Back from the dead, Brandless moves into the creator economy and e-commerce rollups
Brandless, an e-commerce company that once sold sustainable household goods for about $3 a piece, became the first SoftBank-backed startup to close its doors in early 2020 after the failure of WeWork’s IPO spread doubts through the rest of its portfolio companies.
But that wasn’t the end of the story: unperturbed by stories of quality issues, layoffs, and internal turmoil swirling around the company, Clarke Capital Partners, a Utah-based family office, acquired the company once worth as much as $500 million for a steep discount in the summer of 2020, with sources telling Term Sheet the figure clocked in below $100 million (the exact dollar amount could not be learned)—making it a losing bet for investors like SoftBank’s Vision Fund.
For better sense of those losses: in total, some $300 million had been committed to the company back then. The exact amount was lower, however, as SoftBank only invested about $100 million as part of a $240 million Series C round it led, with much of that round contingent upon Brandless hitting certain performance milestones, Axios first reported, as confirmed by a source with knowledge of the matters.
And now, under a completely new investor, Brandless is gearing up again with new funding and a new focus that has it jumping into two red-hot bandwagons within venture capital at the moment: the creator economy and e-commerce rollups.
On Thursday, the now Silicon Slopes, Ut.-based company raised $118 million in equity and debt funding, with the majority coming in the form of debt, according to now CEO Cydni Tetro. The funding will be used to acquire businesses that are profitable on an EBITDA basis and with a revenue of between $7 million to $40 million, and to build out tech that will pay out individuals who successfully refer others to Brandless products on social media, she says.
The funding comes at a time when billions of dollars have been poured into startups buying smaller e-commerce players as online-shopping has boomed amid the pandemic (ahem, Thrasio and Perch) and the term “creator economy” has become the new buzz word. So hot is the competition to buy e-commerce companies that one startup looking to acquire Amazon sellers is giving away Teslas in return for referrals, per CNBC.
“There are big trends happening in the consumer space where we believe every individual person is their own platform,” says Tetro, coining the term “influence-as-a-service” in our conversation.
While the company itself is very different behind-the-scenes from before, with new management, almost entirely new employees, investors, and its second CEO since Clarke’s takeover, both Tetro and Clarke Capital are looking to keep at least the brand DNA buy acquiring e-commerce companies that are sustainable, and as they say, “better for you.” And while many of the acquirers are looking to buy Amazon-focused businesses, the new Brandless still sees direct-to-consumer as its main channel for now. As part of the fire-sale last year, the team did also buy assets including trademarks and formulas for products, leaving a stable of their own to draw from.
In 2017, at the peak of that blockchain bubble, companies left and right—especially ailing ones—were jumping onto the trend. In 1999, a plethora of companies were also suddenly “dotcom” businesses. It didn’t always end well. By pivoting to the creator economy and e-commerce rollups, I pointed out it feels an awful lot like the company is jumping on a fad. While that may be the case, Tetro and Clarke Capital Managing Partner James Clarke though are betting that the fad has rationale behind it, and that by aggregating other businesses, the company can reach the economies of scale by holding more consumer data. Tetro says the company is currently EBITDA profitable.
And they’d better be right: The company has ramped up rapidly in its new home. Having wound down to just 10 employees at the company’s shuttering, Brandless now has 100 full-time workers, exceeding the 80 or so employees it had prior to the 2020 layoffs.
AS IT SO HAPPENS: The former SoftBank Vision Fund partner that led the Brandless deal, Jeff Housenbold, left the firm earlier this year. He has since collected $100 million in commitments for his own venture fund aimed at consumer tech startups, per the Financial Times. Honor Ventures is aiming to raise between $500 million to $600 million in total. Read more.
Jessica Mathews compiled the IPO and SPAC sections of this newsletter.
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