E-commerce aggregator Benitago Group—once a two-man, seven-figure e-commerce business—has raised $325 million in Series A funding in a combination of equity and debt, the company just announced.
CoVenture, an asset management firm, led the round. “Benitago Group is rare in its ability to buy and build businesses,” says Ali Hamed, a partner in CoVenture. “Their capacity to launch products gave us the hypothesis they are not only good at buying and running businesses but also builders.”
Benitago Group, based in New York City, raised a previous $55 million round of debt and equity from CoVenture, which has invested in a handful of aggregators. Benitago Group used that funding to acquire other Amazon brands and now owns a portfolio of about 12 brands in consumer packaged goods, including Supportiback, a posture-protecting device. The company currently has a run rate of about $200 million, according to co-founder Santiago Nestares.
Santiago Nestares Lampo and Benedict Dohmen started Benitago Group with Supportiback, a back-support … [+] product they created that sells on Amazon.
Hamed said Benitago’s ability to navigate supply chain issues in the marketplace and attention to detail and efficiency were factors that made the investment attractive. “If you are a small seller, supply chain has gotten harder,” Hamed says. “Amazon has limited storage in its warehouses. The people who scale have been able to manage their cash flow and inventory.”
Nestares and co-founder Benedict Dohmen, who met at Dartmouth, founded the New York City-based brand in 2016. It has been an early player in the currently hot trend of rolling up small Amazon brands into a stable. “We’re looking at Amazon-only brands that have untapped growth potential—that’s the overarching theme,” says Nestares. The unicorn company Thrasio has been a prominent example of this approach.
Benitago Group aims to acquire more brands with its latest funding round, Nestares says. The company will also do more product development. “It’s a constant process,” says Nestares. “Some of our products have been optimized 4-6x in one year.”
When making acquisitions, Benitago Group uses a 381-point checklist, looking for brands that are already able to check off 40-60% of their best practices, Nestares says. “Those are the brands we want to acquire,” says Nestares. “They have defensibility and are established in the market.”
Benitago Group is also looking for targets that own private label brands and proprietary trademarks. “They need to have their own brand identity,” says Nestares.
The company has looked to distinguish itself by serving as an incubator for the brands it acquires, according to Nestares. With an in-house brand development studio, it has come up with a very detailed, 100-step process to develop brands, according to Nestares. Typically, Benitago Group will, for instance, test the packaging and color of a product for customer appeal.
According to Nestares, Benitago Group’s acquired brands have a 31% growth rate in the first three months of operation after acquisition. That has proved to be an advantage for those acquisitions where there is an earn-out—money the seller gets if the business maintains a certain level of performance. “If they go with an aggregator who doesn’t know how to grow their brand, they are at the mercy of the aggregator,” Nestares says.
Source by www.forbes.com