What’s on Asymmetric’s Mind in Spring 2023
Despite ongoing market tumult we remain squarely focused on our strategy...
While roll-up investment approaches - stitching together smaller businesses in typically fragmented industries to build a larger company - have been a feature of the LBO industry for decades, they have only begun filtering into early-stage venture capital in notable ways in the last handful of years. As Thrasio, Perch, and similar (largely Amazon-focused) aggregators began to prove out the potential of generating venture-scale returns in roll-up format, venture capital began to pour into the space. Given our firm’s roots in both operations and private equity, we appreciated the core equity value creation logic of these businesses - typically found in some combination of scale-based multiple arbitrage, significant asset-level operating improvement / optimization, and attractive acquisition dynamics (deferred purchase price, financial leverage, reinvestment of free cash flow). However, we elected not to make an investment early in our firm’s life in any player pursuing these crowded, traditional applications as (i) the surplus of capital entering the space led to elevated acquisition multiples, reducing prospective returns, (ii) the volume of new entrants given low barriers to entry combined with the relative lack of differentiation we observed were clear structural concerns and (iii) the frenzied pace of acquisitions indicated downstream issues were likely. Armed with these views, we began a research effort to determine if there were novel or less crowded use cases where this value creation playbook still held, perhaps with some idiosyncratic tweaks. Today, we at Asymmetric are thrilled to announce publicly that we have found exactly that in Elevva, whose most recent round we’ve just led and whose board I recently joined.
Elevva is an aggregator of leading high-growth e-commerce brands across Latin America. The company both acquires healthy, category-leading digital storefronts primarily on Mercado Libre as well as launches new brands in categories without high-quality acquisition targets. While Elevva benefits from the value creation levers described above, it enjoys at least three distinct advantages over these traditional approaches:
While a small number of aggregators focused on Latin American e-commerce do already exist, competitive intensity relative to market size remains orders of magnitude below that of the U.S. or Europe and Elevva’s target areas often result in proprietary acquisition opportunities. In addition, an investment at this stage is always a bet on the founding team. From our first meeting with Anibal, Felix, and Max, we have been struck with the depth of their understanding of e-commerce in Latin America, how they see the market evolving over time, and the role that Elevva can play in the continent’s growth. Their backgrounds across M&A and Mercado Libre are well-suited to the task at hand; but, even more than that, we were impressed by their passion for building an enduring company and the hunger they have displayed to date in showing impressive early growth. We are thrilled to partner with them on their journey, and welcome them to the rapidly expanding Asymmetric family.