After raising $8 million in November to roll up top Amazon marketplace companies, the new Boston-based startup Perch has begun putting that money to work in its first few deals.The brainchild of Chris Bell, formerly Wayfairs head of logistics and a Bain - Co.
principal, Perch is well-positioned to serve as unifier of a bevy of disparate products in one nest.The companys recent acquisitions include brands selling a sand anchor for beach umbrellas (Beachr), a waterproof apron for cooking, a hip sciatica brace (Bodymate) and other similar products that wouldnt be out of place in a late-night infomercial or on the Home Shopping Network.We believe that the future of product R-D is entrepreneurs that are closest to the problems, says Bell in an interview.
We look for products that are top three in their niche [Their founders] want some liquidity and we can bring that onto our platform and add price optimization, ad-spend optimization and cross-geography marketing.In a way, Perch is tapping into a similar urge to give Americas huge population of tinkerers and inventors better access to market and a chance to monetize their ideas la Quirky, the failed attempt by GE to turn gadget ideas into new product lines for GE.By contrast, Perch waits for the businesses to gain traction, then offers to buy the products from their owners and give them up to two years of participation in any upside that the product generates at certain milestones that Perch sets for the participating entrepreneurs.Three years ago I would not have started this business, says Bell.
Amazon has made this a much more defensible place.The Amazon marketplace remains somewhat of the Wild West, where intellectual property rights are often ignored and successful products are copied at lightning speed by vendors with access to the same commoditized supply chains.
Its really marketing muscle and an ability to get better margins through scale that creates winners, it seems, and Perch is using its technical know-how to get to the top.Acquisitions can range from $750,000 to $2 million upfront with the upside on the back end still to come, according to Bell.
Financing this operation is a $4.5 million equity round and $3.5 million in debt financing by some of the nations leading venture firms.
Perch wont buy any company thats doing less than $250,000 in revenue.Spark Capital led the deal for Perch, with general partner Alex Finkelstein taking a seat on the companys board of directors.
Tectonic Ventures also participated.
Finkelstein, who led Sparks investment in Wayfair, was introduced to Bell through Wayfairs chief operating officer.
He immediately saw the potential in Perchs pitch.If you look at it from a macro standpoint.
Amazon is growing very quickly and the third-party marketplace is growing very quickly.
Within the next year were going to have a large portfolio and itll do well in any environment, Finkelstein said.Amazons third-party sellers are a $200 billion market and the largest single vendor is a $500 million seller, Bell noted, and that is an opportunity that a well-capitalized company can exploit.Were going to be managing hundreds of micro-brands and the only way to do that is through a technology platform, Bell said.
Theyre generally niche products that are not big enough that Amazon Basics would come into that category.
Were competing in smaller categories, but even some of these niche categories are tens of millions to hundreds of millions in revenue.While Perch has seen some impacts from the economic shutdown caused by the government response to the COVID-19 epidemic, the company expects the shift in consumer behavior to be the wind beneath its wings, rather than against its branches.Medium-term its pushing more people to buy online, says Bell.
And Perch isnt slowing its pace of acquisitions.
We made two acquisitions in March and were likely going to close another two in the next two weeks.