Buy and grow: Start-up Rainforest eyes opportunities in acquiring APAC e-commerce personal care brands

Established in January, Rainforest was launched by executives from some of South East Asia’s top start-ups, including Carousell, Airbnb, Fave and OVO.

The company describes itself as a ‘serial acquirer’​, targeting e-commerce brands that have the potential to grow.

“It’s becoming increasingly easy to anyone to set up a brand. Anyone who has an idea of what’s interesting for the market can create it and entrepreneurs can start with a relatively small capital to create the brand they want,”​ said co-founder and CEO JJ Chai, who previously held roles at Carousell and Airbnb.

However, a handful of these microbrands end up “getting stuck” ​after establishing the business.

“Some [entrepreneurs] don’t really want to create a company – hire people to keep an eye on it and so on. So, they decide to exit and that’s where we come in,” ​said Chai.

“We allow them to exit, take cash off the table and go back to doing what they like, which is starting from zero and creating a new niche, a new segment, a new product.”​

While the company is open to letting founders stay on with the brand, Chai noted that most of the entrepreneurs are more interested in moving on.

“In general, these solo entrepreneurs like the flexibility. I guess the challenging part moving forward is having the founder DNA in new products. They usually have a good nose for what will work. This is something we have to build in-house or work with agencies.”​

Amazon natives

Chai told CosmeticsDesign-Asia​ that the firm is now more focused on brands that are sold predominantly – around 60% – on Amazon and have a good ranking on the e-commerce marketplace.

“The reason why we [are looking for Amazon native brands] is because its just faster for us to acquire brands with the Amazon infrastructure. There’s no complexity around warehousing and its all managed predominantly by Amazon.”​

He added: “Most importantly, we like the fact that the brand has some standing in the Amazon ecosystem. For instance, if I search for botanical moisturisers, it will come up high on the rankings. Then we won’t have to spend more on Facebook or Google ads.”​

With Amazon, the company will also be able to have a global reach, compared to other e-commerce marketplaces that are more focus on certain regions.

“There are quite a number of Amazon native entrepreneurs in Singapore. We estimate a group of 15 to 20 of them doing over a million dollars. It’s a small club but across the broader APAC region, there are millions of them, with a huge chunk coming from China,” ​said Chai.

Rainforest is focused on selected product categories, namely home goods, pet care and personal care.

Aside from the draw of repeat purchases, the company is interested in the personal care category for the innovation that is out there, said Chai.

“Personal care is very interesting for us. If you look at how personal care is evolving – yes, there will always be the big brands – but there are also individuals that want to create their own vision. That’s why we are interested in this space because there’s so much opportunity to address the whitespaces.”​

Currently, the start-up has already acquired a few brands that it will only disclose at a later date.

Among them, there have been no personal care acquisitions as the company has yet to find a “compelling”​ brand, said Chai.

The company will be focusing more on skin care products and brands that address a niche with positive reviews and rankings.

“I think by next year, when we have a good stable of Amazon brands, will look into Shopify natives as well as dotcom type brands,” ​said Chai.

Big funding

At the beginning of May, Rainforest received U$36m in seed funding led by Nordstar with participation from Insignia Venture Partners.

A significant part of this funding would go to acquiring brands and building up its team, while another portion will be invested in tech-powered solutions.

“There are parts that we cannot replace, like creativity and brand direction, but for day to day stuff, we will invest in tech to makes sure we are using technology to solve it,” ​said Chai.

“What we’re trying to do is automate things. If you think of P&G, they have a big ream to manage all their brands. But in a digital-first world, you may not need too many finance people because it will be automated.”​