Investors are betting that the next Warby Parker will spring from Amazon

Where Amazon walks, a graveyard follows. The phenomenon was clear yesterday, when investors spooked by its pharmacy offering drove shares of traditional drugstores down. But now, venture capitalists are considering the company’s platform fertile ground to grow new consumer-facing brands. On Wednesday, venture capitalists such as General Catalyst, Khosla Ventures, […]

Where Amazon walks, a graveyard follows. The phenomenon was clear yesterday, when investors spooked by its pharmacy offering drove shares of traditional drugstores down.

But now, venture capitalists are considering the company’s platform fertile ground to grow new consumer-facing brands.

On Wednesday, venture capitalists such as General Catalyst, Khosla Ventures, and Arbor Ventures injected $175 million in Series A funding into Heyday, a company that acquires and incubates companies that sell products on Amazon. That’s right: $175 million for a company that just came out of stealth and hired its first employee in August. 

The bet is that consumers want to shop in a centralized marketplace, a space currently dominated by Amazon—and that sizable businesses can spring from the e-commerce giant. Heyday CEO and co-founder Sebastian Rymarz points to Anker Innovations, a Chinese company selling eponymous portable batteries that’s now valued at $11.8 billion in trading in Shenzhen after getting its start almost entirely on Amazon.

“Warby Parker and Dollar Shave Club dominate in direct to consumer,” Rymarz says. “We don’t think that it’s going to be those brands that are going to win in marketplaces. [Marketplace] brands need a whole new stack…to be able to rank well on digital shelves and to optimize listings.”

Heyday’s investors aren’t the only ones running with this thesis. Thrasio, another acquirer of companies that list products on Amazon, recently raised $260 million in Series C funding led by Advent International and says it is a profitable unicorn. And there’s Perch and Heroes in Europe—each of which have millions to buy up consumer brands listing on marketplaces.

Heyday both launches and acquires brands that list on marketplaces. On the acquisition side, the company plans to buy only profitable businesses with $2 million to $20 million in revenue that it believes can be ten times larger, investing between $3 million to $20 million in a company. With more data on marketplaces and consumers, Ramyrz and his cohorts believe they can help brands better target customers and organize their supply chains.

While I colloquially say such firms are betting that a big consumer-facing brand like Warby Parker could spring from Amazon, there are also key differences. Many direct-to-consumer brands appear to have control over their operations. By relying on a marketplace, companies like Heyday and Thrasio face the issue of platform risks.  It’s what famously made life difficult for gamemaker Zynga, which early on made much of its games based on Facebook’s network. It’s also an issue the media business knows well, as more news is delivered via Google or Facebook

It’s well-known on Amazon too. The marketplace giant has been accused of using data from independent sellers on its website to launch competing products. And what’s to say that Amazon won’t suddenly change its listing algorithm, upending companies on its platform altogether? Rymarz acknowledges those risks, though he believes Amazon has still allowed, and has a key stake in, allowing the overall marketplace to proliferate.

The ultimate prize here, though, is whether such brands can use Amazon as a launching pad to attract consumers all on their own merit and through their own channels.

Heyday has not yet reached unicorn status, though it plans to reach $200 million in annualized revenue by the end of 2021 and $1 billion by the end of 2023.

I HATE YOU, I LOVE YOU, I HATE THAT I LOVE YOU: Adam Neumann may be suing SoftBank—and there’s no shortage of ugliness there—but the Japanese giant’s CEO Masayoshi Son says he still loves the WeWork co-founder and believes Neumann will be successful in the long term. He believes Neumann has made mistakes and that he himself is to some extent responsible for those errors, Son said at the New York Times DealBook conference. Son added: “I still love him. I still respect him…I’m a big believer that someday he will be very successful.” 

Again, this all comes as Neumann is aggressively suing the Japanese giant over its scrapped plans to acquire $3 billion of WeWork stock, including from Neumann himself, and as SoftBank has reported billions of losses on that particular investment. You can watch the full interview here.

Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com

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