Only a few months after its founding, the Stryze Group was able to collect 100 million US dollars. And it did so with a very simple business model.
It's not easy for a start-up to raise 100 million US dollars. Especially not one that has only been around for a few months. But Berlin-based Stryze Group managed to do just that at the end of 2020.
The money comes from VC Upper90 and from Alstin Capital, a VC fund from Carsten Maschmeyer's corporate universe. Both capital providers are heavyweights on the scene. They are investing so much money even though Stryze's business model is actually not new. So what exactly does the company do that enables it to raise such sums?
Sebastian Funke can explain. The 40-year-old is CEO of the Stryze Group and a veteran of the German start-up scene. He founded the gaming start-up Smyt back in 2006, and has been active as a company builder in the retail sector for about ten years. In 2017, he founded Manuco, a company that trades private labels on Amazon and is something like the nucleus of the Stryze Group. "We already acquired smaller Amazon retailers with Manuco two years ago," Funke explains. With Stryze Group, he now wants to take this business to a new level.
The company's approach is simple: Funke and his team analyze which retailers have earned a good listing on Amazon. In doing so, Stryze Group focuses predominantly on sellers of everyday items, for example coffee capsules, yoga mats or scissors. "However, we stay away from hypethemes; fashion and electronics are also not interesting for us," Funke limits. Stryze does build brands itself, such as the coffee capsule brand Gourmesso, the first brand Funke and his comrades-in-arms launched, he says. But sometimes, he says, it's easier to take on a successful company. "The listings that these companies have earned, you can't even achieve those on your own in the short term," he says. 18-24 months would take something like that. That's why Stryze Group approaches dealers, offering manpower, capital, know-how. "We can help with the internationalisation of the business, for example," says Funke.
Stryze is not necessarily focused on Amazon, however the marketplace of the American online retail giant is the most important channel. 200 billion US dollars were turned over by third-party retailers via Amazon in 2019, a huge potential. However, Facebook and Instagram are also becoming more relevant as shopping platforms, although a different approach is necessary there, according to Sebastian Funke: "With Amazon, they can work with pull marketing, in the social networks it's about push marketing." Behind the terms is a simple idea: whoever searches for something on Amazon - for example, coffee capsules - also wants to buy them, so no longer decides in principle for or against the purchase, but only for a brand. Whoever is well placed here on Amazon profits. On Facebook, Instagram and the like, on the other hand, users aren't necessarily on a shopping spree; anyone who appeals to them here with their products can't necessarily expect a purchase, no matter how well they position themselves. He first has to push the consumers. Marketing experts speak of low "conversion rates".
Stryze's business model is not new; US competitors have been operating it for some time. In Germany, however, it did not catch on for a long time, partly because capital was lacking. "With Manuco, we had to finance all our acquisitions from cash flow," Funke recalls. Banks and other capital providers had held back, in part perhaps simply not understanding the business model. Recently, however, venture capitalists have taken notice, he says. "That's one of the reasons we started Stryze Group, to target these VCs and debt investors," Funke says.
With the money it has now raised, Stryze is fully committed to growth. By the end of the year, the current 25 brands under the umbrella of the group are to become over 100, and the number of employees is to increase from 60 to 120. "In the medium term, we will also need more capital for this," says Funke. He is optìmistic that further financial backers will step in. "We have always been profitable, we don't burn money," he says.
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