Two former Zulily executives have landed greater than $150 million to gasoline a brand new enterprise that seeks to purchase worthwhile e-commerce companies.
Jason LeeKeenan and Kevin Saliba are the co-founders and co-CEOs of Cap Hill Brands, a Seattle agency that uniquely combines the funding capital of a personal fairness agency with deep operational expertise of a startup accelerator. They’ve additionally gained over some big-time backers, together with VersionOne Ventures and Victory Park Capital. Seattle enterprise capital agency Maveron — identified for its deal with client manufacturers and an early investor in Zulily — is also a backer.
LeeKeenan and Saliba are already off to a quick begin — not a shock given their Zulily roots which was legendary in its early days for shifting amazingly quick.
Since forming the brand new entity final summer season, the duo have bought 10 e-commerce corporations. These embrace instructional merchandise agency Merka; bean bag and ground pillow maker Butterfly Craze; and Aquapaw, the creator of $40 pet grooming product that makes it simple to scrub the canine within the bathe.
LeeKeenan and Saliba promise extra is to return.
“We wish to proceed at a fairly quick tempo,” stated Saliba, the previous chief advertising and marketing officer at Zulily who beforehand bought Seattle startup ImageKind to CafePress.
Thus far, every of the acquired corporations have been bought for lower than $10 million. Cap Hill Manufacturers doesn’t have a set acquisition worth vary for its targets, and LeeKeenan stated they wish to entice a wide-range of worthwhile e-commerce corporations that may profit from the group’s operational expertise.
“As we deliver these corporations into our portfolio, we’re concerned in all facets of operating the enterprise: advertising and marketing, product sourcing, provide chain achievement, all that stuff,” stated LeeKeenan, who was a senior vp at Zulily and later bought Seattle startup TraceMe to Nike. “This isn’t about simply shopping for these corporations and letting them stand on their very own. Somewhat, we truly assume, with our group’s experience, we will deliver them to new heights and and actually speed up development.”
One of many methods might be serving to portfolio corporations use numerous e-commerce platforms, notably Amazon. It has change into more and more advanced for sellers to navigate the assorted e-commerce marketplaces, and Saliba thinks they may help.
“One of many many levers we wish to pull for development is to get these merchandise extra broadly distributed,” he stated.
LeeKeenan added that there’s been comparatively little liquidity within the e-commerce market for a few years, creating a possible opening for Cap Hill Manufacturers to maneuver.
Roll-up methods just like the one Cap Hill Manufacturers is embarking on should not new. Within the Seattle space, Fexy Media — led by Lisa and Cliff Sharples — have taken an identical method within the on-line meals media area.
The concept is that smaller manufacturers can obtain better scale by counting on a group of operational specialists, which unfold their data throughout your complete portfolio. “We’re very a lot deep within the weeds on these companies,” explains Saliba.
Entrepreneurs who promote to Cap Hill Manufacturers sometimes take an upfront fee, with the potential of future earn-outs primarily based on efficiency. The agency buys 100% of the corporate. In most situations, the founders go away as soon as the deal is consummated.
“Considered one of our objectives right here is to make a whole lot of millionaires,” stated LeeKeenan, who declined to reveal the pricing or phrases of the offers they’ve made so far.
Maveron has by no means invested in a “roll-up” type of enterprise earlier than, however accomplice Jason Stoffer stated “this chance was too good to cross up.”
“We imagine that the accelerated market shift to e-commerce from COVID presents this group the chance to construct the subsequent technology P&G/Unilever kind client product enterprise,” stated Stoffer.
E-commerce gross sales surged 37% within the third quarter of final yr, and Stoffer doesn’t assume that pattern will cease as soon as the pandemic ends. On Amazon alone, third celebration sellers symbolize about 50% of the corporate’s retail income. Which means 1000’s of third celebration sellers are doing about $100 billion in annual gross sales on Amazon, a chance that Stoffer stated is “very huge and thrilling.”
“Jason and Kevin’s problem might be constructing a machine that may establish which of those corporations have excessive potential after which purchase after which develop these enterprise throughout a number of channels over time,” he stated.
Even nonetheless, he thinks they’re up for the problem, calling them “distinctive entrepreneurs.”
Discovering nice e-commerce startups could also be a bit like discovering a needle in a haystack. However LeeKeenan stated they’ve bought an excellent sense for locating merchandise which might be “beloved” — a talent in addition they honed whereas at Zulily. As well as, the 20-person group has constructed software program to assist establish merchandise which might be gaining momentum, and in consequence could possibly be engaging acquisition targets.
As soon as Cap Hill Manufacturers discovers an organization they like, LeeKeenan stated it might take lower than 30 days from preliminary telephone name to the enterprise proprietor to wiring them the funds. “We’re fairly environment friendly in how we go about it,” he stated.
Whereas $150 million is a major sum of capital, LeeKeenan and Saliba stated it’s simply the beginning. The preliminary funding spherical was oversubscribed, and a few potential buyers who needed into the deal have been even locked out.
“The curiosity we’ve gotten extra broadly is that this truly might be expanded,” stated LeeKeenan. “Kevin and I are on this for the lengthy haul. And we expect there’s a really massive firm we will construct out of this.”
And that may imply tons of, presumably 1000’s of manufacturers below the Cap Hill umbrella within the subsequent 5 to 10 years.
“If we now have a big portfolio of nice client merchandise that clients love, that’s an amazing, priceless sustaining enterprise,” stated LeeKeenan.