Morning Tea #4: My new office, Euro Fintech Unicorns, Amazon Roll-ups
Last week, my startup moved into a new office in Soho (not SoHo). It’s such a dramatic and welcome change from working on a small desk in a dark corner of my bedroom.
I sit next to a massive window and usually leave it open to soak up some energy from the hustle and bustle outside. In a delightful glimpse of a carless utopia, Soho has been mostly pedestrianised during the pandemic and the roads fill with people eating and drinking towards the end of the day. Unfortunately, the City of Westminster, in its infinite wisdom, has decided to put an end to this, and instead dedicate the streets of Soho to those driving through it.
After our recent fundraise, we’ve also started recruiting for a few jobs to supercharge our product output. At this early stage, we’re hiring a team able to work together in Soho for at least a couple of days a week. This is a rebellion against the never-go-outside Zoom enabled work invasion of your home, a bet on the mental health benefits of going outside and seeing people, and a belief in the value of in-person work in building a hugely challenging and important company. I’ll be cycling in nearly every day.
Unicorn sightings in Europe are on the increase, particularly of those in fintech.
Klarna, which allows millennials to pay for things a few weeks later than they otherwise would for some reason, was privately valued at just under $50bn. Checkout.com, the secretly enormous European Stripe, raised an outrageously large $230m series A. Revolut, despite being called ‘the worst company in the world’ by at least one guy on the internet and not having a UK banking license, has made (paper) millionaires out of 70 of its employees. Wise, formerly known as TransferWise, was valued at $11bn for its direct listing in London. You get the picture.
Seedcamp and Index, in particular, two big-name London-based investors, are doing a roaring trade. They each invested early in more than ten now exited fintech unicorns which nets them and their LPs returns in the order of 100x to 1000x every time. They’re backed up by giants like Tiger Global Management, who pump the startups full of money at later stages in order to realise world domination.
In a world where every company is (apparently) becoming a fintech, maybe starting a company in Europe isn’t such a bad idea.
On the 1st of September 2021, European startups that buy up (rollup) third-party Amazon sellers raised $1.1bn in a single day. They’re going after Thrasio, the market leader in Amazon M&A, with over 100 brands and a valuation of over $1bn.
Rollups can buy an Amazon business for around five times earnings and, just for mashing a bunch of them together, have it immediately worth four times that. This is apparently such a lucrative business for Acquco, that it started dishing out Teslas for seller referrals.
However, is it a good idea to buy businesses whose value depends entirely on algorithms and terms controlled by Amazon, a company with a largely unregulated marketplace that often competes with its own users? Is it a good idea to do this with large amounts of venture debt?
When Amazon controls over half of the US eCommerce market and you’re an acquisitive retailer, maybe you don’t have much of a choice.
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