Fundraising for Thrasio style aggregators
Will we see more D2C brands aggregators in India?
The global eCommerce industry has grown exponentially in the past decade. We have thousands of online brands in India. The market size in the USA and China is even bigger.
Thrasio, an American startup, raised a lot of venture capital in 2018 to acquire and grow the best Amazon sellers. Their goal was to become a company with hundreds of great online brands. Several other startups followed suit and raised billions of dollars under the same premise.
This Thrasio (D2C aggregator) model arrived in India in 2020. Since then around 7,8 startups have collectively raised half-billion dollars from both domestic and global investors to acquire Indian online brands.
So is there still a space for a new D2C aggregator in India?
The Indian eCommerce market is massive. IBEF (Indian Brand Equity Foundation) says it stood at $41 Bn in 2020 and will grow to $114 Bn by 2025. Personal care, beauty and wellness, apparel, and home & kitchen account for a lion's share of this. And all aggregators are focusing on these categories.
Most aggregators buy D2C brands for 0.9–1.3x multiple of the annual revenue (depending upon the EBITDA). If we take 1x multiple as an average, $500 Mn will buy only $500 Mn worth of brands. That's 1% of the total Indian eCommerce market ($41 Bn).
Big D2C brands like Boat, Mamaearth, etc. comprise a big share of this $41 Bn. And these brands won't sell to aggregators. Groceries and other non-branded stuff (not a focus area of aggregators) also have a big share.
Despite that, the untapped potential is huge. We still haven't scratched the surface. Investors will pump billions of dollars in India for acquiring online brands if the current aggregators can prove that this model works.
So will we see new aggregators in India?
The market size is not a constraint. The question is whether investors will back new aggregator startups or continue to pump money in the existing players?
New founders might struggle to convince new investors to back them unless they have a stellar track record in building or growing brands. This is not a tech play. It is about identifying the right brand and growing them through better marketing, logistics, and products.
Aspiring founders will also have to differentiate themselves from existing players. They just can't say they will focus on either fashion or home & kitchen or wellness. These categories are taken. They will have to show a new vision.
The best approach would be to reach out to the big VCs and hedge funds that have not invested in any aggregator. All investors know this could turn out to be a 20x opportunity. The ones who missed out might want to back new players with attractive valuations.
But everything will boil down to the founders' pedigree and their team. Thrasio has validated the idea. They will have to convince investors that they can execute it better than others.