With $8 million to consolidate Amazon’s top marketplace

sellers, Perch makes its first deals

techcrunch.com/2020/04/07/with-8-million-to-consolidate-amazons-top-marketplace-sellers-perch-makes-its-first-deals/

Jonathan Shieber @jshieber / 1 year

After raising $8 million in November to roll up top Amazon marketplace companies, the new
Boston-based startup Perch has begun putting that money to work in its first few deals.

The brainchild of Chris Bell, formerly Wayfair’s head of logistics and a Bain & Co. principal,
Perch is well-positioned to serve as unifier of a bevy of disparate products in one nest.

The company’s recent acquisitions include brands selling a sand anchor for beach umbrellas
(Beachr), a waterproof apron for cooking, a hip sciatica brace (Bodymate) and other similar
products that wouldn’t be out of place in a late-night infomercial or on the Home Shopping
Network.

“We believe that the future of product R&D is entrepreneurs that are closest to the problems,”
says Bell in an interview. “We look for products that are top three in their niche… [Their
founders] want some liquidity and we can bring that onto our platform and add price
optimization, ad-spend optimization and cross-geography marketing.”

In a way, Perch is tapping into a similar urge to give America’s huge population of tinkerers
and inventors better access to market and a chance to monetize their ideas à la Quirky, the
failed attempt by GE to turn gadget ideas into new product lines for GE.

By contrast, Perch waits for the businesses to gain traction, then offers to buy the products
from their owners and give them up to two years of participation in any upside that the
product generates at certain milestones that Perch sets for the participating entrepreneurs.

“Three years ago I would not have started this business,” says Bell. “Amazon has made this
a much more defensible place.”

The Amazon marketplace remains somewhat of the Wild West, where intellectual property
rights are often ignored and successful products are copied at lightning speed by vendors
with access to the same commoditized supply chains. It’s really marketing muscle and an
ability to get better margins through scale that creates winners, it seems, and Perch is using
its technical know-how to get to the top.

Acquisitions can range from $750,000 to $2 million upfront with the upside on the back end
still to come, according to Bell. Financing this operation is a $4.5 million equity round and
$3.5 million in debt financing by some of the nation’s leading venture firms. Perch won’t buy
any company that’s doing less than $250,000 in revenue.

1/2
Spark Capital led the deal for Perch, with general partner Alex Finkelstein taking a seat on
the company’s board of directors. Tectonic Ventures also participated. Finkelstein, who led
Spark’s investment in Wayfair, was introduced to Bell through Wayfair’s chief operating
officer. He immediately saw the potential in Perch’s pitch.

“If you look at it from a macro standpoint. Amazon is growing very quickly and the third-party
marketplace is growing very quickly. Within the next year we’re going to have a large portfolio
and it’ll do well in any environment,” Finkelstein said.

Amazon’s third-party sellers are a $200 billion market and the largest single vendor is a $500
million seller, Bell noted, and that is an opportunity that a well-capitalized company can
exploit.

“We’re going to be managing hundreds of micro-brands and the only way to do that is
through a technology platform,” Bell said. “They’re generally niche products that are not big
enough that Amazon Basics would come into that category. We’re competing in smaller
categories, but even some of these niche categories are tens of millions to hundreds of
millions in revenue.”

While Perch has seen some impacts from the economic shutdown caused by the
government response to the COVID-19 epidemic, the company expects the shift in consumer
behavior to be the wind beneath its wings, rather than against its branches.

“Medium-term it’s pushing more people to buy online,” says Bell. And Perch isn’t slowing its
pace of acquisitions. “We made two acquisitions in March and we’re likely going to close
another two in the next two weeks.”

2/2