Business was booming for Adam St. George when he decided to shop around his four-year-old brand Angry Orange Odor Eliminator. Sold primarily on Amazon, his citrus-scented petodor remover was racking up more than $2 million in annual revenue.
Within hours of listing the operation on an online brokerage, St. George was inundated with phone calls. Planned time off to visit family in Ohio morphed into a marathon of negotiations with brokers, family offices and individual investors. The winner: consumer-products startup Thrasio, which sent a term sheet within a week of the listing and insisted on a response the next day.
“They weren’t messing around,” says St. George, 52, who sold Angry Orange for $1.4 million in 2018, a sum beyond his wildest dreams that paid for a nearly month-long vacation in Hawaii and a new fishing boat. “You get this big check and it’s like, wow. It’s a trip.”
That check, though, paled in comparison to the return expected by Thrasio, which quickly revamped Angry Orange’s operations and has since increased its annual revenue eightfold, to $16.5 million. Named after Thraso, a brave Amazonian warrior from Greek mythology, Thrasio was founded by two serial entrepreneurs in July 2018 with a single mission: to roll up third-party sellers on Amazon. Over the last two years, it has spent over $100 million snapping up nearly 100 businesses, boosting their revenue to more than $400 million; it now sells 10,000-plus items—massage guns, hiking poles and everything in between—on the nation’s biggest online retail platform.
“We are a white knight in this ecosystem,” says co-CEO Josh Silberstein, 45. His co-founder, Carlos Cashman, 48, explains: “[Amazon] has been the most potent creator of entrepreneurship and entrepreneurs the world has ever seen.... Then, when it starts to get too complicated when [these companies] hit a certain scale, we are there.”
Silberstein and Cashman are not alone. Lots of people suddenly believe that Amazon’s small businesses represent a big opportunity. Over the last 24 months, 10 to 15 companies have raised $100 million or more apiece, totaling at least $1.5 billion, to buy up Amazon third-party sellers, according to Jason Guerrettaz, cofounder of brokerage WebsiteClosers.com. Among them are a company started by a former Wayfair executive and one from the founder of Charming Charlie, the accessories retailer that filed for bankruptcy twice.
These entrepreneurs and their backers—including blue-chip private equity players like Advent International and JPMorgan, big venture firms including Khosla Ventures and monied individuals such as Zillow cofounder Spencer Rascoff, former Tinder CEO Elie Seidman and Los Angeles Dodgers executive Tucker Kain, are betting millions they can score big returns piggybacking on Amazon founder JeffBezos’ billions.
“The fervor in this space is absolutely crazy,” Guerrettaz says. He adds that sellers who got perhaps 50 inquiries a year or two ago now attract between 200 and 300 in just the first hour of a listing. “We probably receive 20 to 25 emails a day from different groups reminding us that they are well-funded, a buyer in this space and are looking for deals.”
It’s all part of consumers’ unstoppable migration to online shopping. Amazon is now the world’s third-most-valuable company, with a $1.57 trillion market cap that lags only Apple’s ($2.03 trillion) and Microsoft’s ($1.64 trillion). The Seattle-based giant sold $335 billion worth of products in 2019, according to Marketplace Pulse, up 21% from the prior year. Amazon accounts for roughly 40% of all e-commerce spending in the United States, according to eMarketer.
Independent merchants on the site have been a huge part of that success. There are over 2 million third-party sellers worldwide. In the U.S. alone, these businesses moved 3.4 billion items via Amazon in the 12 months ending in May, up from 2.7 billion the previous year. Over 30,000 of these sellers in the U.S. each generate at least $1 million in sales a year, and many rely on Amazon to handle retail’s messy logistics: delivery, returns and customer service. In aggregate, these small businesses are vital to Amazon, accounting for about 60% of its product sales, double the percentage they represented a decade ago. By and large, the pandemic has been good for these companies: During this October’s Prime Day, Amazon’s annual 48-hour sales event, third-party sellers had their two biggest days ever, according to Amazon, with sales rising nearly 60% year-over-year to $3.5 billion.
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