🕹This Indian startup got $40 million just for their idea.

Here's why.

Last week, I saw a pretty shocking startup-funding news- "10club raises $40 million seed funding".

Seed funding means they don't even have a product, they only have an idea!

$40 million just based on their idea??🤯🤯

This got me curious- how good was their idea that investors gave them this much money?💰💰

Turns out, 10club is implementing the idea of one of the sexiest startups in America right now- Thrasio.

Today's article is a deep dive into Thrasio. Plus, we'll take a look at the startups applying Thrasio's model in India.


Hey friends I'm Shreyans! Welcome back to another edition of my newsletter, Integral- a place where we get smarter about the Indian tech industry.

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Thrasio is a startup that will blow your mind- just look at these facts👇👇

  1. It became a unicorn in just 2 years- a record🚀🚀 It is now valued at around $3 billion.

  2. It is very profitable- It had a profit of $100 million last year🤩🤩

  3. It sells 15,000 products on Amazon🔥🔥

All this is possible because of its simple strategy- buying lots of small brands and improving them.

Yeah- the secret to a profitable startup is this simple😭😭

It was founded by Carlos Cashman and Joshua Silberstein in 2018. Since then, the company has acquired more than 100 brands selling on Amazon. After acquiring the brands, they improve and streamline them. The result? A super-attractive business that every investor wants to fund.

To understand why Thrasio is so successful, first, we have to understand selling on Amazon.

Amazon saw that selling a product requires a lot of expenses. The seller had to manufacture the product, buy warehouses for storing the product, buy systems to manage and keep track of inventory, setup delivery networks, handle returns and refunds, etc

So in 2006, they introduced Fulfillment by Amazon(FBA).

Using FBA, sellers on Amazon just have to manufacture the product. Amazon handles everything else- storing, shipping, returns, refunds, etc. That's why 66% of sellers on Amazon use FBA- it's cheap and convenient.

But Thrasio co-founders saw a problem with FBA-

As you grow from $1 million to $10 million, the margins would decrease and it gets even harder to make returns. We simply observed the reality that all these great companies had reached a point between a lack of access to capital and simply not being able to keep doing what they do.

Another problem is Amazon itself. As I said in my LinkedIn post a few days back-

Amazon treats the shopkeepers on its platform as garbage. It favors products by big companies, puts the products of shopkeepers at bottom of the search results, copies the products of shopkeepers and sells them as Amazon Basics, and bans shopkeepers from Amazon if they complain.

This is a problem for all sellers on Amazon- but it is particularly problematic for FBA sellers because they are very dependent on Amazon.

In my post, I wrote that the solution to this problem was Shopify-

Using Shopify, shopkeepers can set up their own online store, and sell directly to their customers. Shopkeepers don't have to worry about paying Amazon for ads or standing out in the search results or getting banned. They have complete freedom with their online store.

But as many people in the comments pointed out, this is not a good solution for most sellers. On Amazon, at least sellers had a ready-made customer base. On Shopify, they have to attract customers on their own.

This means sellers are trapped between 2 extremes- Amazon and Shopify. On Amazon, they are being harassed and hunted. On Shopify, customers will never find them.

There should be a middle-ground solution to this.

🕹Enter Thrasio:

Thrasio's model combines the best of both Amazon and Shopify. Thrasio sellers get Amazon's customer base and Shopify's independence.

Specifically, Thrasio acquires brands that use FBA, streamlines its operations and other improvements, and grows the brand on Amazon and outside Amazon.

Buying and growing brands is not a new strategy. Companies like P&G and Unilever have used this strategy for a long time. Their model is called the "house of brands". Here's what P&G's "house of brands" looks like-

The concept behind a "house of brands" is simple- lots of brands under a single company, each have its own market and separate ops. They have no relation to each other. Brands get more resources and reach. The company gets access to many markets and a solid base to take risks.

Because Thrasio is acquiring brands, there are even more benefits- both for the brand and Thrasio.

The benefit for brands? They achieve meteoric growth🚀🚀 after being acquired by Thrasio.

The benefit for Thrasio? Buying up all these small brands makes Thrasio's earnings more valuable. This is called "multiple arbitrage

(Caution: This is a very complex financial concept that flew right over my head. So I may have explained this incorrectly. Feel free to correct.)

I thought Thrasio's process to acquire brands would be something boring and full of legal jargon. Surprisingly, the company has made massive innovations in this boring and fixed process. I think these innovations are one of the main reasons for Thrasio's blockbuster success. Come with me, I'll walk you through Thrasio's innovative process.

Step 1: Finding brands to acquire

The innovation starts from step 1. There are 5 million sellers on Amazon. Finding valuable brands out of 5 million would be pretty difficult, right? So, Thrasio comes up with a detailed process to find good brands.

I came across this podcast where Ken Kubec, the VP of Acquisitions at Thrasio, described their process-

I probably looked at over 300 companies over the past year. And what we really look for is first and foremost, I call it R Cubed. it’s reviews, rating, and rank.

Do they have reviews that should establish them as a leadership position? Just from a social proof standpoint in the category.

Do they have their rating, the product quality to back up and sustain their position

and then rank: are they ranking organically on high keyword volume?

[minimum revenue of the brand?] we look probably I would say one to 30 million in revenue.

[What type of brand?] private label. Trademark brand registry.

They also look for brands that have more revenue from fewer products. Why? Because more revenue on fewer products makes a brand valuable.

Step 2: The Acquisition Offer

How much does Thrasio pay to acquire these brands? Is it a random number based on negotiations?

Nope. Thrasio has a system for that too-

Thrasio starts from the Amazon Seller’s last twelve months carried profits, to that it adds back the Amazon seller’s salary, to get the so-called seller’s discretionary earnings. On that number, once a multiple has been agreed and negotiated, the business gets sold. Usually on the seller’s discretionary earnings is applied a 2-4 valuation multiplier.

These people have perfected the acquisition process- the average acquisition takes just 35 days! This is a big competitive advantage in a market with lots of competitors.

Step 3: 503 steps to improve the brand

Yep, that's right. They have a 503-step process that they apply to the brand and improve it.

Some of these steps are inventory management, streamlining operations, digital marketing, advertising, automation, etc. Note that most of these are small improvements, but combine the contribution of 503 small improvements, and you get a super-improved brand.

And the result of these small improvements?

Some of Thrasio’s brands have seen a 96% improvement in their best-seller ranking on Amazon less than three weeks after their acquisition, in addition to a 233% increase in revenue year over year.

Vybe, Quility, Cloud Massage, and Angry Orange are a few of Thrasio’s key acquisitions. They manufacture products such as body and foot massagers, weighted blankets, and pet deodorizers.

Angry Orange is one of Thrasio’s most successful acquisitions. Thrasio has grown the brand from a $1 million business to a $25 to $50 million business.

In my mind, I picture Thrasio as a washing machine. The brands it acquires are like dirty clothes😂😂 You put dirty clothes inside a washing machine, and the clothes come out sparkling clean. Similarly, brands get acquired by Thrasio and come out as super-optimized.

🕹Thrasio-style startups in India:

This completes your Ph.D. on Thrasio🤣🤣 Now we come to India. Lots of Indian startups are implementing Thrasio's strategy in India.

Just look at the amount of funding and the names of investors- mind blown🤯🤯

So many big names investing here, obviously, this space is going to explode💥💥

Another interesting thing here is the founders- most of them have left big companies to start these startups.

Mensa's founder is the former Myntra CEO. GOAT's founder is a former Flipkart fashion head. Evenflow's founder is a former Uber executive.

These Thrasio-style startups are acquiring brands in fashion, apparel, home decor, arts and crafts, bedding, yoga mats, bedsheets, premium food items, kitchenware, etc.

Although they're mostly applying Thrasio's strategy, they are adding their own flavor as well-

Each company has its own strategy, the proverbial ‘wine and dine’ before making a buyout pitch. Some offer unparalleled market expertise, others offer a ‘founder friendly’ relationship where the Amazon seller will still run the company, and some others promise that their companies- so far popular on Amazon but obscure otherwise- will get covered favourably by the media.

And they're facing some India-specific problems as well-

because in India so far, online-only brands have not worked- unlike the US. Even Nykaa and Lenskart realised at some point that you have to go offline

Even Byju's realized this problem. As I wrote in my article Why did Byju's buy Aakash Institute?, Byju's realized that online-only education will take a few years to get established in India. Until then, Byju's would have to combine online and offline education. That's why they bought Aakash coaching- they needed its coaching centers.

That's why even Reliance is combining both online and offline retail- it knows that people won't switch to online entirely.

These Thrasio-style founders have realized the same thing-

Founders are already realising this, and two founders Moneycontrol spoke to think they will have to buy a few offline brands a few years down the line to solve the market size issue.

The future for Thrasio-style startups in India:

One reason why Thrasio's strategy of buying brands will work is that America has a culture of brands- they lakhs of brands over there. But what about India? I don't think there is any brand culture here, there are only like 10,000 brands. How will Thrasio-style startups in India overcome this problem? You can't force people to buy branded items, right?

Plus, Thrasio thrives on closing the acquisition deals very quickly. In the Indian scenario, with all the regulatory hurdles, is it possible to do so? If the acquisition takes 6 months instead of 35 days, will the brands still agree to the deal?

These are some of the problems that still remain for Thrasio-style startups in India. They have to solve these problems if they want to succeed.

But Thrasio-style startups are just getting started in India- I'm confident they will sort out these problems. They have massive potential, and I'm excited to track their journey!


🕹My short articles from this week:

  1. 10 facts about Robinhood

  2. Swiggy and Zomato harm restaurants

  3. Flipkart launches a Meesho-clone: Shopsy

  4. Netflix faces serious competition


This wraps up today’s newsletter. I hope you enjoyed reading it. If you have any feedback/suggestions/corrections, just reply to this mail and share them with me.

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