amazon is rapidly expanding its presence in the region,” explained Gonzalez Luna in an interview with TechCrunch. “This lack of a single dominant marketplace introduces complexities not typically seen with solely Amazon-focused sellers.”

He further elaborated that operational procedures are more intricate, requiring extended negotiation periods and a greater emphasis on establishing trust. Consequently, Wonder Brands intends to pursue fewer, but larger acquisition targets compared to its U.S. counterparts.

Founders’ Expertise

Federico Malek brings extensive commerce experience to the table, having previously worked at Argentinian insurtech iunigo.com. He also founded e-commerce fulfillment company Avenida.com, which was later acquired by Groupon in 2010, where he subsequently served as managing director for the region.

Nicolás Gonzalez Luna’s background includes a tenure at Goldman Sachs, where he specialized in mergers and acquisitions (M&A).

Investor Confidence

Michael Breitstein, a principal at CoVenture, highlighted the complementary skillsets of Malek and Gonzalez Luna. He believes their combined experience, alongside their ability to secure funding and construct a robust platform, positions Wonder Brands for success.

Acquisition Strategy

Despite the competitive landscape for acquiring digitally native companies generating around $1 million in revenue, Wonder Brands is prioritizing larger sellers and operators. Their target acquisition size is a minimum of $5 million in annual revenue.

Furthermore, they are adopting a “buy and build” strategy, differing from the “buy and consolidate” approach favored by many other roll-up companies.

Comprehensive Support for Acquired Companies

The company’s core objective is to empower its acquired businesses to effectively sell across multiple channels. They provide support in four key areas:

• Category management and brand development
• Marketing and performance optimization
• Technology for automating processes like inventory and logistics
• Operations to manage all necessary sales channels

Malek explained that in Latin America, inventory often requires consolidation into a single warehouse, followed by segregation based on the specific sales channel.

E-commerce Roll-Up Investment Trends

The acquisition and scaling of companies represents a substantial business opportunity. According to London-based Hahnbeck Business Systems, an e-commerce M&A firm, e-commerce roll-up companies have collectively raised $7.24 billion in disclosed funding to date, tracking investments in FBA (fulfillment by Amazon) acquirers globally.

Market Size and Potential

Various reports indicate that Latin American e-commerce giant MercadoLibre boasts a market capitalization ranging from $70 billion to $94 billion. Amazon, meanwhile, sees marketplace merchants responsible for 55% of all units sold, equating to approximately $300 billion in sales in 2020, as estimated by Marketplace Pulse based on Amazon disclosures.

Future Growth and Expansion

The recent seed financing will enable Wonder Brands to invest in team expansion, focusing on the four core support areas and marketing initiatives. Currently employing 20 individuals, the company plans to triple its workforce within the next month.

The funding will also supplement existing debt facilities available for brand acquisitions. The company aims to complete six to seven acquisitions in the current year.

Wonder Brands projects to achieve $55 million in revenue by year-end, with a subsequent target of $100 million in revenue within the following 12 months. The company currently operates in Mexico and intends to launch operations in Brazil by the end of 2021.