One of the hottest types of businesses to sell right now are e-commerce stores that do business on the Amazon platform. While investors used to overlook these one- or two-person third party sellers, now some in the investment community have recognized that the best-run among these shops can be very profitable—and that aggregating a stable of them and managing the back end of the businesses for greater efficiency can allow backers to create a very profitable juggernaut.
This approach has been gathering steam slowly for the past few years but has become more popular recently now that Thrasio, a “unicorn” company, has embraced it, and Anker—a brand of portable device chargers that sprung up on Amazon—has gone public. Another big factor is the growth of e-commerce since the pandemic.
Marketplace Pulse, an industry publication, found that nearly $1 billion in new capital was committed, in a mix of debt and equity, to firms looking to acquire Amazon sellers and brands. “2020 is the year it became popular to start buying Amazon businesses,” says Ryan Gnesin, CEO and majority shareholder of Austin- and New York City-based Elevate Brands (formerly Recom Brands). It was only around 2018 that Amazon allowed someone to own multiple accounts, Gnesin says.
If you’ve built an ecommerce store on Amazon and are looking to sell it, how do you get in on the action? I spoke about that recently with Gnesin, one of the investors who has been on the hunt for e-commerce properties. His firm announced in February that it had raised a $55 million fund in a Series A round from a group of fintech and global business leaders. Elevate Brands announced it had raised another $12.5 million in early April, as it got set to acquire its 20th Amazon brand. The firm, which has been an Amazon operator since 2016, acquired its first Amazon business more than a year ago. Its goal is to acquire 100 of these brands by the end of 2022.
Gnesin recently shared with me some of the factors his firm is looking for when it is on the hunt for deals. If you’re aiming to position your e-commerce business for sale, here are some tips on what to emphasize in your marketing to investors and acquirers.
Recognize that investors are data driven. Investors who know Amazon will want to compare your business other similar ones, so it’s important to have your financials and other key data very organized. Gnesin and other investors in the space are looking for about 25% earnings before interest, taxes, depreciation and amortization EBITDA. Therefore, a business with $4-5 million in annual revenue might need about $1 million in EBITDA to be attractive. Ideally, an e-commerce store will have two years of trailing…
Read More: Investors Are Beating The Bushes For E-Commerce Stores That Sell On Amazon.