E-commerce aggregators have collectively raised hundreds of millions of dollars over the last several years to push ahead on strategies to consolidate a number of smaller online retailers. Now, the aggregators themselves are the ones getting swallowed up.
Today, SellerX, a Berlin-based roll-up play that has raised nearly $900 million in equity and debt and is valued at more than $1 billion, announced that it would acquire Elevate Brands, based out of Austin and NYC. Elevate, like SellerX, is in the business of buying up smaller retailers that sell over marketplaces like Amazon with the aim of getting more economies of scale around marketing, manufacturing, and supply chain management. Elevate, on just the amount of capital that has been pumped into it, is around a quarter of the size, with some $250 million raised to date.
The companies are not disclosing the value of the deal but note that it’s an all-share transaction, and it will also include a new investment of €60 million+ ($64 million) in the combined entity from existing SellerX investors Sofina as the lead, plus L Catterton, Cherry Ventures, Felix Capital, 83North, Upper90 and TRCM Fund also participating. The merged business will also be getting an extended credit line from BlackRock and Victory Park Capital funds to buy up more companies — presumably not just individual retailers but other aggregators as well.
It also declined to disclose its new valuation when asked.
The merged company will be called SellerX Group, led by SellerX’s current co-CEOs and co-founders Philipp Triebel and Malte Horeyseck (Elevate’s co-founders Ryan Gnesin, Jeremy Bell, Robert Bell respectively as president, head of M&A and global business development head.
It will have 80 Amazon-native brands and annual sales of €400 million ($426 million). The deal is expected to close by the end of next month (June).
Roll-up plays have a tendency to start all looking like each other — there are only so many variations on “economies of scale for Amazon merchants”.
But for a few years, pre-2022, the idea of businesses raising money to pursue Amazon-like economies of scale looked smart and bankable — there are tens of thousands of individual retailers selling across big online marketplaces, and it seems like a no-brainer that this fragmented space would need consolidation and exit options for those retailers. Thus, for a while it looked like anyone building an e-commerce aggregator startup could pick up $50 or $200 million to pursue the model.
But the funding landscape has gotten significantly more constricted in the last 18 months, and many investors have become jumpy pouring large sums of money into startups that have not been able to turn a profit. So it only felt like a matter of time before the consolidators themselves — these aggregators — would start to get consolidated, too.
Now, that is what’s happening, and in a somewhat ironic twist, it has not taken long for these consolidations to follow a pattern, too. It was only a month ago that Razor Group, another aggregator based out of Berlin, also acquired another roll-up business, Stryze, and closed off a big fundraise at a $1.2 billion valuation.
“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,” Razor’s CEO and co-founder Tushar Ahluwalia told me at the time. “Plus M&A is very close to the DNA of this space.”
One point of differentiation among aggregators has been that some are aiming to build the technology stack that they are using both to source retailers to acquire, and to then run them more efficiently as combined businesses; and some are sourcing third-party software for these purposes, focusing instead on bringing management smarts into merging and running multiple e-commerce operations under one roof.
It sounds like SellerX placed itself in the former category, while Elevate identified with the latter more.
The new business will use SellerX’s technology platform, supply chain infrastructure and “proprietary warehouse operations,” and “internationalization capabilities” the company said, while “Elevate Brands will contribute its strong expertise in turning marketplace-native products into consumer brands sold across multiple channels.”
“Elevate Brands and SellerX are a perfect match: a strong cultural fit, a shared vision, and complementary capabilities,” Triebel said in a statement. “This acquisition combines our know-how and diversified portfolios of strong brands with a market-leading technology platform and strong operational infrastructure. By leveraging our combined strengths, I am convinced we are well-positioned to drive further consolidation in the industry.”
Whether that becomes a powerful enough formula to keep the merged company independent will be something to watch. Razor Group has said that it will be buying more businesses over time; Thrasio — one of the bigger players in the space — recently raised funding and is operating under a new CEO, making it another one to watch.