SINGAPORE (THE BUSINESS TIMES) - Founded by alumni from some of South-east Asia's top start-ups, including Carousell and Fave, e-commerce brand aggregator Rainforest is launching with US$36 million (S$48.1 million) in seed financing to buy and grow Asia-based brands that sell on Amazon.
The round comprised US$6.5 million in equity financing led by Nordstar, with participation from Insignia Ventures Partners. A US$30 million committed debt facility was raised from a US-based debt fund.
JJ Chai, co-founder and chief executive officer of Rainforest, said the debt is not convertible but involves a single-digit percentage of warrants attached. The debt covenants include the requirement to acquire profitable brands with sufficient track record, and that Rainforest maintains a healthy interest coverage ratio, he told The Business Times.
Mr Chai formerly led growth and strategy for Carousell and was Airbnb's former South-east Asia managing director. Ole Ruch, managing partner of Nordstar, said: "We have had the privilege of knowing JJ Chai for a long time, having worked closely with him when he was at Airbnb."
Co-founder and chief financial officer (CFO) Jason Tan was former CFO at fintech companies Fave and Ovo. Chief technology officer Per-Ola Rost, another co-founder, is an Amazon software entrepreneur and a seven-figure Amazon FBA (Fulfilment by Amazon) seller, said Rainforest.
Amazon's third-party gross merchandise value was US$300 billion in 2020, growing at 50 per cent year on year with over 30 per cent of the top third-party sellers based out of Asia.
Rainforest, founded in 2020, has fully acquired three brands to date. It acquired the first two brands in the home/beddings category for about US$1.1 million from a Singaporean entrepreneur. The third brand is in the personal health category for about US$800,000.
The final deal value depends on the performance of the brands post-acquisition as there is an earn-out component, said Mr Chai. The initial acquisitions were financed from the startup's balance sheet, but will be refinanced with debt. Subsequent acquisitions will be mostly financed via debt.
"At the moment we are focused on brands that sell predominantly on Amazon and have a strong brand position on the Amazon platform in lifestyle categories (home, pets, personal care). We don't do highly seasonal, fast-evolving product categories like fashion and electronics," Mr Chai said.
Deals are evaluated based on strategic value to the portfolio, taking into account opportunities for further growth including geographical expansion, margin improvement and widening of the product assortment.
Mr Chai added: "Eventually, we hope to be a digitally native house-of-brands. A cross between Newell Brands (parent company of brands like Rubbermaid, Papermate, Yankee Candle) and The Hut Group (a UK-based listed company that houses a selection of lifestyle brands selling mainly online)."
