Why these ex-Carousell, Fave execs raised $36.5m to join the global Amazon roll-up frenzy

As expected, one trend has come knocking on our doors.

In March, Tech in Asia wrote a detailed report about why Southeast Asia should pay attention to the new trend of ecommerce aggregators, companies that roll up smaller online sellers to benefit from economies of scale.

What caught our eye then was a hot new startup by ex-Lazada CEO Pierre Poignant, which at the time announced its US$150 million fundraising to acquire third-party brands on Amazon.

Photo credit: 123rf

Like clockwork, other players have joined the fray. Singapore-based Rainforest has come out of stealth mode and announced today its seed financing round of US$36.5 million to acquire Amazon third-party sellers.

“The space is very, very deep,” Rainforest CEO JJ Chai tells Tech in Asia. “We look at the brands not just to grow them on Amazon but also other marketplaces around the world.”

Nordstar Partners and Insignia Ventures Partners provided US$6.5 million in equity financing for the round, with the remaining US$30 million in debt facility supplied by an undisclosed US-based debt fund.

Before taking on his role as CEO at Rainforest, Chai previously led growth and strategy for Carousell and was the former managing director in Southeast Asia for Airbnb. Rainforest chief financial officer Jason Tan, meanwhile, held CFO positions at Ovo and Fave, which was recently acquired by Pine Labs for US$45 million.

See also: Fave investors are getting all their money back, says CEO 

While Rainforest’s seed round can be considered a large one for a Southeast Asian startup, many of its peers in the US have raised hundreds of millions of dollars in a single funding round. That’s because the model requires lots of cash up front to bid for and acquire sellers and then build these merchants to the next level.

The Rainforest team / Photo credit: Rainforest

It’s also worth noting that most of the round consists of debt. According to a source we spoke with who works for an ecommerce marketplace, this business model involves buying up companies using loans and then paying these back with the healthy profit margins of the acquirees.

The idea is that margins can be improved by aggregating these brands and scaling them by cutting costs, reducing inefficiencies, and hopefully generating better sales and revenues.