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Heyday raises $555M to buy up and scale more D2C brands in the Amazon marketplace universe

·7-min read

Consolidation to have better economies of scale is one of the biggest themes in the world of e-commerce, and today a player in the world of online retail is announcing a large round of funding to double down on its approach to the concept. San Francisco-based Heyday -- which buys up and then grows direct-to-consumer merchants and brands that have found initial traction, leveraging the Amazon marketplace -- has raised $555 million, a Series C that it will be using to continue expanding its technology, investing in business development, and to buy up more assets. Specifically, it will also be deepening its engagement in Asia (with a seventh office in China); hiring more brand management experts and other talent; investing in more product development; and building out its marketing, supply chain, data science and M&A tech stacks.

The Raine Group and Premji Invest co-led this round, with previous backers General Catalyst, Victory Park Capital and Khosla Ventures also participating.

Heyday competes against a large field of startups also raising huge amounts of money to follow their own Amazon marketplace roll-up strategies. Other big names out of the U.S. include Thrasio (which picked up a cool $1 billion in October) and Perch ($775 million in May). Heyday has been moving at a fast clip to keep up since being founded in 2020. This latest round comes on the heels of a $70 million Series B that was raised only in May of this year, with the total capital raised by Heyday at $800 million, a mix of equity and debt (Heyday did not specify the proportions of equity and debt in this latest Series C).

"Our pace is insane," said Sebastian Rymarz, Heyday's co-founder and CEO, in an interview. "We were born 16 months ago and are already crossing $200 million in revenues." (That's an annual run rate figure.) The company said its brands are currently growing at a rate of 64% year-on-year compared to the broader e-commerce market.

Heyday has never disclosed its valuation, and Rymarz would only say that this latest round was made at "a very good valuation."

That lack of detail is intentional. "I don’t want the team thinking or me getting into my head that ‘we’ve won,'" he continued. "We’re only 16 months in to what we think will be a multi-decade journey. I don’t want to celebrate valuations at this stage." Sources say it's over $1 billion, although that is still fairly vague, not least because we don't know how much equity it's raised to date.

As a point of reference, Thrasio is now valued at about $5 billion; Razor Group out of Berlin was valued at over $1 billion last week; and Perch also is now in the nine-figure range. As with all of these, Heyday is also profitable on an EBITDA basis, Rymarz confirmed to me.

There are millions of third-party sellers using Amazon as their primary route to market, and Heyday and others like it have seized on a prime opportunity to target them: Often, these merchants lack the capital or appetite to take their businesses to the next level of growth. At the same time, as Amazon and other marketplaces mature, there are more sophisticated ways and more technology that could be used in aid of improving how to leverage them to find more buyers for products, amid a pool of me-too brands that are also finding ways to game Amazon's algorithms.

The pitch that Heyday makes is that it has built technology that evaluates this sea of merchants to identify the most interesting of them all. Rymarz said that for every 100 merchants it looks at, it might consider buying just one.

When Heyday buys these companies, and their intellectual property, the idea is that it reaps the rewards of doing that scaling itself. It does so by integrating the business into a larger platform to manage marketing and sales analytics, production and distribution, and retail channels; and by following the company's initial trajectory to continue developing more products to take along on that journey.

Given the number of third-party merchants and the gating factors for them scaling, this has become an area ripe for consolidation, and so, unsurprisingly, it has also become an area ripe for competition among consolidators.

In addition to Thrasio, Razor Group and Perch, others that have recently raised both equity and debt for the same ends include Heroes, which raised $200 million in August; Olsam with $165 million; Suma Brands ($150 million); Elevate Brands ($250 million); factory14 ($200 million); as well as Branded, SellerX, Berlin Brands Group (X2), Benitago, Latin America’s Valoreo and Rainforest, and Una Brands out of Asia. There are dozens more.

How Heyday differs from these others is that, at least up to now, it has focused not on quantity of merchants, but quality.

Rymarz said that Heyday currently has only 15 brands in its stable, compared to, say, 200+ for Thrasio and 150+ for Razor Group. Again, this is also intentional: "We have much larger brands, with five of them making up over 70% of our revenues."

He positively bristles when Heyday is described as a rollup play. "Amazon is a launchpad, and we are not an aggregator," he said.

For competitive reasons, Heyday has never publicly disclosed any of the names of the brands that it owns, but they are products in categories like home and lifestyle. And the bigger strategy is not just to build up their profiles on Amazon but to extend to a variety of other channels, including placement in household-name brick and mortar chains. (Rymarz showed me several brands under the condition that I would not publish their names, but just so that I could get a better idea of what it owned. At least two of them are gearing up to sell in stores like Target.)

Heyday's pitch these days typically does not bring on any of the teams involved with the brands that it buys up (there are sometimes exceptions to that, Rymarz said), but it has been bringing on more people with extensive e-commerce experience into the team to build out its wider operation. In addition to hiring more branding and retailing teams, it has included adding a number of new executives, including a CFO (Navid Veiseh, previously at Amazon and Coupang); a CMO (Reema Batta, formerly of Opendoor and Expedia), and a chief administrative officer (Todd Heeter, formerly of Doma and Anixter).

It's been interesting to see how so many investors have piled into the opportunity in the last couple of years. (Other big names that have been backing Amazon marketplace consolidators include SoftBank, BlackRock, Silver Lake, Target Global, Tiger Global and more.) Part of the appeal is that it gives investors a look into some of the massive e-commerce growth that we've seen over the last decade, in a landscape that has otherwise been dominated not by startups, but by big players like Amazon. That, of course, has become an even more acute opportunity in the last two years with the rise of COVID-19 and the accelerated shift we've seen to more people shopping online than ever before.

“We have been exceptionally impressed with Sebastian and his team, their vision, and commitment to operational excellence for the next generation of consumer brands,” said Jake Vachal, managing director at The Raine Group, in a statement. “Heyday's innovative approach to growing and incubating brands provides entrepreneurs access to leading technology, as well as deep-rooted expertise spanning operations and marketing. We are excited to be partnering with this team as they continue building a differentiated platform for quality, digital-first brands.”

Investors in this round said that Heyday's particular approach was also a factor.

“Heyday’s differentiated strategy and world-class team stand-out in what is playing out to be one of the most explosive new industries,” said Sandesh Patnam, managing partner Premji Invest, in a statement. “We are excited to partner with the leadership team to help Heyday leave a mark on the e-commerce space.”

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