“Acquisition” is a sophisticated term often being associated with large corporates and big business houses. The idea that small businesses with an online presence can also be acquired and multiple such ventures can come under one umbrella company is hard to digest. Thrasio has made it possible in the US and now India is gearing up for it!
A small business owner may not be looking to exit when they establish the venture and start operations. Nowadays, if a small business is being run online and is successful, there are startups buzzing around looking to acquire such undertakings.
The benchmark has been set by Thrasio, a 4 year old US-based startup, that acquires third-party Amazon sellers and offers lucrative exits to their founders. It is currently thriving on a portfolio of 100 brands and is going strong with a profit of $100 million on a revenue of $500 million.
What is the Thrasio-style business model?
The model is driven by the philosophy of benefitting on somebody else’s success. The acquiring company identifies digital-first businesses that have the potential to scale further and with acquisition, brings the required technology, industry expertise and marketing strategies to accelerate the growth engine of these brands.
The parent company makes money as and when the acquired businesses grow.
(Source: Thrasio Business Model’s VC Investment Thesis and its Global Peers, Unicornomy.com)
Thrasio Buzz in India
Inspired by the success Thrasio witnessed in the US, being valued at $6 billion in 3 years since launch, Indian entrepreneurs too decided to ride this wave. Considering the massive potential in India’s retail and increasing digitisation, startup founders took no time to jump on this untapped opportunity. India has always been a multi-platform market, with several marketplaces like Amazon, Flipkart, Nykaa, Meesho, Myntra catering to consumer demand, apart from the brands’ own websites.
Running a business online has been an alien concept in India until very recently, hence brands do need some hand-holding to adapt to the new normal. Technology brings the potential to scale exponentially and Thrasio-inspired businesses help brands with the required skills and capital.
Many Indian players have studied the market deeply and have launched operations, acquiring and closely working with scalable brands. Some key players include Mensa Brands, GOAT Brands, GlobalBees, and 10Club. Each company has its own strategy to make the buyout pitch, ensuring the acquisition deal is mutually beneficial and the right set of expertise is offered to the business.
(Source: Media reports and Moneycontrol Research)
Future Outlook
The trend of partnering with brands and growing with their growth is fairly new and upcoming in India. Indian entrepreneurs are often attached to their brands and getting them aligned with an acquisition proposition is certainly a challenge. Thus, all deals should be structured in a manner where the founders are aligned with the vision and get to participate in the upside of the businesses when it’s taken global.
From a broader perspective, the market structure and dynamics are bound to change, as the supply-side would become concentrated with a lesser number of players. While it may help acquired brands reach economies of scale, it also implies reduced price competition when facing Indian consumers.
Whether India is ready for this change is yet to be determined.
Author:
Karan Pawani
