The Singapore-based Rainforest has been one of the most recent participants in the growing number of companies that “roll-up” small e-commerce brands. The company was launched in January by alumnus of the most renowned startups in Southeast Asia which include Carousell, OVO and Fave, Rainforest acquires Amazon marketplace sellers. It is similar to the Amazon-centric strategy adopted by Thrasio, Branded Group, and Berlin Brands Group, three of the most well-known e-commerce aggregators. But Rainforest is among the very first companies in the market to be launched outside of Asia and focus on buying brands from the region. It also focuses on home products such as personal care, pet, and home products, with the aim of creating the e-commerce equivalent of the conglomerate Newell Brands, whose portfolio includes Rubbermaid, Sharpie, and Yankee Candle.
Rainforest has announced that it has raised seed capital of $36 million from Nordstar with the participation of Insignia Venture Partners. The funding includes equity of $6.5 million as well as a $30 million debt facility from an unidentified American credit fund.
Chief executive officer and co-founder J.J. Chai, who has held executive positions with Carousell and Airbnb, told TechCrunch that Rainforest has raised money for the money through debt (like many other aggregators of e-commerce) since it’s non-dilutive and can be used to buy eight to 12 brands through Amazon’s B2B Fulfilled by Amazon (FBA). The other co-founders of the startup include Chief Financial Officer Jason Tan, who held similar roles in OVO and Fave, as well as the Chief Technology Officer, Per-Ola Rosst, who founded Amazon analytics tool maker Seller Metrix and ran an FBA brand that was worth seven figures.
Rainforest’s portfolio currently comprises three brands that it bought for 1 million each. Rainforest wants to wait until it has a larger portfolio to reveal the brands it has; however, Chai stated that they have the mattress brand, which is a top-selling product on Amazon, the maker of cereals, and a kitchenware company. The focus on specific areas will enable Rainforest to improve supply chain efficiency as well as product design and marketing as it grows its brands.
Amazon’s gross merchandise volume for 2020 was $490 billion. As per Marketplace Pulse, 300 billion of that was derived through third-party sellers. Thrasio and Branded Group, which was founded with Lazada Co-Founder and Former Chief Executive Officer Pierre Poignant, also acquire Asian brands. However, the majority of online aggregators have concentrated only on American, European, or Latin American sellers (like Mexico City-based Valoreo Valoreo, which has recently raised funds). Rainforest is expected to look at sellers from regions in the Asia-Pacific region, which includes China, Southeast Asia, and Australia.
Chai estimated that around 30% of Amazon’s third-party sellers are located in Asia He expects more e-commerce companies to open in Asia. “All the ingredients are there, and I guess it’s just a matter of time when more people figure it out and solve this problem,” Chai declared. “Everything we’ve seen has worked out, and most of the original creators have noticed the trend of the explosion of microbrands.”
Rainforest is a popular choice for home goods as well as personal care and pet products. FBA sellers are currently generating 5 million to 10 million annual sales and earning a minimum of 15 percent profit margin. The majority of their pipeline of prospective offers are direct inquiries. Rainforest is able to provide brands with an appraisal in just two business days. If they’re interested in the offer, due diligence generally takes around one month. Sellers typically receive the first tranche of their funds within 40 days.
The company is planning to explore other marketplaces in the near future; however, it is focusing on Amazon due to its analytics, which allow faster valuations. Rainforest examines what it calls the “Three R’s,” or reviews, ratings, and ranking, to assess how a seller’s doing. It is also looking for companies that can go beyond Amazon into other channels and possess unique intellectual property that appeals to a wide audience. “We’re looking for products that can traverse global markets,” Chai said. Chai. “For example, there will be no lawnmower covers, which are very American and may be less relevant in this part of the world, because our intention is to take these brands to their next level potential.”
The majority of the brands that Rainforest has in its pipeline are operated by sole proprietors who have grown to the point that they’re required to recruit an additional team to keep growing and want to leave to go on to the next venture.
“Being capable of creating an actual brand for physical goods and creating a significant business around it is an incredibly new phenomenon. In the past, you needed factories or a huge branding company (R&D). “It’s the combination of online marketing, marketplaces, and supply chains that are being altered that has created a new opportunity for individuals to create brands the same way it was the case when the App Store permitted people to distribute programs,” said Chai.
“Where we are able to play into that trend is that there are numerous microbrands and a lot are stuck. So, we can offer entrepreneurs an exit strategy andbring a brand to its full potential.”