The rise and fall of Amazon aggregators

Amazon aggregator funding is down by more than 80% in 2022. However, much of the previously committed capital has yet to be deployed. Therefore, despite little new financing, the acquisitions have not stopped.

2021 was the boom year in the boom-bust cycle used to describe economies. Over a billion dollars flowed in monthly to fund aggregators during the boom period. Due to external and internal factors, that stopped in 2022. This year is shaping up to be the period of decline.

Last year, by September 2021, aggregators had raised nearly $9 billion in new funding. This year, the figure is just $2.3 billion. The moving average chart forms an almost perfect bell curve. The next period is about to be as calm as the months before the madness.

Venture capital (VC) funding has declined overall, though not as severely as for aggregators. According to Crunchbase, for example, funding fell 27% year-over-year in the second quarter of 2022. During the same period, funding for aggregators fell 77%. Macroeconomic factors, including inflation and rising interest rates, have slowed venture capital funding, but aggregators had additional hurdles.

Macro issues aside, many pursued scale before building a foundation, with some turning out to be “worse at being Amazon sellers than the Amazon sellers they acquired.” All of that is solved by adjusting the strategy and approach of mergers and acquisitions. And sometimes, unfortunately, layoffs. Meanwhile, it led to the “Abyss of Disappointment” stage of Gartner’s hype cycle.

If 2021 was the year to launch an aggregator and attract what seemed like unlimited capital on a virtually copy-pasted pitch deck, 2022 is the year of survival. Multiple brokers and investment bankers say deals are still closing because many aggregators have yet to spend their capital. The acquisition market is healthy but fundamentally different from 2021. However, the downturn period of the cycle could last a while before winning formulas emerge among the existing 100 aggregators.

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