Thrasio.io has a $1 billion valuation. It has raised $520 million in funding over the last year. It generates $300 million in annual run-rate revenue (as of July 2020) and spits off about 10% of that in EBITDA. It fashions itself as a brand creation and growth engine that will disrupt the consumer packaged goods markets. “For the first time in four decades, the competitive advantage that legacy brands once held has disappeared within the past five years and are being rewritten,” their CEO says.
These companies typically are known as acquirers of FBA (fulfillment by Amazon) businesses.” Heyday was one of the latest to get funded, with $175 million in November.
Here's their business model:
- Buy successful (i.e., growing and profitable) start-up brands that are operating as FBA sellers on Amazon
- Make them operationally better
- Make them bigger
(Now the interesting parts)
5. Develop technology to identify FBA sellers likely to succeed so you can acquire them before others
6. Develop technology and teams at “the center” to be really good at steps 2 and 3 (i.e., operations and growth)
The typical FBA brand that’s acquired has about $5-10 million in revenue and generates about 10% in EBIDTA margin. It’s usually run by a single entrepreneur or small team. It’s identified a niche that resonates with consumers but is having difficulty scaling.
Thras.io or similar acquires the company with a combination of up-front cash and earnout payments. The typical buyout price is 2.5-4X EBITDA.
There are some intuitively attractive features to the model. First, innovation is done by hungry entrepreneurs in garages and basements, not by corporate operators. Second, the operational improvement and scaling work is done by corporate operators with the teams and technology to do it well, not by some under-resourced guy in his garage.
The less obvious and more provocative challenge that Thrasio and it's ilk present to incumbent holding companies (and their agencies) is its approach. It is in many ways the anti-brand management approach that had been developed by P&G, Unilever, and others and embraced by the big agencies. There are no apparent OGSMs, JTBs, brand pillars, or messaging frameworks.