Suma Brands raises $150M to acquire more third-party brands for its Amazon roll-up play ' TechCrunch

Amazon has been a key player in the ecommerce industry for many years. This is partly because it's a website that consumers can use to purchase just about any product sold by Amazon and its 5 million+ third party merchants, and have it delivered directly to their homes. The system isn't perfect. Today, one startup is announcing funding to consolidate and roll up some third-party merchants.Suma Brands is a company that buys the most successful and interesting brands on Amazon. It has received $150 million in funding. The round was led by Material and Pace Capital, and a credit facility by i80 Group.Sumas's funding will come in two forms. One, it will be debt. This will be used to acquire companies. The other, it will be equity. The equity in this case is $12.5 million, and the remainder is in debt. Valuation is currently not disclosed.At the moment, roll-up plays are coming to town at a rapid pace. We've written about many of them raising funds, including Elevate; Thrasio; Heyday, Branded, Heroes; SellerX, SellerX, Heroes; SellerX, Berlin Brands Group (X2), Benitago, Latin Americas Valoreo and Rainforest and Una Brands from Asia.The premise of all these is the same. Amazon has built its business around economies of scale. However, that efficiency has not always been achieved at the marketplace level. You still see many sellers working independently and facing all the challenges they face as they grow. These include the need to have more advanced tech tools to manage areas such as marketing, analytics and supply chains, more buying power with suppliers, capital to grow, and more strategic talent succession plans.Roll-ups are where the roll up plays come in. They provide a way for market founders to exit their businesses without having to give them up. By giving them the opportunity to grow under the wing a company that is looking to build brands with others, they can help them to succeed.Suma is a startup based in Minneapolis. Andrew Savage, co-founder, has an interesting background that gives him a unique insight into online retail and retail.He has worked for Amazon for many years, leading teams in categories such as toys and spearheading the company's push to target university students. He was also a Target employee for many years, where he helped to build Best Buy and These are two Minneapolis companies. This is one of the reasons why Minneapolis is an attractive city to start an e-commerce company.He was also an executive at Dolls Kill, a hip independent e-commerce firm. This means he knows both the challenges of being a small, indy brand as well as how big companies work to sell them.Both of his co-founders have impressive track records. Jon Dussel, the former CFO at Dolls Kill, was the founder of Blue Apron and was also the CEO.Savage said that Suma was founded because he saw a clear opportunity to create a company that would bridge the gap between small merchants and large platforms better than it is now. Suma might be looking at the challenge from an operational perspective, even though that may well mean economies of scale or economic opportunity which are the main motivators for other roll up players.Savage stated that this will include managing supply chains and sourcing, as well as running performance marketing, brand building, and multiple channels across Amazon and other properties. They also provide working capital.We looked at a lot of potential investments in this space and didn't find the right team until Suma was contacted, stated Jordan Cooper, General Partner at Pace Capital.The Suma team, co-founders and current Suma CEO, are e-commerce operators by nature. Asher Hochberg (Managing Director at i80 Group) said that they are a proven team who have demonstrated their ability to scale ecommerce businesses quickly.Suma, as others in the space, won't say how many brands they have acquired, nor will it give too much detail about its strategy for what it is looking to acquire. Lone Cone is a brand of children's shoes, while Turmaquik is a company that makes turmeric supplements.Savage told me that the goal is not to buy up brands or give founders an easy exit or tie every star to Amazons rise. Some may want to stay on while others might leave Suma, and some brands might find D2C a better or supplement option to Amazon. There is no one size fits all approach.It is a $300 billion area, and it is growing at double the rate of inflation, stated Savage. It's an ocean. There are over a hundred thousand global brands that have revenues exceeding $500,000 worldwide. It is easy to get lost among all that.It is refreshing to see that in a market with a lot the same products, Amazon is overpopulated by sellers who buy wholesale goods from the same vendors. It is somewhat depressing to realize that the choice isnt nearly so large when you consider Suma's efforts to create something new simply by focusing her attention on other things.Savage said that what gets people out of bed isn't creating financial instruments, but a stable environment that makes them feel better. Our uniqueness is in our focus on founders and the time we spend thinking about this before purchasing a business. We don't want to be like other me-too business owners.Ive spoken with a number of founders in this field, and one of my biggest takeaways has definitely been that it may not be a winner-take-all-market if the space is a long term winner, because each company is bringing something unique to the table that gives them a new angle for success.Although the if is in this premise is still debated, it's not surprising that Amazon could also be a consolidator and may be the best in terms of financial strength and operational expertise.Savage stated that he was not sure whether Amazon would ever attempt to replicate the roll-up approach, but it is something to keep an eye on. It is a strong indicator that Amazon is determined to pursue the strategy, even if it faces additional competition.