Threecolts raises $90M to build out its toolkit for third parties selling on marketplaces like Amazon
Reading Time: 4 minutesAmazon rules the roost when it comes to e-commerce, with its marketplace outpacing everyone else when it comes to gross merchandise value, reach and market capitalization. That fact inevitably makes it a big part of how millions of brands and retailers sell goods online. Threecolts, a London startup founded by an ex-Amazon exec that builds software for brands and retailers to manage their Amazon sales channel, has picked up some 22,000 customers since it first set up shop in 2021. Now, to feed its growth, it’s announcing that it has raised $90 million in funding.
The $90 million figure covers a Series A that Threecolts closed recently; an earlier, never-before disclosed pre-A investment; and some debt, with investors across those tranches including Crossbeam Venture Partners, General Global Capital, Stratos and CoVenture. Yoda Yee, Threecolts’ founder and CEO, would not disclose how much was invested in each of these areas, citing competitive advantage and the fact that there have been a number of others, like Brex, that are paving the way for being less precise when discussing how much and when financing events have taken place, because it provides too much signal to rivals. He declined to talk about valuation for the same reason.
Threecolts, however, is profitable, and says that revenues have grown 6x year-over-year. It’s used the debt to make acquisitions — 14 in all to date in less than two years, in a roll-up play that echoes those we have seen in other parts of the e-commerce ecosystem (specifically among those aggregating smaller e-commerce retailers that sell on Amazon).
That high number of acquisitions speaks to the bigger fragmentation in e-commerce, but also the consolidation that is taking place right now: A number of interesting ideas, breathed into life as startups by way of easy access to funding, have had a hard time more recently raising more funding. Now as they get to the end of their runway, or find it hard to scale, they are getting snapped up by those able to keep going.
Yee previously worked at Amazon coordinating with third parties selling on its marketplaces, and through that understood a little about what Amazon does provide, what it does not and what could be done better.
Most importantly, he saw firsthand that Amazon’s position both as an enabler, but also competitor to retailers and brands, complicates its relationship with those third parties. Not only does Amazon sell items that directly compete with those that resellers or private-label retailers are selling on its platform, but ultimately, it will create algorithms that result in maximum conversion for Amazon itself, not that of any individual seller. And as a third-party seller, that could boost you, but it could also bury you.
‘Because we are able to focus on tools alone, customers trust us more,’ he said. ‘You just can’t trust Amazon with things like automated repricing. Amazon has its own incentives.’
Repricing is just one example here: The same goes for other functions, and beyond that, how Amazon chooses to use the data that it amasses about how people buy and sell on its platform. It is not the only startup that’s aiming to address this opportunity: The inherent conflict that Yee points out has spurred the rise of a number of companies building tools for third-party sellers, and these compete with Threecolts. They include Helium 10, Jungle Scout (which has raised a lot of money itself) and more.
But with more than 6 million businesses doing business on Amazon, the opportunity is clearly one with room for multiple players, and also approaches. The basic concept has driven Threecolts to develop (and acquire) a set of tools that include not just tools to monitor and adjust pricing, but also real-time listing and inventory alerts, customer service integrations across different channels, API dashboards, third-party data source monitoring, automation for feedback and product review monitoring, analytics around profit and sales, and more.
Some of those tools complement what Amazon has done a solid job in providing: Threecolts doesn’t offer a competitor to Fulfillment by Amazon, but it does have a tool to monitor FBA fees.
Threecolts says that its 22,000 customers collectively generate more than $30 billion in gross merchandise sales and have collectively added $200 million in profits due to Threecolts’ tools, as well as a 200% bump in detail page conversions.
That client list includes big names like Samsung, Panasonic and L’Oréal, but also a long tail of smaller sellers (which are 70% of Threecolts’ base and 50% of revenue) and even some of the roll-up companies that have been acquiring successful brands that sell on Amazon, attempting to create their own economies of scale either in supply chains or something else.
What Threecolts tracks is indicative of macro trends in the e-commerce universe. Yee said that Amazon accounts for the vast proportion, 90%, of where its customers currently sell, but he added that it is seeing some activity in requesting tools to cover other marketplaces like Walmart, eBay or more localized or vertically focused sites. He also noted that recently there’s been a surge of resellers as customers, versus those selling their own, original ‘private label’ products.
Although there has been an uptick in activity on platforms like Instagram for so-called social selling, this hasn’t made its way into requests for Threecolts to support those platforms. Yee said that the likes of WhatsApp and Instagram do come up in conversations, but it’s more to do with them as customer support channels, he said.
‘Threecolts’ impressive execution over the past year means that sellers can now access a one-stop shop solution for an increasing number of pain points, easing vendor fatigue and administrative loads,’ he added in a statement. ‘Yoda and team have provided returns that are realized in quick feedback loops for customers of all shapes and sizes, from large enterprises to up-and-coming businesses.’
Ref: techcrunch
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