The business of being an e-commerce aggregator may be down but it is definitely not out.
Razor Group, one of the string of startups that has made a name for itself as a “roll-up” startup — raising big money to acquire and consolidate Amazon (and other marketplace) retailers — is now making a different kind of consolidation play. The Berlin startup, which says it is profitable, has acquired one of its competitors in the aggregator space, Stryze Group, as part of a bid to be “the consolidator of consolidators.”
“It makes sense right now for smaller players to become a part of Razor Group,” said Tushar Ahluwalia, the CEO and co-founder. “The natural route is consolidation, that is the path forward. We’re building a stronger company by joining forces. That is what you have seen and will see, and what we have executed.”
Stryze was acquired in all-share deal, with Stryze investor Upper90 — a major backer of e-commerce aggregation plays (it’s one of the big investors in Thrasio) — also taking an additional equity investment in Razor.
Upper90’s investment closes out Razor’s last funding round, which it’s calling its Series C, at €80 million ($88.4 million) — with other investors in the most recent round including L Catterton, Presight Capital, Blackrock, GFC, LatinLeap, Redalpine and 468 Capital. It also bumps Razor’s valuation up to $1.2 billion, sources at the company tell me. (For context, Razor Group had a valuation of more than $1 billion in November 2021.)
Other acquisitions quietly made by Razor in the last 11 months include the well-capitalized aggregators Valoreo in Latin America and Factory14 in Europe.
Razor has some 140 “assets” under its umbrella currently (assets can include multiple brands: its site lists over 200 brands), with 2022 net revenues of $453 million across them. Its plans are to use the acquisitions to grow deeper, and more quickly, into new geographies and to expand in product categories where it already has traction, and to tackle more regional channels to complement its mainstay business on Amazon.
Razor’s M&A, fundraise and valuation bump are coming at a time when many e-commerce startups, and specifically aggregators within it, have found themselves at a crossroads.
Not only has e-commerce activity landed back on earth after a stratospheric rise in transactions during the peak of the COVID-19 pandemic, but some might say it’s actually shrinking, as the wider economic climate — major economies around the world are teetering on recession — is driving a lot of consumers to be significantly more careful how they spend money.
Meanwhile, aggregators raised hundreds of millions of dollars to roll up Amazon third-party retailers in a bid for better economies of scale in those businesses, but that strategy has not played out as efficiently as many had hoped, with many pausing their rapid acquisition strategy as a result.
“2022 is a different world,” Ahluwalia said, who says he and those in the e-commerce space think of it all as “pre-2021 and post-2021.” That means that aggregators who have in the past been very bullish on building their own startups — capitalizing on the opportunity of scooping up choice companies among the millions of small businesses that have been built to sell on Amazon and other marketplaces — are running out of runway, finding it hard to raise more money, and see the logic of the Razor approach and having conversations.
“What is helping us in executing consolidation and become an even bigger business is that founders are facing all those questions. Plus M&A is very close to the DNA of this space.”
Razor’s pitch has from the start been that its approach is very different from that of its peers, in that it has built its own technology in house: This is in contrast to a number of others who knit together third-party tools to manage and run these businesses, sometimes with some of their own tech and sometimes not. Initially, its aim was to evaluate potential targets.
“We got very good at reverse engineering the Amazon algorithm,” co-founder and CTO Shrestha Chowdhury said. (The third co-founder, Oliver Dlugosch, is the company’s COO.)
And since then, its attention has turned to using and building out that tech to run its myriad businesses in a better way, not just to help with product selection but to manage supply chains and other major operational requirements (and cost centers) in running e-commerce efficiently.
Overall, although aggregators felt like one of the prime bubble opportunities at the peak of the startup funding bonanza, the whole space is far from wiped out today. Thrasio, one of the older and biggest of the aggregator startups, had a valuation of between $5 billion and $10 billion back at the end of 2021 when it raised $100 million. In the year since, though, it changed CEOs and laid people off.
PitchBook notes however that it had actually quietly raised more funding, an undisclosed amount from CrossWork and Elevation Capital, at the end of last year. And that new CEO, longtime former Amazoner Greg Greeley, is now slowly bringing on more top Amazon alums like Steven Shure (who joined as president and CCO earlier this year) — all signs of Thrasio’s ambitions.
Add to that the emergence of yet more players in the space, too: Just last week Rob Solomon, the former CEO of PayPal, took the wraps off his own move into aggregator land with the well-capitalized Kite.