There has never been a better time to be an e-commerce entrepreneur. The growth of new e-commerce brands powered by Shopify and sellers using Amazon’s marketplace is seeing a realm of new possibilities open up in this space.
That’s why we’re supporting Propagate, a company on a mission to boost digitally native retail brands by connecting them to working capital and resources. Like a startup incubator for early stage e-commerce businesses, Propagate partners with rising direct-to-consumer (D2C) brands and helps them scale and find exit opportunities, while simultaneously allowing investors to take part in the future of commerce.
The Nuts & Bolts
Problem: As e-commerce enjoys prodigious global growth, we’re seeing a boom in new digitally native brands selling online thanks to Shopify’s platform and Amazon’s marketplace. That’s leading to a rise in aggregators or so-called roll-up companies focused on acquiring private labels and D2C e-commerce brands, which is already seeing billions invested into third-party sellers on Amazon alone.
These aggregators offer expertise and capital to take sellers to the next level by helping them improve marketing, packaging and positioning. Tactics in this space are evolving quickly, but the prevailing strategy here is to get as big as possible to enjoy economies of scale. However, there are other approaches at play here too, such as brand incubators. Similar to how tech startups can benefit from joining an accelerator, early stage D2C brands can also use guidance and resources from a platform that helps them grow and prepare for an exit. That’s because many new e-commerce entrepreneurs lack the capital, time, and expertise to quickly grow their brands.
Brand incubators in this space include companies such as Moonshot Brands and HeyDay, among others. But these players, like aggregators, typically target sellers that already have some traction and pull in revenues above $2 million. That leaves a huge gap in the market, as the overwhelming majority of Shopify-powered brands and Amazon marketplace sellers make less than $1 million in annual revenue.
Solution: Think of Propagate as similar to a pre-seed startup accelerator for digitally native e-commerce brands, but with the added component of offering liquidity through an investment platform akin to an AngelList.
On one side Propagate looks to accelerate brands by targeting sellers that would usually fall under the radar of aggregators. Propagate partners with these brands and provides working capital and a team of industry experts to help them scale and expand to new selling channels. That includes providing growth marketing, data collection, customer service, and supply chain management services. The goal is to help these brands 10X revenues and reach a point where they can exit to larger incubators and aggregators. Here, Propagate provides access to existing acquisition partners.
On the other side, Propagate looks more like an equity exchange or equity syndication platform. It does this by asking an important question: what about the little guy? That’s because most small investors are locked out of deploying capital directly through platforms such as Thrasio, Unybrands, Perch, or CircleUp. But Propagate gives them that opportunity, creating a platform where small investors can earn passive income via stakes in growing private e-commerce brands.
Getting to know Propagate
Founder and CEO JD Jernigan is well acquainted with the third-party seller landscape, having spent two years spinning up Shopify stores by helping develop, optimize and automate them. JD also founded CoLabs, a commercial real estate endeavor, where he gathered syndicates of real estate investors to purchase and flip commercial properties. In JD we see a strong founder with the right expertise and mentality to grow this business, which has already seen him ink important partnerships.
These are boom times for the global e-commerce industry, with sales predicted to hit $4.2 trillion in 2021. When it comes to third-party seller services, Amazon in 2020 generated $80 billion in revenue and the overall marketplace aggregation space is hot right now, with some players raising big funding rounds. In Propagate we see a company targeting an underserved part of this growing ecosystem. We believe it is positioning itself as an alternative investment platform for early stage e-commerce sellers at a time when there’s rising demand for similar lending solutions.
The future of Propagate
Already, Propagate has multiple brands under management and is making progress when it comes to partnerships. The company has built and fostered a strong network of relationships with partners across several key areas, such as lenders and aggregators for brand acquisitions. That includes working with industry players such as Moonshot Brands.
Ultimately, we believe the time is ripe for a platform like Propagate, and we look forward to helping the company boost a new generation of e-commerce entrepreneurs by facilitating acquisitions at scale.
You can learn more about Propagate at: https://www.propagatebrands.com/
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