Berlin’s Razor Group raises $125M at a $1B+ valuation for a platform to buy and scale
Companies snapping up merchants selling on Amazon to build in more e-commerce economies of scale into the model are on a rapid pace of growth at the moment, fueled in no small part by giant infusions of money from the world of venture capital. In the latest development, Berlin’s Razor Group — one of the more ambitious of the aggregators out of Europe — has now raised $125 million of equity funding in a Series B round that CEO and co-founder Tushar Ahluwalia said pushes the company past a $1 billion valuation.
In a sea of startups that have collectively raised billions of dollars to scoop up smaller Amazon-based merchants, Razor believes that its numbers speak to it being one of the biggest, and possibly the biggest of all in Europe, even as more 70% of its revenues are actually generated from the U.S..
Razor said that it is profitable on a group Ebitda basis; going to post $400 million in revenues for the year ending in December; and on track to pass $1 billion in sales in 2022, on a business model that Ahluwalia claims is not simply based on en masse “rolling up” smaller Amazon merchants that have been built on top of the e-commerce giant’s marketplace and fulfillment (FBA) infrastructure. Its ambition: yes, buy them up, but then integrate them into a wider operation and eventually move away from being wholly dependent on Amazon.
“Our pitch is not that we are an FBA acquirer, but that we work in three phases: acquire, operationalize and then transform,” he said. “Technology helps us to be very good in each of those.” Ahluwalia said that 12% of Razor’s revenues are already “non-Amazon” and the plan is for the to move up to over 20% in the next three quarters. “We’ll also be more diversified,” he added.
This Series B is an all-equity round — the equity aspect being a contrast to a lot of the raises made by startups in the same business as Razor’s, including a $400 million round Razor itself raised in March of this year, which was $375 million of debt for acquisitions, and $25 million in equity. It’s coming from a mix of new and previous investors, including Fortress Investment Group, 468 Capital, Victory Park Capital, Presight Capital, Blackrock, Jebsen Capital, Redalpine and GFC (GFC is the fund from the Samwer Brothers of Rocket Internet fame: Ahluwalia and another co-founder, Christoph Gamon, are both Rocket alums).
The reason for raising equity is to have more flexibility with the capital than Razor (or others in the space) might have when raising debt.
“We estimate that half of the Series B will be used for acquisitions with the remainder for hiring, building the operation and doubling down on certain markets like China,” said Gamon, who is Razor’s managing director. Razor currently has some 300 employees with operations in Berlin, Delhi, Austin, London, Bangalore and Shenzhen.
Razor launched only 14 months ago, but it has been taking a page from the Rocket playbook in aggressive expansion. From a standing start, the company is now on track to have some 80 merchants in its group by the end of this year, covering some 150+ plus brands. As a point of reference, in March the company had just 30 brands in its stable.
That quick expansion underscores the frenzy of activity that we have seen in this space, as startups amass large piles of capital to buy up, integrate and scale merchants that have built successful businesses around selling on Amazon, by way of the company’s marketplace and fulfillment infrastructure, but might lack the funds, talent or exit strategy to scale beyond that.
Just a couple of weeks ago, Thrasio — one of the big players out of the U.S. — raised $1 billion on a $5 billion valuation; Perch raised $775 million in May of this year, and we know of at least one other competitor to them about to also announce a major round; and these are just three recent, big deals. Others include Heroes, which raised $200 million in August; Olsam ($165 million); Suma Brands ($150 million); Elevate Brands ($250 million); factory14 ($200 million); as well as Heyday, The Razor Group, Branded, SellerX, Berlin Brands Group (X2), Benitago, Latin America’s Valoreo and Rainforest and Una Brands out of Asia.
This gives those third-party merchants looking to sell up a lot of options when it comes to buyers.
So the trick for the Razors of the world is to both figure out how to find those that are under the radar but poised to grow, or to pay a premium, or bring together assets in a clever way that will make them more valuable in the longer term.
Razor’s pitch is that it’s able to do this by way of a tech platform built from the ground up that analyzes the long tail of merchants selling on marketplaces like Amazon, and then helps to integrate those that it acquires to operate them as a more singular business in terms of sourcing, marketing, and logistics.
Shrestha Chowdhury, another co-founder who is Razor’s CTO, said that to date Razor has used its platform to analyze and evaluate some 1.5 million Amazon merchants, and out of that it has already sourced 80,000 potential targets. Those two numbers should give you some idea of the scale and opportunity, but so should the fact that Razor has only acquired 80 merchants to date.
“Unlike most other players we don’t rely on FBA brokers,” Chowdhury said. “We source proprietary deal flow.”
And that seems to be at the crux of Razor’s approach: speed, but also a dose of trust and experience to follow through on that. “Deal-making is something extremely personal,” Ahluwalia said to me back in March. “A seller needs to like you. Our calculations have allowed us to be the first in these deal conversations.”