Evolution of Aggregators in 2021 and looking forward in 2022 ⎜ Elevate Brands ⎜ EP 202

Ryan Cramer: What's up, everyone? Welcome to my corner of the internet. I'm your host, Ryan Cramer, and this is Crossover Commerce. Presented by PingPong Payments, the leading global payments provider helping sellers keep more of their hard- earned money. Hey, everyone, welcome back to another episode of Crossover Commerce. I'm your host, Ryan Cramer, and this is my corner of the internet where I bring the best and brightest in the Amazon and e- commerce space. Before we get started, I just want to give a quick shout out to our presenting sponsor, PingPong Payments. What is PingPong Payments? Well, I'm glad you asked. We are a cross border payment solution helping sellers save more of their time, money and effort when it comes to sending or receiving funds. If you're paying your suppliers, your manufacturers, your VAs overseas and want to get money to them quicker so you can get your goods quicker or just help your employees get paid on time without paying those exorbitant fees, make sure you check out a solution like PingPong Payments. You can do that by going to usa. pingpongx. com/ podcast to catch all of our past episodes, but also sign up for free. It's free to save money today. Who doesn't want to save some money when it comes to sending or receiving their payments and also putting those funds back to their bottom line? So, if you're a seller of any large or small scale, you can save today and use those funds to invest more into your business and buy more inventory or even help your way along to exiting your brand. That's actually what we're going to being talking about today. Again, check out pingpongpayments. com in the links below or go to usa. pingpongx. com/ podcast. This is episode 202. Thank you for joining. Again, this is season four. I've already done it. We've just started season four here last week before we capped off our 200th episode and season three late into December, so we're starting fresh into 2022. It already feels like it's been a long week, so we're going to go ahead and get kick started with some great content this week. We got three episodes coming, so if you're watching us on Facebook, LinkedIn, YouTube or Twitter, thanks for joining us for the first time or the 202nd time. We appreciate you just tuning in whenever you are able to. If you happen to not be able to catch every episode, you can just go to our website or you can go and find Crossover Commerce on your favorite podcast destination. That being said, I do want to go ahead and kick off with one of the cooler companies that I haven't had on in a while, believe it or not. It has actually been one of the first 25 episodes that we had in season one back when they were known as a different name, Recom Brands. If you're thinking about who's Recom Brands, maybe you just forgot all about them. They've actually became Elevate Brands, one of the larger acquisition companies in the Amazon space today in terms of raising funds, acquiring different brands and just growing like crazy. Based in Austin, Texas as well as New York City. In New York, all over the world, they're growing like crazy, and we're going to be talking about what we saw in 2021 and also looking forward to 2022 trends. So, that's what today's episode is about. Actually, we have him on the podcast for the first time. It's been a long time since I've been wanting to get him on the podcast, but really excited to have on the director of Global Partnerships, TJ Hyland of Elevate Brands. TJ, let me go ahead and bring you on today. Thank you for joining us on Crossover Commerce today.

TJ Hyland: Thanks, Ryan. How are you?

Ryan Cramer: Man, I'm doing well. It's week two of 2022. A lot of two's going on today. It's 202-

TJ Hyland: I was going to say, episode 202 in 2022.

Ryan Cramer: There's a lot of rapper rhyming in there.

TJ Hyland: crosstalk.

Ryan Cramer: Exactly. I'm not awake enough. It feels like already 1: 00 on the east time when we're doing this. I'm not awake enough to come up with something creative like that. But anyways, thank you for spending some time today. Man, we actually intersected a lot. For people who may not know, and they should, your background or what you did in your past and what you do now, give me a quick minute or so background of you and your history in the space.

TJ Hyland: Sure. When you were talking about PingPong cross border payments, I was having a bit of flashback there.

Ryan Cramer: PTSD.

TJ Hyland: Yeah, exactly. My background is I've been in the Amazon ecosystem since 2014. I worked at two previous companies in the global payment space, WorldFirst and Payoneer. So, similar to PingPong in the sense of helping sellers who were selling cross border with bringing your funds back and then also making those payments out to suppliers and stuff like that. At Payoneer, I was the head of partnership there, kind of connecting the ecosystem. That's what's crucial here. What Ryan is doing with PingPong is making the connection for sellers where payment is not always something that you think about at the forefront, but it's a crucial part of the business especially in the e- commerce world where every dollar counts in such cash flow heavy businesses. In August of this year, about five and a bit months ago, I moved over to Elevate Brand. Here too, I'm looking after partnerships. It's fun, it's different, it's exciting. We talked about the aggregator space and everything that's going on, and I think we're going to dive a little bit later. But same concept in the sense of connecting sellers with service providers, service providers with sellers, networks with people, and people with networks. Just everything coming together. It's been really fun at Elevate because they've never really had somebody in this role before. To me, it's a crucial role. It's a one- to- many role, but it's how do you get in front of as many people in the right place, in the right time, with the right people and their platform? So, again, thank you for having me, Ryan.

Ryan Cramer: Yeah, absolutely. Well, you're obviously tugging on my heartstrings. It's what I do, very similar too, here at PingPong. A lot of people don't think about that, and I think it's one of those missed ecosystems. If I'm an entrepreneur, for example, and I'm working on a scale, I'm not even the service provider, and I'm talking about partnerships, it could be something in the likes of software, it could be the likes of shipping logistics, it can be the likes of different ways in which your company needs to partner and either rely on an external extension of you on your company. There's a lot of different businesses like ours where we provide services or run brands or whatever that might be. The glue that holds everything together between the sales, the marketing, the business development, whatever that may be, is the partnership world. You've had that, your experience, in this space for a long time. Do you feel more it's like a networker and kind of a, hey you should talk to this person, making those connections happen? Is that what you love so much about the role?

TJ Hyland: Yeah. I mean, it's a people- person role, right? You have to be able to know who you know and know who's good at what. When I was on the service provider side, it was very much of aligning myself and aligning our business with the businesses that we worked well with that had a common guiding light to get to the end. Ultimately, that is supporting sellers in their mission to grow their business. Nowadays you're talking about exiting your business, but back then you didn't even really have that option. It's kind of a vetted voice. The way that I think about partnerships are relationships. I have a relationship with this service provider who does shipping. You as a seller have been working with me for three years, you trust me, you trust my beliefs and who I've worked with. From that perspective, it's a vetted voice. You have the opportunity to go speak with 150 different shipping and logistics companies who has time to do that. So, referrals are the ultimate sign of respect, I feel. When somebody can say, " I've worked with these people, they are good, they'll do good by you," that's the ultimate respect to receive one and then also to give one. It's like, I recognize that you are good at your job and your company is great and now I want to pass business to you. The other side of it is now I'm not on the service provider side anymore but more on the" seller side." We use a lot of these service providers. So, it's like writing a line of who do we use as a solution and who else can we explore working with and which part of the businesses needs some external help versus internal help. It's a fun game of matching things up like that and experimenting. One of our big MOs is to experiment. If you're going to fail, fail fast and get on to the next thing, which is really focusing on the growth side.

Ryan Cramer: That's a great way to look at it, define it. I know, if I have to put myself in your shoes, from a service provider, obviously, you can partner with lots of different people and they can be in that same category, for example. But if you're an operator, very similar to what Elevate does, you may not get a chance to spread the love as much. Do you find it more difficult to have to actually dive in the weeds? Maybe not your level, but as a company of, like, hey, there's lots of great options, who do we pick? Because you can't spread the love with shipping logistics too terribly much, I'm assuming, or you can't use every single software solution, just that it doesn't make financial sense, so it's who do you pick and what do you decide to go with? Does that make it a little bit more of a harder decision in which, hey, these are our trusted, we actually use these companies in that capacity, or is it a little bit more different than that?

TJ Hyland: It makes my job a little bit more difficult because I have the relationship with, if you say, like PPC agencies, with the softwares and with the agencies, and there's five softwares and there's five agencies. We can't use all 10 of them, but all 10 of them want Elevate to use their business. So, it's about maintaining those relationships. I can speak to my experience. In the past I've worked with people at this business, or in the past I've worked with them and I know that they would do a good job. But the thing is it's spreading a lot. I think we talked about this in the aggregator circle enough. I don't necessarily really consider a lot of the aggregators as competitors. I think we may compete on certain listings, certain categories, certain keywords, but in reality there's plenty of pie to go around. We're going to compete on deals, this brand is going to be talking to X company and Y company and us. That might drive the price up and benefit the seller, but we're not really competitors in the long scheme of things. Ultimately, for most of the aggregators, we want them to be successful. I think there's enough pie, big enough pie, I should say, for everyone to win here. Sellers included. Sellers are the biggest winner here.

Ryan Cramer: Absolutely. Well, yeah, that's a good segue into what I think 2021 showed us. There's a couple different things I would point out. If you've been living under a rock for a year, congratulations, you've escaped a lot in the space. But if you're new to e- commerce or if you just came in the space, you probably heard a lot of the numbers of raises and capital raises and all these companies coming out of essentially nowhere, but they're building brands, and they're having all these opportunities to operate on a grander scale, as a grander scale. Because with more money comes capability, right? If I'm a person who own a team of three, I can only scale so much in terms of logistics and growth and sales and whatnot. But in the use of an aggregator space or a brand aggregator like you guys at Elevate, there's the opportunity of doing it on a grander scale, but then rewarding the person for starting that business or brand and seeing it through to the end. So, when you were potentially looking around at which aggregator you want to look at, why Elevate? What makes Elevate special and different in your eyes as opposed to others that might be out there? What's the distinguishing factor?

TJ Hyland: I think from a seller perspective, you want to always feel comfortable with who you're doing business with. I think it comes back to the relationship side of things. You want to be with someone who has maybe been in your shoes or you can know and you can trust. I think that's one of the main differentiators about Elevate is Ryan and James, the two co- founders who I think have been on Crossover Commerce, like you said episode 25 or whatever that was, they started as sellers themselves. They started selling in 2016,'17. They did retail arbitrage. They were selling a very well-known-

Ryan Cramer: They're selling Nike shoes, weren't they? Or something like that.

TJ Hyland: Nike and Adidas shoes, yeah. They grew it into a pretty significant business but then ultimately it's a resell business. You don't really have any assets to sell. So, in the end of 2019 they pivoted and got into the aggregator space and Recom Brands which was, as you mentioned became Elevate Brands, and that's where we sit today. Why Elevate is a great question. Ultimately, from a seller perspective, there's a couple of things that you should consider. One is the structure that you want. Do you want 100% acquisition and you hang up your coat and you go sit on the beach with your money? Fine, cool, no more worries for you. Or do you still want to be involved? We are probably one of the only aggregators that does partnerships and joint ventures. Speaking with a lot of other larger sellers nowadays, they're not ready to hang it up yet. They still think that their business and their brand has a ton of potential, and for us it's exciting. If they come to us and say we want to do a joint venture, we want to do a partnership, we want to take some cash off the table but we still think that with Elevate, coupled with our expertise, we can now grow this business from a 5 million EBITDA business to a 15, to a 20, to a 50. They might cast out of their capabilities, but their brands, they know, still has a ton of potential. So, we do partnerships like that. We do joint ventures. We do situations where we'll acquire the team and the owner can go do whatever they want. They're out of the business. But that's a big consideration for a lot of sellers is I have a team of 5, 10, 15 people. What are they going to do? I don't want to put 15 people out of a job just because I wanted to get a payday. So, we've added an example of a deal we closed a couple of months ago where the owner actually left but 13 of their team members actually joined our business and are now full Elevate employees. So, it's like that acqui- hire situation. And then the last part is just on flexibility. It's on deal structure. We're talking about that. There's the partnership, acquisition, 100% acquisition, but also on the payout side. If you wanted cash, if you wanted to earn out, if you wanted equity in Elevate, in certain situations when we talk a lot about those partnerships, we offer equity in the Elevate parent company. Because you're no longer working really for yourself, you're working for the greater company. You want to focus on growing your business, but you also want to have a leg to the greater business goals. That's actually one of the great parts about Elevate, every employee has equity as well. You're not just clocking in, clocking out, doing your job. While we raise a significant amount of money, we're still, in theory, a hyper growing or hyper fast growing startup. There's still a ton of things changing and roles changing and job descriptions being added, and that, and that. Having equity like that from any level of employee perspective or from a business that exits, it's some extra kicker for you.

Ryan Cramer: Well, you had mentioned something that I've heard not very much of, to be honest, and that's in the capacity of evolving the structure of which people want to either leave their business or have a mark in the space. It's no longer just a clean cut. It feels like it seems that there is this partnership. I like the partnership aspect of if they want to stay on, it's just thinking outside the box of how does everyone win in that capacity. So, do you see yourself as more than just like... I have this feeling that 2022 is going to bring in new phrase or a new word for what businesses are. It's not aggregators anymore because that's just the acquisition of assets. It's a very clean and simple cut and dry definition. This is more of a collaborative partnership or more like an... Not an accelerator because that's a different business model, but almost like a cultivation of brands and growth of brands from conception all the way to, maybe it is, to portfolio or private equity or what is down the line or if Elevate goes public. Again, we're not going down that route either, but it seems like this concept of different partnerships, does that make it even more exciting or should that make it more exciting for brands out there to understand and be educated to, hey, it's not just a cut and dry scenario of you're leaving your business behind that you put your blood sweat tears. It's now a, hey, I found a growth partner in a business that understands my vision and we can work together to eventually, maybe I do, leave it in the good hands of them. Or I think that there's more potential and on it, I want to see it through.

TJ Hyland: Yeah. When I was at Payoneer previously, I hosted a round table of what we now are openly calling aggregators. I'll tell you, in the previous call before the webinar that we did, nobody wanted to be called an aggregator. They all came up with, I'm an operator, I'm an accelerator, I'm a this, I'm a that, like a lot of hte names you just said. I think aggregators has just stuck because it's maybe the easiest thing to just name them, but I'm 100% on the same boat as you. And I don't think that's what really differentiates a lot of the" aggregators." A lot of them do business differently. While we're all buying these Amazon businesses, post day one everyone has a little bit of a different strategy in terms of how they want to get this business to the next level. Whether it is as a conglomerate or whether it is individual businesses and scaling, a hundred businesses are focusing on 10 big ones, or however it is. I think what you said about a growth partner is spot on. We have the abilities to help these businesses scale. Growing a business from one to five million, hard, but easy in the grand scheme of things. Growing it another 5x, from five million to 25 million, a lot harder on your own especially with what we know of capital constraints and just resources. You can do one to five million maybe by yourself, a couple of VAs, but you can't really get the 25 million EBITDA business with a small team. Just in terms of the products that you need to turn over to get there is significant. So, yeah, I think viewing what we now call aggregators generally as growth partners. More specifically, Elevate, in the way a lot of the structures that we're doing, is really accurate.

Ryan Cramer: Absolutely. So in 2021, that's where a lot of people understood, think the statistic is pretty notorious of there's a billion dollar raised in every single... I said raised. It was announced by companies every month for the entire year. I think 12 to 13 was the official number that 2021 entered. In your estimation, obviously you can't predict but do you think that continues to grow or do you think it levels off and slows down? Is this just a beginning ripple for you or is there a bigger wave coming in that capacity if you had to guess? Because you're from the financial world. Obviously it starts with a trickling effect. You see one and then you see 10 and then you see 50. Do we hit our peak and then we're coming back down to earth or are we still right in that rocketship either?

TJ Hyland: It's a really interesting question. The biggest player in the space making the biggest waves and everyone benefits off that. But at a certain point, their valuation becomes a certain number. Are they still growing and is that value still increasing? I think it is. I think probably for the first half of this year, we'll still see some significant raises. We've only raised up to series B to date, and I know we have grander growth plans. So, whatever is next coming, it's coming and I don't think we're alone. I saw on LinkedIn just before we popped on that another company raised$ 113 million. I think in general, what we'll see by the end of the year is a bit of consolidation. I think it's just inevitable. There's way too many aggregators, and I think what we need to do is see what is out there from an aggregator perspective, from a brand perspective. The amounts being paid now are significant. Now we're getting sort of a next level of businesses that are out there where the payouts are going to be even higher. To do that, you need to raise more money. But again, a lot of times when you're raising debt and equity, you are more on the debt side. You need to prove the growth and have the growth plan that have the potential. That's why, I think from an Elevate perspective, we've probably been a bit conservative in 2021. We've acquired 20 something, 25 to 26 brands in the calendar year. I think on the smaller side, in January last year, the businesses are valued under a million dollars. Close the year, paying out 20 million something. So, we've acquired larger businesses as we've grown, so we didn't try and get ahead of ourselves and take on too much. I think that's really benefited us to date and will in the future, growing at our pace and not just doing the big cash grab and acquiring as many businesses as possible. Just doing the compliance and the due diligence and being really strategic about who we are buying so that we know that we can grow the business. Whether with the original entrepreneur or not, it's just going to set us up for longevity. I know you talked on or touched on what our growth plans, exit plans are. It's not dissimilar to some of the other players in the space. Whether we do get acquired or whether we go public, all these things are on the table.

Ryan Cramer: Options are always nice to have, so it's never a bad thing to corner yourself into a market and have to find that one person. But is it fair to say, and i think I have my own personal opinion about this notion that aggregators have made it harder or brand acquisition companies, we're going to come up with a title here in this episode, is it fair to put blame on companies that are acquiring brands at scale that costs are rising across the board on Amazon, whether it be operations and cost for PPC clicks or just... I see no similarity to logistics, I only see it on the cost of advertising in terms of PPC or standing out on Amazon. Is that a fair assessment that people can put on people who are acquiring larger brands? I have my own opinion, but I would like to hear from you of when people say that. What are your initial thoughts?

TJ Hyland: My initial thought is no. If you think about the number of brands that have been acquired since aggregators came about, whenever that is, two- and- a- half, three years, maybe it's a thousand brand, maybe. Maybe it's 500 or the high hundreds number of brands at least from A US perspective. How many sellers are there on Amazon? Over a million, right? So, yes, the spend might be different from a larger brand or an aggregator in that sense, but when you look at the entire picture and the entire scheme of things, it is not that impressionable, I don't think. I think it also will... Yeah, aggregators I think, obviously I'm sitting here at one so I have a little bit of bias, but I think they're very good for the industry as a whole from a product perspective, from a software perspective, from a solution perspective. All of the best softwares that are on the table today were created by sellers themselves. I think that that's pretty evident, that they saw a problem, a gap, a need in the space and said, nobody's doing this, I can build it, I can use this tool for myself. And then what they do is they realize, hey, everyone can actually use it. It's not really a leg up advantage, it's more like democratizing the opportunity. I think that's really what aggregators are doing here too is cross all the softwares and all the solutions, to have something to build that scale. If you wanted to still do your business and scale it on your own, you're going to benefit from the changes that a lot of these SAS, logistics, whatever companies are making for the aggregators or creating for the aggregators and benefiting from that in the long run. But interested to hear your take on it too.

Ryan Cramer: No, I think... I hate broad stroke commentary. The reason I say that is because on social media it's very easy to assert an opinion, not back it up with any sort of factual evidence and then just get people behind you. It's an easy assessment to correlate; oh, things got a lot more expensive, or the shipping logistics problem happened when a lot more aggregators came in space. That's not true. That's simply not true. There's clearly more evidence of is there manpower shortage and everything like that. But when it comes back to cost, it's not like you are spending a million dollar budget on a coffee mug, PPC spent. That's just not the case. I think the case is that over time in the Amazon, cost increasingly rise and Amazon continues to raise their costs across the board. I think, gosh, even brands, I think, associated with it. There was a recent report back of 2021 of there was something around 30 to 34% of costs are all going directly to Amazon and that's just referral fees and storage fees, everything like that. Amazon didn't call PPC necessary. You spend it as an add- on option of doing that. But we all know as brand owners, you need PPC to stand out in the capacity of, if you're launching a product or you want to keep it at top of mind and take over certain categories. I think that's an unfair assessment to say just because of more people entering the space and having money at their capability, it's all going to go directly to PPC. I think it just has to be how do you get smarter about your spend and how to utilize your dollars and stretch it a little bit differently. But again, that's just my take. I wish I had more factual evidence to back that up, but I can't imagine that just because there's billion dollar entities that enter the market, again as a collective whole, people can do that at scale as well. If they're collectively doing that, they're going to be doing the same spend as well to grow their brands, you're just doing it on a faster pace. That's my initial thoughts as well.

TJ Hyland: Yeah, I think you're spot on. In terms of, in the last calendar year, how many significant changes on the Amazon platform have there been for sellers? We talked about try and buy and review manipulation and all that. People that maybe had done that stuff in the past to launch products are now realizing, hey, I need to do actual PPC to launch products and realizing the cost of that compared to the cost of the previous option. Similarly, you touched on logistics and freight, right? I think that's coming from China. I think that's coming from California and the shortages there in staff, right? Your container cost now being 20k versus 2. 5k or 3k. Yeah, that's obviously going to affect your margins and that's going to affect your business, but neither of those things are the direct results of an aggregator.

Ryan Cramer: Great. I'm going to just put that to bed. I don't think that's a fair assessment for people to say. I'm going to throw that back up-

TJ Hyland: crosstalk it, yeah.

Ryan Cramer: Exactly. Well, again, inaudible the value, there's a blame to be. Again, just because there's more shop... Again, it's more shopping, there's more eyeballs and the nature is going to drive up costs inherently, it's hard to educate economics in terms of supply and demand. When there's no more demand and your supply is at shortage, that's when costs go up, and that's inherently what is happening right in front of us. We actually had a question come in, TJ. This is good for you. From Chris Schultz on LinkedIn. Chris asked, what categories are you focusing on there are Elevate? That's a great question, Chris. Is Elevate known as an agnostic aggregator or are they known as more of a specific category, acquire, or you will only look at certain categories as some are out there?

TJ Hyland: From our perspective, we are category agnostic. We stay away from ones that may be very opinion based like fashion. High skew town as well. But generally, I think we currently sit in 10- plus categories across our 30 something brands. We're pretty agnostic in that sense. What I would say about the category is the niche, the better. The more obscure the niche is, is better. The place that you can stand out the most adds the most value to your business. Categories that we do sit in and that we do like, outdoors, pets, sometimes in the baby space. Not that we're only looking at those, but those are ones that we have acquired that we like, that we've done well in. When new brands come to market, it says this one's in the pet space. You look around and you say, well, does this one compliment the one we already have? Yes, that makes it sort of extra incentive for us to go after something like that.

Ryan Cramer: Makes sense, yeah. I think those are very popular categories too, so there's a lot of different purchases happening in those and deserve very, not green but very rich spaces to be in too. Has there been a brand that... I guess, I also ask the opportunity of if I'm an aggregator or if I'm the brand, is there a minimum or is there a set of requirements that I should be inherently fixed on? Is there a certain dollar amount that I need to be, like discretionary earnings, at the end of the year? What do I need to have in place and ready if I'm going to be acquired by Elevate Brands?

TJ Hyland: From my perspective, like I said earlier, a year ago we were buying smaller businesses but as we scaled, we have the ability to buy the larger businesses. I would say, from a minimum perspective, we're looking at businesses doing a seller's discretionary earnings of around a million dollars a year, but there's no real cap on that. If a business is doing, 5, 10, 15, we; re obviously interested in those as well. Not to be said, if you're doing under a million dollars, if you're doing 600k or 800k or whatever it is but on a really great growth path with a solid product and not too complicated and all that, that's interesting to us as well. We're not really saying no to everyone. We have a team here that evaluates the brands when they come in and can give you feedback as well. If you say, " What do you think my business is worth? Do you like my business? Do you have any feedback?," we'll be able to look at that from a high level, depending on whatever information you want to share, and give you feedback and say, " Today on the market, you should be able to get this. Even if it's not buy us, we're pretty open and transparent in those conversations too.

Ryan Cramer: Do you feel that there is more of an emphasis on this minimum qualities instead of a potential of a product that just hasn't gotten there yet? What I mean by it is it needs a little bit of coaching, it needs a little bit of love or it needs some financial backing in order to get it where it could be, taking almost more risk. I would say risky from the investment standpoint, but the product is so good it just hasn't gotten there from said founder yet. Is that where market, do you think that's going to be a little bit more inherently risky of, hey, we can't go after the top person in the baby toy category anymore because they get hit up by everyone, or they sold and that will continuously be there more often than not. Maybe it's shooting for the middle in finding those high value brands that have really great ideas, they just don't know how to take it to the next level. Going to a person like Elevate, elevating that brand to another level and everyone wins in that capacity. Is that where you think the market continues to look forward in 2022?

TJ Hyland: Yeah, 100% the more brandable the business is, the more opportunity there is, the more attractive it is for us to to look towards. You're right, if you say toys, I'm sure the top five guys or 10 people in toys are hit up every day by 100 different aggregators. So, do you then look a little bit down the page? Maybe page two because no one goes to page two and you say, okay, based on these keywords and these categories, how does this product rank with, A, what we already have; B, what we're targeting; c, what might be of interest to us in the future? Could we take this business that may be doing just a million or just 800k, which is still a significant business, and say can we pump cash into this, put investment into it from a resources perspective and turn it into one of those top guys on the page? Yes. The short answer is yes. In reality if you're going to be paying seven, 8x multiple for these businesses, which a lot of the larger ones are asking for, from an investment perspective to make that back, it's going to take a long time and be pretty difficult. If you're already in the high performing business, already the category leader, how much can you actually grow that business? When we look at businesses, we look for those opportunities. Whether it's under optimizing, we can figure that out; or they have a great product but need better branding; or the need to expand it to new markets, whether that's Walmart, or D- to- C, or international, or whatever it is, all those are opportunities and levers for us to do it. The odds are that that category leader, that number one pole position person has already pulled a lot of those levers because they've already gotten to that position.

Ryan Cramer: Right. High floor, low ceiling companies.

TJ Hyland: Down the page a bit, there's a ton of opportunity for us. Whether that's just the seller, the original brand owner or seller doesn't want to do it or just doesn't have the means or the capacity to do it. Those are all things that are good for us and indications for us of an opportunity that we're interested in.

Ryan Cramer: Absolutely. Yeah, like I was saying early, high floor and low ceiling. That's what we've learned across and my audience has learned as well is there's a lot of people who are understanding that, yeah, that number one option, there's nowhere to go but down. That's scary for a lot of investors, right? There's more opportunity for maybe a falling off than there is for growth opportunities. So, what's that healthy balance of, hey from there and you're consistent. I think the brand I was thinking about is the number one pillar brand of, hey it's been there, has 300, 000 reviews or something crazy like that, which again is another how many reviews is too many reviews? Well, that's a different episode for a different time.

TJ Hyland: It's a different conversation. Totally.

Ryan Cramer: Yeah. How many is too many.

TJ Hyland: How do you get all those reviews.

Ryan Cramer: Exactly. Well, yeah. At what juncture do I feel confident that has a good user base and customer base? Anyways, when you're the best pillow in the Amazon and you're there for five straight years notoriously, obviously besides selling more units, you're not allowed places for growth besides off channel like you mentioned. With that being said, I know off channel's a lot of focus for a lot of different companies going into 2022. Is it scary to think that moving a brand off of Amazon or to put more money and effort into a D- to-C or a marketplace as not as structured or as mature like Walmart, is that inherently risky or frustrating to navigate through the waters and understand what the buyer dynamic is and not really get the persona like in Amazon where you have data and you have access to all that buyer capacity? Is it a little more challenging to navigate those waters?

TJ Hyland: Absolutely more challenging, but the future is omni channel. You cannot only be selling on one marketplace in one region. It's just not sufficient. I would argue that that alone is probably riskier. We know how some of the marketplaces act in terms of suspensions and shutdowns and competitors and everything. That's risk in its own way to have all your eggs in one basket. From our perspective I've touched on, but growth is super important. We have a team that focuses off Amazon marketplaces, exploring those, which ones are good for which brands because frankly not because frankly, not everyone is good for each brand and vice versa. And then also D- to- C. Which brands are good for D- to-C? Which ones already have a presence of D- to- C, which ones should we launch a presence on D- to- C? Does it come with a list? Do we have the traffic? Does it have an Instagram following? All these things to cultivate the community and the personas like you're talking about, while it might not be an obvious and clear cut off Amazon as it is on Amazon, I would say two things. One, I think Walmart is a bit of the Wild Wild West like Amazon was maybe five, six years ago. They want more sellers, they want more buyers so they're willing to play with the sellers. And then D- to- C is you have much more control. You own the seller and you own the experience and you own more of your money typically in terms of not paying all those fees. But again, you don't want to cut off that the hand that feeds you. Amazon is the guy or person in this position that has allowed you to get to the space. You're not going to be able to generate traffic like Amazon can provide to you 95% of the time. While I say it may be risky to have all your eggs in one basket, I think it's probably less risky to diversify, to have an international presence, and I think I'm biased on that. But then, to also have the D- to-C, the Walmart, the eBay. Even retail. Certain products that we acquire, they're consumer goods. Whether it's the exact version of it that sits on a shelf in Target or on target. com or in Walmart, a lot of the products that we acquire are shelf worthy as well. Those are part of the longer term growth strategies. But in 2022, we're making significant headway, and it's all of them.

Ryan Cramer: Which is super exciting for the space. As businesses continue to grow, I think that's just the natural evolution of it, which is really cool and exciting. Chris actually had a couple of questions. I know they're a little bit more specific, so I'll just go ahead and plug you. Chris, yeah, I would go ahead and just connect with TJ too and we'll make sure you guys email on how to connect with him off this. But if this makes sense for you, TJ, if it's not too in depth, are you buying companies with massive... This is from LinkedIn, so if you're having question or have a question for TJ or myself, feel free to submit in the comments section. Chris asks, " Are you buying companies that have massive unit turnover because of increased shipping costs from China to fill full containers as well?" And then he mentioned another comment, what logistic network do you have off of Amazon USA? Again, two different questions, both in the logistics world. Maybe let's touch on that, TJ, of trying to figure out, just like everyone else, aggregators and companies like yours. Not so very different than a one- or two- person unit shop of you stop to figure out how to get your goods into ports, into warehousing, FBA facilities, FBM, warehousing, things like that. How does that change what happened in 2021 and already happening in 2022? Does that change the strategy of your businesses of? And maybe we do acquire companies that come with warehouses or have more reliance on third- party warehousing so we can get units via FBA and not have to rely on FBA as much and so on and so forth, or maybe just sourcing logistics is now in South America or Mexico or something a little bit more close but not as initially cost effective. Has that changed more the dynamic of the shipping and logistics strategy?

TJ Hyland: What I would say is yes to all of the above. You hit on a lot of crosstalk-.

Ryan Cramer: crosstalk put this on a silver plate for you.

TJ Hyland: I was just going to say, right? From the first question, are you buying companies that have massive unit turnover? I think unit turnover does not necessarily matter to us. What we focus on more are the margins. How is this business performing and how are the margins over time? Obviously, freight cost increased and you want to fill your container so you get the most effectiveness out of the space and the dollar amount. But it really depends on the per business basis, so happy to connect offline on that, right? If you fill a container with a big product or if you have too much space because your product is small, it really depends on what the margin is that and how that affects your overall business. In terms of logistics network, just to touch on that, the sourcing front, yeah, we have a whole sourcing team that's already made headway elsewhere in the world, in India, in Vietnam, and somewhat in Latin and South America. Just keeping every option open. I think the place that people forget most about is the United States, right?

Ryan Cramer: Right. I was going to ask about that.

TJ Hyland: There is definitely AN opportunity here. There are certain products, there are certain businesses that people want to buy made in the US They don't want to buy a version made internationally. Yes, with that, you typically have to charge higher but most people believe that, as a consumer, I'll pay more because it's made in the US, it'll get to me sooner, it'll be higher quality, whatever the excuses may be. Again, that comes back to margin. If it costs you two more dollars to make per unit but you can get your orders done like that and you're not paying the container fee to come from China to California, and then you're able to get inventory a lot quicker so you're not waiting to refill FBA or your 3PL, is that worth it to you, the opportunity cost? You're going to be selling more because you have it on your shelf and you're not stocked out. You're paying two more dollars per unit, but is that offset by the container cost? Again, every business is different, every situation is different but it's all things that every business today should explore what their options are. Obviously, there's certain things that just doesn't make sense to be made in the US versus China. But also, Mexico and Central America have incredible capabilities on the production side and should be competing with China in the coming years. Maybe not at the scale that China is, but if you can find a niche supplier that works with you, they don't need to put it on a shipping container and get it across the sea. They can drive it up the border as well.

Ryan Cramer: Absolutely. Yeah, that's... Yeah, go ahead.

TJ Hyland: You finish.

Ryan Cramer: I was going to say, I think one of the cooler things is just knowing the options available. I think just being able to come to the table and say this inaudible, and again, that's part of the partnership network world that you and I live in is, hey, maybe there is a company that can help you facilitate that same product or consumption or just produce those products at maybe a little bit more expensive cost, but again, you don't have to worry about that. The timezone differentiating, the language differentiating, the time aspect of everything. There's a lot of pros and cons to it which is going to be more useful for you not having the cost up front and you have that ability to cover that, but you just don't have the choice to basically let your product stuck out. That's almost more like torpedoing your yacht, if you will, and letting it sink.

TJ Hyland: Exactly.

Ryan Cramer: That's worst case scenario for any business if they're going to exit or just be profitable in that mission. Out of stock, worst case scenario, do not let that happen however crosstalk.

TJ Hyland: Right.

Ryan Cramer: crosstalk.

TJ Hyland: Stocking out is the worst thing that could happen to you inaudible down, but stocking out because you've just spent how much money on PPCs to get the rank, to get the positioning, to get up the pace, maybe to get the buy box. It's like, you're stuck out, you're down the bottom and you're going to fall pretty fast. So, exploring all your options. Like I said, last time in Mexico, we definitely have the capabilities. I think Tim Jordan and Amy Whiz are doing a crosstalk.

Ryan Cramer: A go in there. I think they're going down, yeah. That's what Amy said last episode, she's going to be-

TJ Hyland: A big crosstalk trip, yeah.

Ryan Cramer: crosstalk.

TJ Hyland: Yeah, so another plug for their trip. That's really interesting stuff. People have done trips to China and now it's like, okay, cool, what else is there? I'm excited to see what comes from that?

Ryan Cramer: Absolutely. As we're wrapping up this episode, TJ, you delve in a lot of international. Just looking at a bigger picture of eCommerce at scale, what's exciting for you in 2022, and then maybe obviously tie it into what Elevate's going to do and focused on here in the early days and months of 2022?

TJ Hyland: For me, from my perspective, I still get really excited that we have the ability to change sellers' lives. I think back to 2014, '15, '16, '17, '18 even, these sellers really just thought they were going to have to... not have to, but could just run these business in perpetuity and make a good chunk of change on a monthly basis and they have it as their side gig or even their full- time job. But now, they have the opportunity to make life changing money and generational money. If you're paying out$ 20 million, that's probably$ 19 million than you ever thought you'd end up with. That part still gets me really excited. That's personally, but then also from an Elevate perspective. Empowering sellers to take control over their lives. They definitely started this journey on Amazon to do just that. You hear so many stories of, " I was stuck in my 9: 00 to 5: 00, hated it, started this on the side, now it's this, now it's that." The thing is, if you have that entrepreneurial spirit, it doesn't go anywhere. You sell your business and, guess what, you can do it again or you can go do something else. We have so many people that tell us, when they do sell their business, " We're going to start again. We're going to build a new business." Bought two businesses from the same guy already, and he's building another business. Now it's that term which is build to sell, which is a whole new genre of businesses, but it's a bit more optimized, more focused business that's built exactly for how the aggregator wants it. Rather than building it for five years, you build it for a- year- and- a- half, two years. And then from an aggregator perspective, like I said, we're looking to raise more money, we're looking to make bigger differences and not only take this business from where it is today, from 30 something brands and say we want 100 brands, but more so focusing on the growth of those brands. We have a 20/ 30 vision which I guess would be seven years post today or eight years. We want to elevate product in every household in America, which I think is very achievable. It's something about doing things the right way, with the right people, with the right entrepreneurs. The one thing that I say often is nobody knows these businesses better than the sellers themselves, or the brand owners themselves. A lot of times it's an idea they thought of and a lot of times it's an idea that they found, that they fell in love with, that they made their passion and made their business. There's always that argument of do I have a business or do I have a product? The ones that the businesses have taken that single product and built it into something more. That's what we are really looking to do, is to take this conglomerate of businesses and build it into something bigger.

Ryan Cramer: Does Elevate ever think about or do you know if that, and again you can tell me to go fly a kite if you don't want to answer this, do you guys ever consider building out your own in house brands, or is that welcome in the culture there if someone has an idea? Obviously, you want to operate and do that if it's not competing with another brand that you guys are operating. Is that welcome within the company or is that expected to happen?

TJ Hyland: Well, I think a little bit on the brand manager side. We have people that have sold businesses to us. Like I said, that worked for us. We've also had people that sold businesses to other aggregators that now work for us. From there, they're like experts in this. They know what they're doing. They're operating our brands but they're also potentially launching their own brands. It's something that comes up to us often, a question of why are you paying$ 10 million for a brand? Why don't you just start a brand? It's like, well, even if I put$ 10 million in it, is that the best use of the$ 10 million, right? The first six months, getting things going, the product sourcing, the logistics, getting into America and then the initial ranking, that's the hard part. The scaling from there is typically easy. The creating variations, once you already have the engine going, is not as hard as the initial part. If the initial part was easy and you can just throw cash at it, everyone in the world would be doing it.

Ryan Cramer: Yeah, you'd be an incubator.

TJ Hyland: crosstalk.

Ryan Cramer: You wouldn't be an aggregator, you'd be an incubator. But yeah, I would agree with you. I think the time equity that you're paying for, that's ultimately what it comes to is you have to sift through the data. You can't go down every dark rabbit hole yourselves.

TJ Hyland: crosstalk.

Ryan Cramer: That's just impossible and not a good use of time. But when people do that for you, they're working on their own behalf. Again, they're probably reinvesting into their business, they're giving all those things for you. You're just paying for that time equity over the past 12 months to, I'm going to say six years is probably the upper end of what you're dealing with. I don't know if many people pass that six- year mark. I could be wrong. Yeah, I think it's super fascinating in that world. I continue to hear stories of really cool entrepreneur journeys of how they got to where they are in exiting. But Elevate, in the last two minutes, what's next on the docket? You guys are sponsoring lots of stuff, what's coming up on the slate where people can reach out and engage with you guys?

TJ Hyland: We will be on the Online Seller Cruise with Carlos Alvarez at the beginning of February. We'll be at Tomer Rabinovich's event in the end of February, which is in Bulgaria. I'll be in Bulgaria for the first time ever. But then of course, we'll be at Prosper. We'll have a large presence there. We're making some cool announcements in the next, hopefully, two weeks. I'm going to tease that here and I'm not going to say what it is although I'm so excited about it. In about, hopefully, two to three weeks we'll be making an announcement. And then a bunch of other cool stuff leading up to Prosper and beyond.

Ryan Cramer: We're going to see an Elevate event here this year that you're going to have to play in and build out yourself?

TJ Hyland: That's why I love partners, right? I love partners.

Ryan Cramer: Other people do it.

TJ Hyland: Partners can arrange and I'll join and then we'll bring our sellers and some money.

Ryan Cramer: God bless the people who run events. That's all I have to say. I'd rather attend and sponsor than have to conceptualize from the beginning. But, no, that's really exciting. I know you guys are inaudible things. So, the marketing team, props to you if you're listening to this over at Elevate. Like I said from the beginning of the show, I've watched Recom Brands become Elevate Brands and see all the cool things have come from this, but it's kind of watching Recom become Elevate and then watch everything follow along. So, you guys, one of the leaders in the space I think, very highly thought of in that regard too.

TJ Hyland: Thank you.

Ryan Cramer: I can't wait to see and work with you guys continuing in the future and seeing really cool stuff and helping entrepreneurs get to their eventual exit, so that's really cool. TJ, how can people get in touch with you if there's a way that they have questions or if they want to engage or talk about cool business ideas that they have? How can they do that?

TJ Hyland: Absolutely on LinkedIn, if you're watching it there. I would say Facebook, but I can't access my Facebook. As I said, two- factor authorization can't log in, so email is probably the best, which is just tj @ elevatebrands. com.

Ryan Cramer: Got you. Perfect. We'll make sure that's tied and, obviously, all these profile for LinkedIn is tied in the show notes here as well. TJ, thank you so much wrapping on today. I'm super excited to see what Elevate does in 2022, and congrats on all the recent announcements of more hirings, more acquisitions and things like that. Congrats and keep up the good work.

TJ Hyland: Awesome. Thank you, Ryan. I really appreciate it.

Ryan Cramer: No problem. Thanks, TJ. Again, thank you everyone who is listening and watching us live on Crossover Commerce. If you're listening to us, thank you for tuning in just a little bit from my corner of the internet to where you might be listening to us. Again, on Apple, Spotify, Google podcasts, wherever you might be listening, to Amazon music. This is where our podcast lives. We've had 202 episodes now of great content. You can go all the way back if you just go to usa. pingpongx.com/ podcast. There's a list of past guests as well as the evolution of different topics, anything from sourcing logistics to marketing and advertising. My goal is to help you understand the topic and get your questions answered. That's what every episode is about. That being said, thank you so much TJ and Elevate Brands. You can go and check them out again in their social links below. If you have questions, go ahead and reach out to them directly through that. Again, connecting people is what we do best and what I do best on this podcast. But if you have other questions or want to learn more about the podcast, go and just follow us on social media to make sure you're notified of future episodes. Having said, we do have a couple of ones I want to go ahead and quickly announce. Tomorrow, we'll be going live with Carina from eComm Nurse. We're going to be talking about the importance of building a brand on Amazon. And then on Friday, we have the one and only inaudible back on the show for another show, getting ready to properly file your taxes, something that I didn't think I would ever talk about on this podcast. But you know what, you as an entrepreneur have been asking for it. We're going to be helping you understand how to prep your business for filing taxes. Super important especially when exiting your business like we talked about today. Make sure numbers are clean, they're aligning properly as well. But that being said, this is Crossover Commerce Episode 202. Thanks for joining my corner of the internet. We'll catch you guys next time. Take care.