Thrasio, once king of e-commerce aggregation, files for Ch.11

Thrasio, the U.S. start-up that raised billions of dollars and popularized the concept of e-commerce aggregation — buying up and restructuring dozens of smaller brands and third parties selling on marketplaces like Amazon in a bid for better economies of scale — has commenced a restructuring of its own. The company has filed for Chapter 11 bankruptcy protection to cut its losses on a mountain of debt. It said it has also secured an emergency $90 million in emergency financing from unnamed existing lenders.

Thrasio raised more than $3 billion in equity and debt over the years to fuel its roll-up play, and its collapse into bankruptcy protection is one of the biggest examples of how mighty growth-stage tech businesses have fallen in recent times.

The restructuring support agreement covers 81% of Thrasio’s revolving credit facility lenders and 88% of its term loan lenders, the company said, and it will erase around $495 million of the its existing debt, as well as defer all interest payments in the first year post-emergence from Chapter 11.

The $90 million in new capital, it said, “is expected to provide sufficient liquidity to support the Company throughout this process and beyond. In particular, the financing will enable the continued operation of Thrasio’s brands, support ongoing business operations and provide the Company with access to new capital upon emergence from Chapter 11 to support go-forward business operations.” More details on the restructuring here.

The news should not come as a surprise: there have been murmurs of the company’s impending bankruptcy since last year. Since 2022, the company has been laying off employees and taking other steps to restructure its business such as pulling out of certain markets.

We have contacted Thrasio to ask if it plans to lay off more employees with today’s news and will update this post as we learn more.

“Over the past year, we have made significant progress transforming the business and advancing our objective to introduce hundreds of brands to millions of customers,” said Greg Greeley, Chief Executive Officer of Thrasio, in a statement. “We are taking steps to build on this progress by strengthening our financial position and working with our lenders to support our future success. Thrasio is one of the largest third-party sellers on the Amazon marketplace, and with a strengthened balance sheet and new capital, we will be better equipped to support our brands, scale our infrastructure and enable future opportunities.”

Thrasio overall has been a victim of a perfect storm of market conditions plus its own business model.

Amid the major downturn in fundraising that hit privately-held tech businesses starting at the end of 2021 (and still ongoing), late-stage businesses, which needed the most to stay afloat yet were not in a position to IPO, were especially in a tight bind to stay afloat.

Thrasio was a case study in late-stage “startups”: over several years it had raised well over $3 billion in funding across equity and debt rounds — money it pulled together from investors like Silver Lake, Oaktree, Innova and many more — to itself buy up a wide range of smaller e-commerce businesses built to run on Amazon’s fulfilment infrastructure but with little appetite to continue and scale those enterprises on their own.

Thrasio’s pitch, the same one used by the many other roll-up plays that are still on the market today, was that by buying up the greatest of these businesses — there are millions of them in existence globally — it could consolidate production, distribution and marketing. It would have unprecedented access to data that it could use across the wider business to improve results overall. And it could build new technology to improve that larger operation.

“Our business is getting better as it gets bigger, and these investments will be invaluable as we continue on that path,” said Carlos Cashman, one of the co-founders said in 2021, when he was still the CEO. At the time, the company had just raised $1 billion at a valuation, it said, of “up to” $10 billion. Josh Silberstein, another co-founder (who is no longer with the company), told TechCrunch in 2021 that Thrasio made a profit of $100 million on revenues of $500 million in 2020.

None of that really played out as planned, as you can probably guess. Consolidating disparate businesses is not as easy to do as it is to say. Consumer tastes for goods shift all the time, and moreover, e-commerce has seen a lot of pressure due to the economy tightening, meaning sales targets were likely hard to make on what might have been a wobbly cost base.

There were layoffs and a change of leadership, bringing in Greeley, in 2022. By September 2023, secondary market firm Forge Global was estimating that the valuation of Thrasio — which itself had already shelved plans for an IPO due to its own financials and the state of the IPO market — had dwindled to just $193.9 million. (It noted that even in 2022 it was “just” $4.5 billion, not the $10 billion that the company had said it was.)

Thrasio is the most notable of the roll-ups to collapse, but with businesses like Branded, Berlin Brands Group, SellerX, Heyday, Heroes, Perch and more collectively raising more than $1 billion to jump into the aggregation race, it is unlikely to be the last?