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What are Thrasio-style startups and what's driving their appeal in India?

Using a model pioneered by Thrasio in the US, several startups like Mensa Brands and GlobalBees were born in India during the pandemic. Let us understand the appeal of these Thrasio-style startups

Topics
start ups | Indian start-ups | Amazon

Krishna Veera Vanamali  |  New Delhi 

If you are a founder in India running a successful small business online, you would not have started it with the idea of an exit. But now, a new breed of startups has emerged. It specialises in acquiring fast-growing digital-first brands and scaling their products. This template has been spearheaded by the three-year-old US startup Thrasio, which acquires successful third-party sellers and gives their founders a lucrative exit. Thrasio’s team of experts now manages a global portfolio of nearly 100 brands. Founded in 2018, Thrasio made an incredible $100-million profit last year on a revenue of $500 million. The company is valued at $6 billion based on its latest funding round. A number of startups have spawned in India in the past year to replicate Thrasio’s success in the country and have together raised around $300 million so far. Some of them are Mensa Brands, GlobalBees, 10Club, Upscalio, Evenflow, Powerhouse91 and GOAT Brand Labs. Venture capital investors have poured in significant amounts of money in these startups in a short period. For instance, Mensa Brands, founded by former Myntra CEO and Medlife co-founder Ananth Narayan, has raised over $80 million in two rounds of funding. GlobalBees set a record for the biggest Series A funding in India when it raised $150 million in June, split equally between equity and debt. Nine-month-old 10Club raised $40 million in one of the largest seed financing rounds in India. GOAT Brand Labs, founded by former Flipkart executive Rishi Vasudev, closed a $36 million Series A round in July. These startups acquire online brands across categories like fashion, beauty, personal care, food, home, sports and lifestyle. They also target Direct-to-Consumer (D2C) brands operating in niche categories and ship their products directly to buyers, thereby cutting out middlemen like All of them follow a typical three-step process. In the first step, the startup gets to know the seller and their business after one or two meetings.

To express an initial interest a, a Letter of Intent may be signed. After this, it carries out a thorough due diligence and verification of financial statements, sales, costs, marketing, and supply chain. If the startup is satisfied with the brand’s growth prospects, it attaches a valuation and undertakes preparation of contracts and other paperwork to integrate the seller. And, finally, when the seller signs off, they receive the funds in their account. In some cases, the founders continue to receive a share of the profit going forward, even after selling their business. From the start to finish, the process is completed within 8 weeks. The work of the acquirer does not stop here. The brand goes through an integration process, following which the startup brings in its expertise across marketing, technology, supply chain, inventory management, logistics and product development to scale the business rapidly. In less than a year since their founding, these startups have already got going. Mensa Brands has acquired a majority stake in 10 consumer brands, with revenues between $1 million and $10 million. It is planning to acquire about 50 digital brands over the next three years. 10Club has announced two acquisitions and GlobalBees has also made two purchases. Amid all this, the original Thrasio is also said to be planning to enter India soon. It has reportedly held talks to acquire consumer durables brand Lifelong Online to mark its India entry. These startups are enabling a new wave of wealth creation and value unlocking for India’s small businesses, which struggle to scale beyond a point. According to Amazon, in 2020, as many as 4,152 sellers on its Indian marketplace crossed Rs 1 crore in sales – 29% more than the previous year. This represents the untapped opportunity for the Thrasio-model startups.

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First Published: Mon, October 18 2021. 10:49 IST
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