A department store within a department store

Just a few months after its founding, Stryze Group raised $100 million. And it did so with a very simple business model.

A startup doesn't raise $100 million easily. 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 invest so much money, although the business model of Stryze is actually not new. So what exactly does the company do that allows it to raise such sums?

Sebastian Funke can explain. The 40-year-old is CEO of Stryze Group and a veteran of the German start-up scene. Back in 2006, he founded the gaming start-up Smyt, and for the past ten years or so he has been active as a company builder in the retail sector. 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 that business to a new level.

The company's approach is simple: Funke and his team analyze which merchants have earned a good listing on Amazon. In doing so, Stryze Group focuses predominantly on sellers of everyday items, such as 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 internationalization of the business, for example," Funke says.

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 via Amazon by third-party retailers 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 a long time. In Germany, however, it did not arrive for a long time, also because capital was missing. "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 now raised, Stryze is fully committed to growth. By the end of the year, the current 25 brands under the umbrella of the group should become more than 100, and the number of employees should increase from 60 to 120. "For this we will also need more capital in the medium term," says Funke. He is optìmistic that further financial backers will step in. "We have always been profitable, no money is burned with us," he says.