Rainforest, based in Singapore, is one of the latest in the wave of startups that are “rolling up” small e-commerce brands. Founded in January by alumni of some of the leading startups in Southeast Asia including Carousell, OVO and Fave, Rainforest is acquiring sellers on the Amazon marketplace. This is similar to the Amazon-focused approach of Thrasio, Branded Group and Berlin Brands Group, three of the most famous e-commerce aggregators. However, Rainforest is one of the first companies in this field to come to the market from Asia and is specifically focused on acquiring brands in the region. It also focuses on housewares, personal care products and pet products with the aim of developing the e-commerce version of the Newell Brands conglomerate, whose portfolio includes Rubbermaid, Sharpie and Yankee Candle.
Rainforest announced today that it has raised $ 36 million in seed capital under the leadership of Nordstar, with the participation of Insignia Venture Partners. This includes equity financing of $ 6.5 million and a credit facility of $ 30 million from an undisclosed US debt fund.
Co-founder and CEO JJ Chai, who previously held senior positions at Carousell and Airbnb, told . that Rainforest (like many other ecommerce aggregators) has taken out debt financing because it is non-dilutive and is used to purchase about eight would be sold to 12 brands through Amazon’s B2B service, Fulfilled By Amazon (FBA). The startup’s other co-founders are CFO Jason Tan, who held the same roles at OVO and Fave, and Chief Technology Officer Per-Ola Röst, who previously founded the Amazon analytics tool provider Seller Matrix and ran a seven-digit FBA brand Has.
Rainforest’s portfolio currently includes three brands, each of which it acquired for approximately $ 1 million each. The company wants to wait for its portfolio to grow to reveal which brands it owns. However, Chai said there is a mattress brand that is a best seller on Amazon, a grain manufacturer, and a kitchen ware brand. By focusing on specific industries, Rainforest can streamline supply chains, product design and marketing while growing its brands.
Amazon’s gross merchandise volume in 2020 was approximately $ 490 billion. According to Marketplace Pulse, $ 300 billion of that came from third-party vendors. The Thrasio and Branded Group, founded by Lazada co-founder and former CEO Pierre Poignant, is also acquiring Asian brands. However, most ecommerce aggregators so far focus on American, European, or Latin American sellers (like Valoreo from Mexico City). which also recently raised funds). Rainforest will address sellers in the Asia Pacific region, including China, Southeast Asia and Australia.
Chai said that about 30% of Amazon’s third-party sellers are based in Asia and he expects more ecommerce aggregators to roll out in the region. “All the ingredients are there and I think it’s just a matter of time before more people find out and solve this problem,” he said. “Everything we’ve seen worked out, and of course the original creators noticed this trend, which is that there is an explosion of micro-brands.”
Rainforest is looking for FBA home, personal care, or pet product sellers who currently have sales of $ 5 million to $ 10 million per year and are achieving a profit margin of at least 15%. Most of the pipeline of potential deals consists of incoming inquiries. Rainforest can rate brands within two days. If they are interested in the offer, due diligence typically takes about a month and sellers receive the first tranche of their payment within about 40 days.
The company plans to look at other marketplaces in the future, but is starting with Amazon as its analysis enables faster reviews. Rainforest uses the “Three Rs” or product reviews, ratings and rankings to determine how well a seller is doing. She also wants brands that can expand beyond Amazon into other channels and have unique intellectual property with great appeal. “We’re looking for products that can traverse global markets,” said Chai. “For example, no lawn mower covers, a very American thing that may be less relevant in this part of the world because we intend to bring these brands to their next level.”
Many of the brands in Rainforest’s pipeline are run by sole proprietorships who have gotten to a point where they need to hire a team to keep growing but instead want to get out to move on with their next business.
“It is a relatively new phenomenon to create a physical goods brand and grow a sizable business from it. You used to need a factory, big branding, and research and development. The combination of disrupted online advertising, marketplaces and supply chains has created an opportunity where individuals can create brands in the same way that the App Store allowed people to distribute software, ”said Chai. “We’re playing with this trend of having a lot of micro-brands and many getting stuck so we can give entrepreneurs the opportunity to leave a brand and reach its full potential.”