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How Thrasio buys and grows Amazon third-party sellers

Thrasio Co-CEO Josh Silberstein joins the Yahoo Finance Live panel to share the news of the company's new $750 million in funding, and discuss its strategy of acquiring Amazon FBA businesses.

Video Transcript

ZACK GUZMAN: I want to shift over. I mean, we talk so much about Amazon as being that giant e-commerce play. It's due in large part, though, to something we don't talk about maybe as often, which would be those third party sellers on the platform. One company out there focusing on those entrepreneurial startups, if you want to call them that, on the Amazon ecosystem is Thrasio, a company that's announcing a new $750 million fundraise on the heels of a $500 million debt raise just last month.

So what is this company using all the money for? And where is the growth opportunity there? Here to discuss that with us is the co-CEO of Thrasio, Josh Silberstein, joins us now, alongside Yahoo Finance's Dan Roberts. And Josh, I mean, it's a big raise here. And we talk so much about how big this platform is. Clearly a lot of opportunities for companies like yours to scoop up these third party businesses. So talk to me about how that works.

JOSH SILBERSTEIN: Well, I think the thing to remember is that each of these third party businesses was started by somebody who was an entrepreneur, who set out to build something, either to support themselves or support their family. And, you know, I don't think we come in and scoop anybody up. I think what we do is we find companies that have reached a point where they're successful, but maybe don't have the resources to really do everything they'd like to keep doing. And we give them the ability to find a great exit to be able to actually turn what they've done into a success for themselves and put themselves in a great position.

DAN ROBERTS: Josh, Dan Roberts here. There are a lot of misconceptions maybe about being an Amazon third party seller. Maybe some of them are not misconceptions, but a lot of people believe that the search results are often unfair, or at least, kind of weighed one way if you use Amazon services.

I guess I'd ask you, you guys have proven a track record of buying up these third party sellers and being able to pretty quickly improve their sales. So what is it that most are missing? What's the secret sauce? What are some of the things that they're not doing, and then you acquire them and say, here are the areas where you can rapidly improve your sales and your listings on Amazon?

JOSH SILBERSTEIN: So I think it breaks down to two things, right? If you're somebody who's been able to build a couple of million dollar business and you're growing on Amazon, there comes a day when you realize, you need to manage a global supply chain and a massive marketing effort and your own creative team and your operations and a legal effort. And the level of complexity required to do all of those things well at the same time is not the sort of thing that you can do with a two-person team or a three-person team.

And there comes a point sort of structurally in the evolution of those businesses when the way in which you succeed is not by simply being a really scrappy, a really thoughtful entrepreneur who's come up with a great product, but by being a complete service, by being able to actually do all of the different things that you need to do to be a success, not just well, but extremely well.

And so I think that's really the point at which we get involved or the one at which we sort of are talking to sellers and buying their businesses. They've gotten to a point where they've done what they can, and they just recognize that what you need is not a three-person team. It's the 700-plus person team that we have that spends every day and every night thinking about all of those different problems.

So I think it's, one, sort of being able to actually put the right resources to work to drive success, but also there is a level of expertise that is very difficult to acquire in this space without earning it, without seeing millions and millions of transactions. And the kinds of best practices that we've developed that allow us to, you know, see a 30% increase in revenue in most companies we buy from the two months before to the two months after, that's not something which can be codified as, it's simple as this or it's simple as that. It's frankly a fairly difficult and deep set of operating principles.

DAN ROBERTS: And Josh, Thrasio is not a consumer-facing name yet, and maybe it doesn't need to be. I mean, really, you guys are a portfolio of brands. And I know once you acquire the brands, you keep their name intact.

But I guess I'd ask you, I think a little bit of Fanatics in the sports merchandise business, which now, of course, is more often putting its own name on things, becoming more of a household name. I ask you whether eventually you guys aim for Thrasio to be known to consumers, or you can remain kind of behind the scenes, and you're just the owner of all these other brands.

JOSH SILBERSTEIN: Well, I think Thrasio is a well-known name in the business environment. I think third party sellers know and trust us. I think that, you know, there are a lot of people who are part of the Amazon ecosystem understand that working with Thrasio means working with a company that will keep its word and do what it says it's going to do.

You know, from a consumer point of view, Amazon has some nuance to it. It's actually very difficult to change the brand name on an Amazon brand without resetting a lot of its SEO aspects. You really can't just kind of rename something Thrasio.

Having said that, we expect to be able to begin to introduce Thrasio as a consumer brand over the course of the next year and hope that it will come to a point where we achieve that kind of recognition. I mean, we're already at a point where one household out of 10 in the United States has a Thrasio product. They just may not know it.

AKIKO FUJITA: Yeah, I mean, building on that question, you've acquired, what, more than 100 companies that you started over the last few years. How does this fresh capital raise allow you to be a bit more aggressive on that front? And what are the potential targets you're looking at?

JOSH SILBERSTEIN: I mean, we've always looked at businesses that had anywhere from a million to $10 million in revenue as sort of our sweet spot. And as we've evolved, you know, gotten more comfortable with buying businesses that are in the $20 and $30 million range. And none of that's changed. We still are thrilled to buy a great business with a million dollars of revenue or $15 million.

But we now are also in a position to buy a business with $200 million of revenue or $400 million of revenue. And I think ultimately, our vision is not-- it's not tactical. It's not about buying businesses. We're expecting to change the fundamental nature of how the consumer products industry works. And that means that we're migrating from where we started to something bigger. But ultimately, what we need to do is to actually think about how the assets we've built get reformed into, essentially, a kind of omnichannel retailer that people have started to imagine, but nobody's really brought to fruition.

AKIKO FUJITA: What is a rapidly shifting space. Certainly hope to have you back on the show again to talk about your progress there. Josh Silberstein, the co-CEO of Thrasio, and our thanks to Dan Roberts as well for joining in on the conversation.