Tono Mandly doesn’t consider his company, Riogrande, an e-commerce aggregator, but instead as one whose mission is to build local brands, through acquisition and incubation, for the emerging middle class of Latin American consumers.
Latin America continues to be one of the fastest growing e-commerce markets in the world, with $100 billion in total addressable market, he pointed out. However, it remains a highly fragmented market where only the wealthiest consumers have the ability to purchase goods from the U.S., while half a billion people in the middle and lower classes have to turn to China for cheaper, often lower-quality products, Mandly added.
He, Federico Naides and Ivan Amelong started the company in Mexico City in 2021 to close that disparity by incubating brands and acquiring small and medium brands selling on marketplaces like MercadoLibre and Amazon. They come from backgrounds that include Rocket Internet and Delivery Hero.
“We are building great local brands for the middle class and lower class, mainly creating new brands from zero, but also doing some acquisitions where we can multiply the brand by 30 times,” Mandly added. “Unlike aggregators, of which there are a couple in LatAm bringing a few brands together with multiple arbitrage, we are focused on the growth play and how to automate the process of growth so that the companies see growth in a month that others see in a year.”
While e-commerce aggregators have emerged all over the world, it is a fairly new concept in Latin America, but experiencing explosive growth, driven in part by the global pandemic’s impact on e-commerce. Many are seeing success, for example, Merama, which hit a $1.2 billion valuation just 12 months after incorporation, Quinio, which announced $20 million in initial funding to acquire some 30 companies, and Wonder Brands, which also picked up $20 million.
Unlike the aggregators, which Mandly explained aim to acquire hundreds of brands, Riogrande is going for something more intimate, maybe 30 brands doing $30 million in revenue per year. It will acquire about half of those and create the other half.
Riogrande focuses on brands like home, kitchen and beauty, and after going through Y Combinator, has already taken several brands in the home space from zero to $1 million in revenue in a span of two months.
To help the company scale its plan, it took in $12 million in seeding funding in a round led by Y Combinator and Wollef, with participation from individual investors including Arielle Zuckerberg and Justin Mateen.
Mandly said some of the funding has already been deployed into technology development, so Riogrande can automate every process of brand growth and supply chain and do a few more acquisitions. He expects to also close on a Series A round in the coming weeks.
In the past year, the company doubled its revenue with a goal of reaching $1 billion in topline with 35% EBITDA margins. Riogrande is already profitable, and Mandly says it can now shift comfortably between growth and profitability.
“We have our heads down to work, keep growing and maintain the growth rates with our brands,” he added. “Founders are looking for us because there are no other players who have our growth rates.”