3 Things: Post-Covid Care, Thrasio for Vertical SaaS, Beverage Formulary for Creators

Happy Sunday! I have a ton of fun writing this newsletter every week but this one I’m particularly excited about. Each edition of 3 Things will contain a dive into 3 rabbit holes I’ve found myself going down recently. Subscribe to get each week’s edition straight to your inbox and if you enjoy it, please share! This past week, I’ve been thinking a lot about:

• Post-Covid Care

• Thras.io for Vertical SaaS

• Beverage Formulary for Creators

1. Post-Covid Care

As of January 23rd 2021, there are nearly 25 million Americans who have tested positive for Covid-19 and almost 100 million people globally. Likely, 10s of millions on top of this number have had the virus and either been asymptomatic or did not get tested. While most people recover, there are many expected long term effects that could linger and cause significant health issues down the road, mostly related to heart, lung, or brain health. Images taken months after patients have recovered from Covid-19 have shown lasting damage and scarring to the heart and lungs, even in those with mild symptoms or young patients, which increases the risk of heart and lung complications in the future. There is also concern that Covid-19 may increase risk of developing Parkinson’s and Alzheimer’s even if the Covid patient was young and healthy. Other concerns are blood clots which can cause heart attack, stroke, and can affect the liver, kidneys, lungs, and legs. There’s also the long-term fatigue, loss of smell, and loss of taste that many recovered patients continue to experience.

All of a sudden, there is a massive new health population that needs specific guidance, diagnoses, and ongoing care. A mix of at-home testing kits sold to those who have tested positive plus physical drop-in clinics could help test and diagnose individuals for various long term risks and provide ways of helping mitigate symptoms or prevent issues altogether. For those with severe lung damage, pulmonary rehabilitation has been recommended and services can be provided to aid patients with this and check in periodically on their progress and care. To combat concerns over cognitive impairment, exercises and treatments can be provided which are known to reduce or prolong onset of Alzheimers in those with a predisposition. For loss of smell and taste, an at-home testing kit can assess olfactory disfunction and a variety of treatment options can be provided which include olfactory training, intranasal corticosteroids, intranasal sodium citrate, or intranasal vitamin A. Continuing post vaccine, many experts anticipate the need for a yearly vaccination just like the flu. The clinics could act as those ongoing points of vaccination.

2. Thrasio for Vertical SaaS

Thrasio is a fascinating company that has raised nearly $900M since its founding in 2018 to buy and scale Amazon businesses. They’ve acquired over 100 businesses with a total of 14,000 products and have made over $100 million in profits on $500 million in sales. The companies they buy range from Angry Orange, a pet odor eliminator, to Willow & Everett, a maker of high-end coffee and team accessories, to Bitly compression socks to treat plantar fasciitis. The business model is quite simple; they find the top-rated, bestselling products in a variety of mass-market categories and purchase them for $1M+ from the (typically mom & pop) owners. With each new acquisition, they’re able to apply their expertise in digital marketing, supply chain, and operations to grow the businesses and increase profits. Third party sellers now make up more than 60% of sales on Amazon and just like Amazon has "Amazon Basics”, Thrasio is able to invest in new product development to supplement each of their existing product lines as they discover new customer opportunities.

Just as Thrasio has created a profitable FBA (Fulfilled by Amazon) aggregation machine, there is an opportunity to take the same playbook for vertical SaaS with embedded fintech. There has been a recent trend over the last few years to create niche and specialized software focused on everything from barbers (Squire) to masseuses (MassageBook) to freelancers (Bonsai) to dentists (Curve Dental). As opposed to using a one-size-fits-all platform, software companies are selling purpose-built products that understand the client workflows and tailor the solution to fit their specific needs. The idea is to find profitable, bootstrapped solutions with high ratings and a solid customer base and buy them to aggregate under an umbrella company like Thrasio. There are many similarities in the go-to-market and operations needed for each of these companies so economies of scale would allow you to dramatically grow each while keeping costs low and increasing profit margins. As profits increase, more adjacent companies can continually be added to the portfolio. Tiny Capital is one example of something similar but without the focus on vertical Saas with embedded fintech.

3. Beverage Formulary for Creators

We’ve seen tons of celebrities and influencers create their own makeup brands like Kylie Cosmetics, Fenty Beauty by Rhianna, Rare Beauty by Selena Gomez, HAUS Laboratories by Lady Gaga, and a whole host of others. There are good reasons why celebs started with private-label makeup; it’s a $90B+ industry in the US, the margins are insanely high, and the underlying products are mostly commoditized. It is relatively simple for someone to find a cosmetics manufacturer, tailor the products to their specifications, and create custom branding and packaging. The next wave of celebrity branded products have been in the alcohol space. George Clooney created the tequila brand Casamigos which sold to Diagio for a reported $1B, Snoop Dog created his own red wine blend called 19 Crimes Cali Red Blend, and Kate Hudson launched King St. Vodka (you can see a dozen more here). Alcohol similarly garners high margins ranging from 60-85% and has a range of partners that celebrities can leverage to launch their brand.

What will be the next product that influencers put their name on? I think it could be non-alcoholic beverages and I think it could open up to all kinds of creators and influencers not just the largest celebrities. There has been an absolute explosion of functional beverages (think Magic Mind, Recess, Minna, Sound), ready-to-drink coffees (Grady’s Cold Brew, Rook, Sail Away, Wandering Bear), sparkling waters (Sparkling Botanicals, Mad Tasty, Cloud Water, Aura Bora) and many more categories. Beverage formulation companies exist to help with things like determining the ingredients and proportions, taste formulation, nutrition panel, bottling and labeling, and even matching with manufacturers, suppliers, and 3PLs for logistics. While the margins on non-alcoholic beverages are not quite as high as alcohol or makeup, they’re still higher than most CPG products and are easy to get product to market. Pair the formulation expertise with best-in-class digital marketing and a company could partner with influencers to build branded drinks and market them to their fans.

That’s all for today! If you have thoughts, comments, or want to get in touch, find me on Twitter at @ezelby and if you enjoyed this, please subscribe and share with a friend or two!