Razor Group. Branded. Thrasio. These are big names in the new wave of e-commerce companies taking the world by storm. Their business of acquiring small e-commerce brands that look promising and consolidating them is quite popular in the U.S. and Europe.
The concept has sifted through those shores to Latin America and Asia, where companies like Una Brands and Valoreo have raised significant investment to acquire and build these brands. Today, the concept has made its way into the Middle East and Africa as Opontia has closed a financing of $20 million to acquire and scale e-commerce brands across the regions.
This seed round, one of the largest in the Middle East and Africa, is a mix of debt and equity financing. While Opontia does not disclose the ratio of equity and debt, it confirmed that the majority was debt which will be used to make acquisitions.
Investors include Global Founders Capital, Presight Capital, Raed Ventures and Kingsway Capital. The angel investors that participated are also notable names in e-commerce across EMEA; they include Tushar Ahluwalia, CEO of Razor Group; Jonathan Doerr, the former CEO of Daraz and co-founder of Jumia; and Hosam Arab, the CEO of Tabby and the former CEO of Namshi.
Opontia was founded by co-CEOs Philip Johnston and Manfred Meyer in March 2021. Opontia has teams in Dubai and Riyadh, with professionals from Amazon, Zomato, Noon.com, Namshi, McKinsey and Uber Eats. In the coming months, the company plans to open in Cairo, Istanbul and Lagos.
Often when small e-commerce brands take off, the owner usually starts by being passionate about their product and customers. However, due to no fault of their own, most begin to reach a point of stagnation caused by constraints on working capital, operations, logistics and e-commerce commercial management.
Johnston and Meyer started Opontia to take these burdens off their back by convincing them to sell their brands and for Opontia to manage all parts of their operations. But the interesting thing, like most companies that roll up e-commerce brands, these owners will continuously be involved with the day-to-day activities of building the brand.
“We started Opontia to enable e-commerce entrepreneurs to realize the full potential of their brands. We want to do this both in terms of getting an exit now as well as benefiting from future growth,” Johnston said to TechCrunch. “We also want to help nurture and build the entrepreneurial e-commerce ecosystem in the Middle East and Africa.
When Opontia acquires these brands, the owners get to share in the increase in profits over the next couple of years, Johnston added. “We do this so that they continue to see the benefit of their hard work.”
The two-month-old company is particularly interested in brands with at least $10,000 in monthly revenue and at least $5,000 in net profit per month. Per the categories of products, Opontia has a soft spot for less seasonal “all-weather” products, including kitchen products, bathroom, sport, home and living, cosmetics and toys.
There are lots of startups rolling up e-commerce brands worldwide besides Razor Group, Branded and Thrasio. But none of them has sights on the Middle East and Africa yet, with their bigger and more mature target markets.
For instance, China is the world’s largest e-commerce market, with an annual growth rate of more than 30% and annual online sales exceeding $850 billion. The second-largest market, which is the U.S, stands at over $350 billion. Brazil has annual sales reaching $36 billion, accounting for 32% of Latin America’s e-commerce market. For the Middle East and Africa, these numbers are at $30 billion and $25 billion, respectively.
Both regions present Opontia with a huge opportunity. Still, if past happenings in other regions repeat themselves, it wouldn’t be too long before the company starts facing new competition. Every business needs to adopt what model works best in a region but the founders believe the model used by companies in other markets can also serve the Middle East and Africa, despite differences in size and how they operate.
“The market in the Middle East and Africa is currently less mature than in the West, but is growing faster than any other market in the world, with the number of sellers on marketplace growing at over 50% per year,” Meyer remarked. “The business model will work here because there have been so many amazing entrepreneurs in the Middle East coming up over the last few years. It’s a great opportunity for sellers to be able to realize some of the hard work from building their brand so that they can take a break or work on their next big thing.”
Two years ago, it would’ve been a concern if Opontia or a similar company launched in both regions, as there just weren’t enough sellers. But with the recent and continued growth in marketplace sellers, there are now more than enough brands for Opontia to acquire. Currently, there are about 5 million third-party sellers on Amazon, with 1 million joining just last year. Opontia says that its opportunity lies in the 30,000 African and Middle East sellers in Amazon and Noon marketplaces.
Opontia adds that it will scale acquired brands across their regions and to other parts of the world. The company is in talks with more than 100 small e-commerce brands and claims to have signed “several term sheets” with some of them.
Johnston and Meyer come from two distinct e-commerce backgrounds. A former McKinsey consultant, Johnston worked on e-commerce strategy, private equity and post-merger integration at the Big 3 firm. Before that, he spent years doing venture capital, investing and banking across Southern Africa, London, New York and Singapore. On the other hand, Meyer worked as the chief marketplace officer for Lazada and CEO of Next Commerce, an e-commerce enabler in the Middle East. In addition to acquiring brands, the founders will be looking to hire talent with industry experience, who will be tasked with managing and growing these brands post-acquisition.
Razor Group. Branded. Thrasio. These are big names in the new wave of e-commerce companies taking the world by storm. Their business of acquiring small e-commerce brands that look promising and consolidating them is quite popular in the U.S. and Europe. The concept has sifted through those shores to Latin America and Asia, where companies […]