Fintech still dominates Latin America’s venture capital rounds, followed by e-commerce. But investors are starting to branch into specialized opportunities, according to LAVCA (the Association for Private Capital Investment in Latin America). Recent rounds are also including defi, retail trading, and BNPL (Buy Now, Pay Later), besides brand aggregators, D2C, and digital storefronts for SMBs (small and medium-sized businesses), respectively.
Mexico-based startup Valoreo is one surfing the wave of capital inflows for brand aggregators. After raising a $30 million Series A round in July 2021, the company is now securing its Series B, an $80 million round led by the private equity firm L Catterton. The startup doesn’t disclose its valuation, but Alexander Gruell, Valoreo’s co-CEO and co-founder, said there has been a “significant uplift since the last round”. Meanwhile, Martin Florea, co-founder and co-CEO at Valoreo added that the funding obtained in the current round together with the high growth business trajectory positions Valoreo “very well to reach a unicorn status in near future.”
Gruell said L Catterton will own a significant piece of the company, besides the board representation, that already gathers a few names. Founded in late 2020 by Martin and Stefan Florea, Alexander Gruell, Cedrik Hoffmann e Miguel Oehling, the company is backed by global investors including Kaszek, Upper90, Presight Capital, Kingsway Capital, and FJ Labs. In less than one year, Valoreo managed to raise $80 million in its Seed and Series A round. Its latest one was In July 2021, when it raised $30 million.
Valoreo’s co-founder and co-CEO Stefan Florea says the funding came because the company had a period of “tremendous growth” and expanded the team in the last months “with top talent from the region to build the best in class operations and technology machine.”
“Besides the meaningful financial resources we received, we want to make sure to have the best partners on board that is aligned with our values and long-term vision,” he told Bloomberg Línea. “We feel very privileged to have L Catterton as a new partner, who is aligned with our vision and who can add significant value to us given the firm’s long-standing experience of building world-class brands, from being the leading consumer investor over the past decades.”
The unicorn wannabe will use the capital to speed up the acquisition of prominent e-commerce brands in Latin America and invest in its technology, besides expanding geographically and stimulating organic growth for existing brands in its portfolio.
Gruell sees Latin America as a two-player market for brand aggregators with Valoreo and Brazil-Mexico’s unicorn Merama as the leaders, even though startups like WonderBrands are also gathering VC’s attention. Yet, Valoreo claims to have a different business model from LatAm’s recently made unicorn Merama.
“We acquire brands fully and consolidate operations - being able to add new products, improve the ones that already exist, and even create brands from scratch. Merama’s strategy is to invest in the brands to become partners, keeping the entrepreneur in the business governance,” explains Gruell. He adds that investments in this sector are “ultimately good news” for customers and the e-commerce ecosystem in the region.
The exec believes Valoreo’s approach differentiates it by allowing the company to “create more long-term value across technology, supply chain, commercial and marketing capabilities, among others.”
The brand aggregator business
Valoreo’s business is to acquire, operate and scale brands that primarily sell online, with a focus on marketplaces such as Amazon and Mercado Libre. By doing this, Stefan Florea explains that they support local entrepreneurs and offer a profitable return for the companies while providing the certainty that their brands are in good hands.
“Using our financial and operational resources we’re able to create value for these digital brands and transform them into leading brands in Latin America. We are aspiring to offer great value to customers by selling great products, at great prices, with a great customer experience, and can benefit as a company by capturing a part of the value we create in the form of profit from the brands we operate,” he says.
Valoreo doesn’t disclose revenue. However, Pedro Bousoño, Chief Operations Officer, said the firm sees tremendous growth opportunities, particularly concerning channel expansion. “We see these opportunities materializing in the numbers, with for example November/December, which are the most important months of the year in retail, bringing close to 100% year-over-year sales growth and outpacing marketplace performance in the categories where we play.”
Valoreo currently operates in Mexico, Brazil, and Colombia, and has completed the acquisition of more than 25 local brands in various categories, including Beauty & Personal Care, Children, Fitness & Furniture & Decor. Martin Florea adds the company wants to reach other markets in Latin America. “Our goal is to be the strongest e-commerce player in the region and add meaningful value to consumers, sellers, and the broader ecosystem.”
The company has already hired more than 200 employees, and with that, Brenda Hernández, Chief People Officer at the firm, considers it has “an extremely strong operational setup fit for the business Valoreo has today”. It means the company doesn’t foresee a large increase in the headcount for the next few months.