Malte Horeyseck is a multi-time startup entrepreneur. His most recent venture rolls up his previous experiences in M&A, backed with over $100M in funding. His startup, SellerX has raised funding from top-tier investors like 83North, Christopher North, Felix Capital, and Francois Nuyts.
In this episode, you will learn:
- Funding acquisitions of Amazon FBA sellers
- The future of eCommerce
- Malte’s top book recommendation
- His top advice for other founders
- What SellerX is planning next
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
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Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Malte Horeyseck:
Malte Horeyseck co-founded Latin America‘s leading fashion and lifestyle e-commerce platform growing it from 0 to more than 3,000 employees. He has also launched two marketplace businesses and led the turnaround of a beauty brand. Previous experience includes Boston Consulting Group, Dafiti, Jafra, and Siemens.
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Connect with Malte Horeyseck:
Read the Full Transcription of the Interview:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. I’m super excited about the guest that we have today. He’s definitely someone who has been there, done it multiple times, and definitely is going to be quite inspiring to hear about his journey. So without further ado, let’s welcome our guest today. Malte Horeyseck, welcome to the show.
Malte Horeyseck: Thank you, thank you, and thanks for having me.
Alejandro: Originally born in Cologne. How was life growing up there, Malte?
Malte Horeyseck: It was great. Cologne is one of the biggest cities in Germany, but actually, it was a bit outside. I was brought up in a nice family with two sisters. It was great going to school studying there. After the studies, I started my career here in Germany at Siemens, and I took it from there.
Alejandro: Not only in your career, but also in the way that you’ve moved around the world, and also in your studies. You were always putting international or management of business. So what was going on with you and your global approach to looking at the world?
Malte Horeyseck: Yeah, a very good point. I studied international management from the get-go. I always wanted to do an MBA from before I even started working. After my place at Siemens, I did an MBA at Harvard Business School. I actually also met my current co-founder, Philipp Triebel. I consider myself almost a global citizen because, after the MBA, I went down to Brazil and founded my first company. I was always very open-minded to different cultures and international business, so that was always a big driver in my life.
Alejandro: That was quite an interesting journey because you went from Siemens to doing some internships in consulting firms, to all of a sudden, here you go. You wrap it up, you pick up your bag, and you go to Brazil. That’s quite a crazy transition because you are in the U.S., the Promise Land, the American Dream, and you decide to leave all of that behind and go to Brazil and not even speaking Portuguese. So what were you thinking?
Malte Horeyseck: [Laughter]. That’s a good question. After the MBA, many people go into consulting, investment banking, private equity, and all of that, but I was always an entrepreneur at heart, so I wanted to give it a try. Basically, the opportunity was done there in Brazil. I talked to Rocket Internet back then, and there was an opportunity to replicate the success of Zalando, the leading fashion and lifestyle player in Europe and Latin America. So I went down there with three other co-founders to found d’Affiche, which today is the leading fashion, lifestyle, and eCommerce platform in Latin America, in Brazil, Argentina, Chile, and Columbia. That was a super exciting opportunity. Even though I didn’t do any sourcing or worked in fashion or to see commerce before, and, as you said, I didn’t speak Portuguese. I really wanted to build something, build businesses, build teams, build processes, and could do all of that in Brazil. We got lucky, so today, it’s the biggest platform over there, and we’re very proud about that.
Alejandro: What is the business model of d’Affiche?
Malte Horeyseck: The business model is to become the category killer for fashion to one-stop shop for fashion. It’s about the selection and the portfolio. The biggest goal is to get all of the SKUs, all of the main brands to your portfolio because with that portfolio—Amazon calls it the flywheel effect. A bigger portfolio drives conversion; conversion brings down your marketing costs, and then with that, you can acquire more traffic or more efficient traffic than others. Then with that traffic, you can broaden your portfolio again. It was all about that. As the Chief Commercial Officer, I was responsible for creating the portfolio, so everything from portfolio planning, purchasing, the supply relationship, inventory management, and pricing the core commercial topics were with me. What was really interesting there, as well, is that we started with retailing, buying, and reselling brands, then launched our private labels, and then even became a marketplace ourselves with hundreds of thousands of sellers on our platform. So we got that whole complexity from—in the first season, I think we had around 100 brands and a few thousand SKUs, and at the end, I think we have 300-400,000 SKUs nowadays. That’s the selection that drives all of the efficiencies and scale afterward. That’s the important thing in the beginning. Then obviously, it’s marketing. In the end, eCommerce is all about operations and convenience and reducing lead times and customer happiness.
Alejandro: This was a Rocket Internet company, too. For the people that are listening, Rocket Internet is very well known for grabbing business models that they’ve seen around the world and then launching them in other areas. It’s like a different flavor of an incubator program, but it’s already trading—I believe it’s probably available there, trading online. They did an IPO back then. In this case, there was a very interesting approach, which was to merge several entities and to integrate them. As they say, most acquisitions or mergers are very tricky because it’s all about the transitioning aspect of it and the integration. So how did you guys go about integrating all these different properties to make sure that it will be effective and it will be successful to help you guys continue wrapping up the growth?
Malte Horeyseck: We had the situation that we merged two other websites that were from the same group into our operations, to which, on the one hand, made a lot of sense from a financial perspective given the additional scale and the synergies that you would have especially on operating costs. It’s actually very interesting because you hear so many things about post-merger integration and culture. You would assume that even in the Rocket Internet universe with similar co-founders and similar age and very similar cultures how difficult cultural integration can be. So we tried to have an approach that we have a new group together, rather than taking them on in d’Affiche. We wanted to make a new brand name out of it that we made it more as a merger than a takeover. We tried to evaluate everyone equally, no matter from which company they came from. We tried to put the best people in the positions that had to be merged in some way. I think that was the most important one, and the cultural fit, and the people integration. Obviously, then, operational complexities that you have, the normal ones with consolidated and warehouses, etc. The biggest move is gaining that topline, releasing the synergies on the operation expenses that give you a step-change that was completely worth it, and the culture and the end worked out very well. I would say it was a very successful integration.
Alejandro: In this case for d’Affiche, how big is d’Affiche today for our listeners to get an idea on the size and the scope?
Malte Horeyseck: Today, it’s above a billion dollars in sales. It’s profitable and has 3,500 employees, and it’s the leading eCommerce player. We assume around 40% market share in Latin America and with a physical presence in Brazil, Argentina, Chile, and Columbia. That’s the size of d’Affiche right now, more or less.
Alejandro: That’s amazing. In this case, you decide at one point that it was time for you to pack up and go back to Europe and perhaps take a sabbatical. At what point do you decide that’s the best move. I’m sure that leaving your baby behind was not easy.
Malte Horeyseck: Yeah, for sure. It’s interesting how things change. At the beginning, we were naïve enough to think we got out of Brazil and did that for three years. Then go back to Germany. Obviously, in this case, this was a completely super-growth success story. Then you stay longer and longer. But, at some point, for me, especially, I really like the beginning of founding a business, and having the vision, and driving the strategy, and executing on that blank page and building things. I love to build processes, tools, structures, and teams. After four or five years, it turned more into a management job. There were always new things coming, regional expansion, integration topics, etc. But it always became more of a purely management job, and I wasn’t that motivated anymore and also wanted to go back to Germany, actually, which I did for a little bit. I did a small sabbatical, but after six months, it kind of drew me back to Sao Paulo. I’m not sure who has been in Sao Paulo, who is listening in. Brazil is a beautiful country. Sao Paulois an amazing city. I made lots of friends and had a very good network there as well. I went back. I wanted to build something from scratch, again, and this time with my own money, and having my own skin in the business and bootstrap something given the success that our marketplace section out in Não Feche and the size those sellers would have. I said, “Let’s become a seller on the other marketplaces and build something from scratch, some small that grew very quickly. We had a team of 15 people selling fashion, furniture, decoration, and articles on the other five merchandise players in Brazil, including Amazon. I learned everything about being a seller on a platform, which is very important knowledge and experience for me today and what we’re doing today. That was great. In parallel, though, there was an opportunity to acquire a business. It was, for me, a very exciting experience because I never bought a business before, and it was a turnaround case. There were lots of opportunities on the balance sheets, but also some risks. A friend of mine decided to partner up and acquired the business, and folks from that turnaround, which was successful, and some beauty brands on the direct selling space. Things were running well, and the Coronavirus came and disrupted all of our lives. After seven years in Brazil, I wasn’t ready, so I came back. But now, after ten years, I said, “Now is probably the time to be closer to my family.” I came back to Germany last year. Finally, Philipp, my co-founder today, was also in a similar situation, so he left. He has a very complementary background to mine; he did Goldman Sachs, Special Situations Group for the MBA. After that, he founded a company himself as an entrepreneur and did a few rollups in the healthcare space. He was visiting from New York. While he was in Europe, the travel ban occurred, so he was stranded here. We looked at a few products together and ended up founding SellerX.
Alejandro: Tell us about that process of brainstorming, taking a look at what’s out there, and then all of a sudden, you guys say, “I think this idea may have legs.” Then how do you go from that to bringing it to life?
Malte Horeyseck: To be very honest, the first things that we had in mind, after ten years of commerce, I thought, “Let’s look at something new.” As Corona hit, we thought healthcare might be a super interesting space. There’s the digitalization of healthcare happening. There are a lot of interesting projects. Also, if you have our friends and networks started great companies there, so we looked into that for a month or two. Then we discovered this opportunity to roll up Amazon FBA sellers. This is a trend that has been going on in the U.S. for many years. The moment I looked into it and saw the economics and given my background from having a platform view, having a seller view, and also managing a brand view, FOMO, Fear of Missing Out. I had many sleepless nights. We got dragged in and got obsessed with the idea. I think the most important thing when you start a company. Obviously, one thing is assessing the market. It’s very clear how big the market is, so we didn’t need to spend a lot of time there—then trying to identify the key risks before you start something like that because I wouldn’t be as naïve anymore as going to Brazil. That’s a two-to-three-year game. It’s going to be another ten years. You really want to make sure that you’re starting right into the next cycle. We identified two key risks for the idea. One is the Amazon dependency that you have because most of the sellers are purely selling on Amazon. The second one is the competition that would start—big markets, big ideas, let’s scale quickly, you’re not going to be alone for a long time. Most of our analysis was focused on that to get comfortable on that idea. Our answer basically was, “Look. In the end, Amazon is very well-aligned with what we’re doing. They want happy customers, and we are acquiring category-leading products with very good reviews, review mode, high-star ratings, etc., so proven best products. They want customers to have the best products at the best price and the best experience, so we are acquiring those that are usually the prize leader, and the best experience is guaranteed because it’s FBA, which is Fulfillment by Amazon. We are sending our products to Amazon. Amazon does the picking, packing, the sending out of the product, the returns, handling, and the customer service for you. If Amazon is changing their strategy and it’s got to deliver the products with the drone, we will be sitting in the drone. We are fully aligned with Amazon, so we got quite comfortable with that. I think what we’re doing is really cleaning up the Amazon catalog a little bit and making friends nicer and more appealing for the customers. A second one was around competition. That was more important to dig deeper into the market and really understand how many sellers are out there that we can acquire. There are around two million active sellers on the Amazon platform. Looking at the criteria that we use for our acquisitions, we estimate something between 10-15,000 sellers, above $1 million in sales, that would meet our criteria. It’s just a huge, huge market to be successful in. Then we gave it a go and talked to a few VCs, what they thought of the idea, and then Cherry, here in Berlin that I had some connections to before, as well, said, “Love the idea.” We also pitched it to Felix Capital based out of London, and they very quickly jumped on the ship. We raised our seed with Cherry, Felix, and also Village Global, which is a smaller Silicon Valley fund, which Silicon Valley has invested in. But then, as this is an M&A team, obviously, it’s driven mainly through acquisitions. We raised that from TripleFunds and could announce a huge seed round that equity and debt combined over 100 million euros. That’s how we got started, and with the experience, it was [18:14] who was doing what. Phillip was building the investment team, everything from [18:19] to analyzing the seller to doing the due diligence. Then me on the operational side running and operating the business and building the tech around that we need to scale this business.
Alejandro: How much capital, Malte, have you guys raised to date for SellerX?
Malte Horeyseck: Over $130 million.
Alejandro: Got it. When you’re thinking about raising capital for a company like SellerX that is oriented to buying some of those companies that are selling on Amazon and then optimizing them and making them better, I’m sure that there’s a different structure than the one that you would typically see on hyper-growth startups that are just for operations. Here, you also need to take a look at the amount that you need, as well, for doing those acquisitions. How do you think on the fundraising side for the money that you’re going to need for your own operations versus the money that you’re going to need for the acquisitions of those companies? How does that work?
Malte Horeyseck: There are two areas to the business if you compare it to something like d’Affiche where you build a platform from scratch, and you need to acquire customers on an inefficient portfolio at the beginning. You’re definitely overspending on customer acquisition costs, and that’s what makes a company unprofitable at the beginning. Here, it’s obviously a completely different game. We are acquiring profitable assets and consolidating them and growing them further, and using synergy cost energies. It is actually a profitable rollup. That’s why also debt is available for this, in general. Then depending on negotiations with your debt provider and depending on the criteria that you find for your targets, there’s anything between 80-100% you can acquire with debt. It depends what the equity portion is that you need to put in to acquire those assets and then running the business and expanding as an investment, but as we are at the beginning now, mainly fulfilled by Amazon. It’s not that we’re building huge warehouses with our own capital or investing in automation yet. That’s something that’s coming a little bit later when we have to scale. In terms of cash flow, it’s profitable, and even with the interest payments, we’re in a very good cash position that most of the equity that we’re raising goes into financing also the acquisitions and just building the team and the structure and the tech. Looking at how much we’re acquiring, most of it goes into acquisitions.
Alejandro: In terms of those acquisitions, how do you identify, let’s say, one of those millions of sellers that are on Amazon that could be interesting for you? What is the process of identifying a winner? How do you know that one of those sellers has the idea for you to potentially explore something?
Malte Horeyseck: Great question. Maybe two steps back to quickly talk about our vision, so what we want to do needs to be aligned with that. We want to build a winning portfolio of global direct-to-consumer brands. That’s the end goal, and this portfolio will be fueled by acquisitions. At the beginning now, it will be FBA Amazon sellers because that’s the opportunity that is most present where we need to move very quickly, but then, we’ve got to think broader in the future [21:44], so just to understand where the end goal is. I think that’s important. The good thing about Amazon is that all of those sellers conduct their business through the Amazon Seller Central Account. Information is very standardized, very organized because it’s on Amazon. That’s a great thing, so the internal information about orders past and all of that come in a form that makes the delusions very easy. But before you get access to that, also Amazon is a website that you can scrape and crawl. You can get all of the information. There are also services that you can connect with to understand who the category leader is, in which niche, and what we look at in terms of an investment thesis. We’re not necessarily acquiring the seller. Obviously, we’re acquiring the seller, but then he has certain listings, and we are buying the shelf space in the Amazon algorithm, which is a search machine for products. The defensibility of that listing is mainly given through the review mode that those products have. If you buy the product that has 10,000 reviews and 4.7 stars, that’s the best indicator that this is a great quality product, and we want to definitely be in the tier 1 of the review leaders because that’s a position that you can defend on Amazon, even though that is a product that might be similar or look similar to other products. It’s just when the end consumer is looking at reviews for 10,000 products and another one with 50 reviews, the conversion on our product will be higher. That’s also an accelerator going to other Amazon markets where other products might have less reviews. If you enter that market, then that’s a great advantage to scale very quickly. Reviews are one of the biggest factors and also as the differentiator. Then as we build the brand, especially also off Amazon on our own website, then reviews like this get less important. It’s about building consumer brands. Even if those are not the ones that we’re not going to launch TV campaigns and everything about it, even the first seller that we bought that’s in the art supplies industry segment has 15,000 orders every month. Here’s about customer touchpoints and how you can phrase those. Do you have a nice brand visually? Do you tell a nice brand story? Is your content on Amazon great in terms of pictures, videos, and copyrighting? How about your boxes—your unpacking experience, your website presence? Do you give extra content out like painting horses or something like that? Do you engage with your customer afterward? Everything that makes a brand feel like a brand, that’s something that we can execute on without having to heavily invest in reach that will only pay off down the line.
Alejandro: Nice. To get a better idea, especially for the listeners on the scope and the size of SellerX today, is there anything that you can share, like the number of employees or anything along those lines?
Malte Horeyseck: Sure. We acquired more than 20 companies already. We have around 150 employees internally, around 50 from the portfolio companies that we are keeping in integrating, so around 200 employees. Yeah, growing very fast and also looking for new talent to join the club. So if anyone is listening and is interested in this space, feel free to reach out. We need lots of awesome people to help us build this.
Alejandro: Cool. You were alluding to it before on the vision side, so imagine that you go to sleep tonight, and you wake up in a world five years later where the vision of SellerX is fully realized. What does that world look like?
Malte Horeyseck: I think in five years, we will have successfully built and executed an acquisition machine that is fairly automated in identifying the right targets throughout Amazon and other marketplaces and also other direct-to-consumer brands. We will also have fully implemented the operational machine that onboards those and is very automized and pulls all of the levers and brings those brands with very little individual effort and automatization to all of the regions and all of the channels that we want to be in really like an omnichannel approach. That will be built. Over time, we will talk less about sellers and products because as we grow strong on our websites, the conversation will be more about customers and engagement with customers and how to be where they are. Acquisition will always be a big theme, but we will also talk more about launching new innovative products and new brands within this machine and automated value chain. I think it will be a fantastic place to try out new products and launch innovative things. Then, hopefully, get to a point where we have direct-to-consumer brands that everyone has in their homes. A friend of mine always said, “In 2040, we will reach 90% eCommerce penetration.” I was kind of laughing at him, but given the acceleration we’ve seen now through the last year, we are at crazy speed increasing the share. We, meaning all eCommerce companies. I think this customer acquisition that has happened now with people that haven’t bought online before that you won’t lose given the amazing convenience that Amazon and big platforms like that, they will not go away. I hope we will have an amazing impact with our products in almost every household.
Alejandro: Nice. One of the questions that I typically ask the guests that come on the show that I’d like to ask you is to imagine—it’s an incredible journey that you’ve had as an entrepreneur building and scaling companies, now, with your latest baby with SellerX. Imagine that I put you into a time machine, and I’m putting you back to where you just got your MBA from Harvard. Here you are, dreaming about starting something and becoming an entrepreneur, and you have the opportunity of having a chat with your younger self, your younger Malte. What would be the one piece of business advice that you would give to your younger self before launching a company and why based on what you know now?
Malte Horeyseck: That’s a very good question because you think after the MBA, “Wow! The world is mine. Let’s go and see.” In the end, looking back, we were pretty young, so I think maybe given some perspective, what I was thinking about after the MBA, it was not like, “I’m going to build this one billion-dollar-plus eCommerce company somewhere in an emerging market. I just knew that I had a drive to do something entrepreneurial, but that was very broad, from even a niche company to something that big. Maybe the one piece of advice I would give myself back then, maybe thinking about scaling a company, is it’s all about people. That’s what it is, especially in a startup—growing up in a company like Siemens that has lived over 150 years and perfected processes and tools, where people might be a little bit more exchangeable. In a startup, it’s completely the other way around. So people are key, not only to do this stuff, but to build those processes, to build those tools, and the amount and the attention and the detail you have to give the hiring process is really important because that’s the family that you’re building the team that you will rely on. It’s all about hiring the right talent and also hiring the right talent at the right time. I think looking back, also, in terms of mistakes or where you could have done things better was maybe putting the right person at the wrong place or at the right place at the wrong time. So either promoting them too quickly or trying to give some people where you knew it’s not going to work out, too many more chances and then losing a lot of time with that. That’s about it. And with people, you’re trying to perfect your interview methodology and ask them for the right things, but in the end, also, whenever my gut said something, and I didn’t listen to it, that’s where I did most of the mistakes because I thought professionally, I was winning against my gut feeling. When it comes to people, I think there are a lot of things you can check in an interview, experience, know-how, skillset, motivation, but then I think the gut feeling is very important because it’s people that you will win and struggle with and go through thick and thin. That’s the most important thing. I think over the course of time, it went very well, but those are the big decisions that you make.
Alejandro: Lastly, what is a book that you would definitely recommend that has had the biggest impact for you as an entrepreneur?
Malte Horeyseck: Getting Things Done by David Allen. It’s an amazing book because, as an entrepreneur, you are on so many fronts. You’re building things; you need to manage prices; you have growth pains and all of it. What’s really important is to have a great system to get rid of your loose ends, and you get things in a very organized way and put them down so you can prioritize and nothing important falls off the table. It has very simple techniques, but simply having that space where you save it and then getting the anxiety out of your head and being able to sleep because you know it is organized in a structured way where it will pop up with the right prioritization at the right time and to attack that issue. I think that’s something very practical. It is a book that I think is also giving very direct advice on how to do things. I thought that was very useful on a practical scale. Then, all books with that cadence Christians. My favorite professor at Harvard wrote about disruptive business models. It’s more on the micro side, super interesting, and his lens is how to look at businesses and product, the jobs to be done, etc., that’s more on the micro side. It’s an inspiring book. This one was great for micro and the other micro day-to-day stuff.
Alejandro: Very cool. Malte, for the people that are listening, what is the best way for them to reach out and say hi?
Malte Horeyseck: If it’s related to SellerX, then our website. It’s not the most beautiful. It’s still the one that Phillip and I did in the first week of business that didn’t become the priority of today. We’re launching a new one a month from now, so there we have a little template where you can reach us. If it’s on a personal way, I’m on LinkedIn, and you can find me. I’m trying to answer requests there. If you are connected to Alejandro and the team, I’m also happy to get emails forwarded and always super interested in networking and partnerships and thinking broadly outside of the box, so I’m happy to discuss this.
Alejandro: Amazing. Malte, thank you so much for being on the DealMakers show today.
Malte Horeyseck: Thank you so much as well. It was a pleasure, and I really love what you guys are doing and keep up the good work.
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