Last week, Suma Brands came out of nowhere when it announced a $150 million raise led by New York City-based venture capital firms Pace Capital and Material.
The Minneapolis-based company is using that money to acquire and grow fullfillment-by-Amazon businesses (FBA), which saw more than $300 billion in revenue, last year.
Suma Brands' CEO and Founder Andrew Savage said there's hundreds of thousands of FBA businesses on the platform with more than $500,000 in revenue.
Savage, a Minneapolis-native, has a proven track record in the e-commerce sector.
While at Target Corp., he helped start Target.com. And during a four-year career at Amazon, he was on the team that launched the toys category. Most recently, he was chief operating officer of Dolls Kill, a San Francisco-based retail startup.
Savage spoke with the Business Journal about Suma Brand's business strategy and what comes next. The interview has been edited for length and clarity.
You surprised a lot of people when you came out of stealth mode. Was there a reason you went outside the state for capital funding?
Not really. There just tends to be more capital at that scale on the coasts. Some of our co-founders are New York-based, so we had a large network there. It wasn't a conscious decision. I would love, frankly, some Minnesota-based investors on board. That would be fantastic.
Do you have many competitors or is this a wide-open market?
It's a pretty busy space. There's a lot of capital flowing into the Amazon third-party acquisitions market right now. This space is just massive. But it's not like a typical startup, venture capital, winner-takes-all market. There will be a lot of winners here.
What makes you different?
A lot of people in this space have more of a finance background. They're viewing this as an accumulation of Amazon storefronts, and are paying less attention to the underlying product and brand fundamentals. I've got a couple decades running these types of businesses. What's clear to me is the real underlying value is the product and brand.
Do you plan on growing these companies outside the Amazon platform?
Both. One problem we're excited about solving is: How do you position a consumer brand in today's shopping context? There's this old-school idea that if you want to be a direct-to-consumer brand, you have to have all your revenue run through your website. In some cases it might mean Shopify, or social shopping. Other times it might mean physical locations. We have brands we could see in a Target or Nordstrom.
What's the ideal company or brand you're looking to invest in?
We want to find products that we feel approach a customer problem a little bit differently than the rest of the market. A good indication of this is founders who are customer obsessed. They sought to build this business because they're trying to solve this problem.
Are you interested in buying up as many brands as possible? Or working to rapidly grow a smaller batch?
It's somewhere in-between. We're not going to be the fastest company in our space. There's some companies that are acquiring businesses at an incredible pace. Our model is focused on growing at a good pace, but finding brands we can build into household names. That's what gets us up in the morning, not just creating this portfolio of Amazon stores.
How does being in Minneapolis set you up for success?
From a strategic standpoint, I would argue there's not a better place than Minneapolis to start this type of business. We are focused on building brands. If you look at the companies in this area — Target, Best Buy, General Mills, 3M — Minneapolis really flies under the radar in terms of the quality of retail and e-commerce talent. It's just unparalleled.
