Benitago Group, a company powered entirely by its two founders and a virtual team of contractors, has raised $55 million in a seed round of funding that it plans to use to acquire and build other similar ultra-lean businesses, the company has announced.
Santiago Nestares Lampo, 23, and Benedict Dohmen, 24, raised a combination of debt and equity from Coventure, a technology investment firm in New York City. They met as computer science students at Dartmouth College and launched the e-commerce business in 2015 with a posture-support product called Supportiback.
Benitago Group, also based in New York City, has built a portfolio of beauty, nutrition, maternity, orthopedic, pet supply and electronic brands on Amazon since then, with a focus on the European market.
Benitago Group currently has a run rate of $25 million, according to the founders, meaning based on annualized data, it is on pace to hit $25 million in annual revenue. Revenue has appreciated 2.3 times from the same month last year, they said.
Like many seven-figure, non employer firms, Benitago Group relies heavily on automation and outsourced services to run the business efficiently. It has no traditional employees. It relies on a team of 40 contractors around the world to get things done.
To maximize what its team can achieve, the company has developed an elaborate 500-item checklist of best practices. “All the little details individually don’t do much,” says Nestares. “When you add them to a new brand, they add up.”
That approach was what made the investment attractive to Coventure. “The thing we were most impressed by is their incredible attention to detail,” said Ali Hamed, a partner in Coventure. “I think where their genius comes in is understanding how to launch a brand and defend your brand, and understanding the 40 different nooks and crannies of Amazon. The secret sauce to Benitago Group is there are 1,000 small parts to the secret sauce. Companies with 1,000 small secrets are impossible to replicate. Their results come from that. They’ve taken so little capital relative to other people in the space and are competing at similar numbers.”
Benitago Group is part of a fast-growing trend, in which inventors are aggregating high-revenue microbusinesses, primarily based on Amazon, and then taking over some of their back-end processes to make them more efficient. Thrasio is one of the highest-profile aggregators, but several other investors have jumped into the fray.
One reason they are doing so is the potential for big returns. An attractive e-commerce business that uses Fulfilled by Amazon will have net margins between 15-25%, according to Hamed.
Even if a buyer uses debt capital to purchase a healthy one- or two-person Amazon business, it is generally possible to pay off the debt more quickly than in a typical business, creating a more attractive situation for investors, who typically want to sell the business for a higher multiple of earnings before interest, taxes, depreciation and amortization (EBITDA) in the end.
Coventure expects to invest in a handful of companies in the Fulfilled by Amazon space, including some roll-up companies like Benitago Group, according to Hamed. The company is open to working with “founders who have a proven track record on Amazon” who can point the firm to existing businesses they manage or can identify businesses they want to buy next, he said.
Hamed is bullish on this space. “It’s hard to imagine there will only be one or two winners,” he says. “Part of the magic of the ecosystem is that it’s a marketplace.”
Meanwhile, Benitago Group has 12 new brands in the pipeline, according to its founders. “Our hyper-focus was never on raising money,” says Nestares. “It was creating the best brands we can.”
Although they face competition in the space, adds Dohmen, “Our best defense is to grow the brands and add the value. Ultimately, it comes around to the brands adding value to the customers.”