It’s a classic case of turning a business model upside down — but for New York-based startup AccrueMe, the company is looking to invest in the growth of Amazon sellers, rather than acquiring them or issuing a traditional loan.
“What we do is completely different than any other source of financing,” AccrueMe Co-founder Eric Kotch said in a recent interview with PYMNTS. “It’s not a loan. It’s not a merchant advance. It’s not a royalty payment. We [do it] the opposite way. We say, ‘here’s the money, as long as you don’t abuse it, you can pretty much do whatever you want with it.’”
With no set payments, no set terms and no set dollar amounts, the AccrueMe funding model offers flexibility to Amazon sellers who want to continue to grow rather than sell out — and it’s catching on.
“We are ranked as the No. 1 financing company on Amazon Seller Central right now,” noted Co-founder Don Henig, pointing to the five-star ratings that existing partners have given the two-year-old company. “We haven’t announced how many investments we’ve done yet, but we have $100 million to put out on the street. Our systems are built. We’re busier now than we’ve ever been, and we are pretty much doubling [our business] every month.”
Different Than Aggregators
Whereas the growing number of Amazon aggregators are actively looking to buy out and take over successful businesses and scale them, AccrueMe tends to invest $20,000 to $250,000 of capital into small, profitable companies that want to grow, and then shares in a commensurate amount of the profits without charging interest or requiring monthly payments.
“The other day, we offered a guy I think $300,000 and he only took $50,000, and we encourage everybody to do it exactly like that,” Henig said, “Start slow. Take your time. The only way to lose with our program is if you leave the money uninvested in the bank.”
By losing, he means that the typical business borrower usually needs less money than they are approved for, yet they are still obligated to pay interest and make payments on the full amount. “Let’s say a seller goes to Amazon in January and they get approved for a $100,000 loan. They feel pretty good. It’s a really big ego boost. So they take it, even though they probably don’t need the full amount. But they’re wasting their money. They’re paying for something they don’t really need if they’re only going to use, say, $40,000 initially,” Henig said.
The Profit-Share Formula
Because AccrueMe handpicks and screens all the companies it invests in, and can also track sales in real time via the Amazon API plug-in, they are able to see if and when a seller runs into trouble so they can intervene if need be.
As far as the profit-share math, if AccrueMe were to match a company’s existing capital, thereby doubling it, that would give AccrueMe 50 percent of the total capital, but entitle it to only 25 percent of the total profits. “If we put in 30 percent of the capital, we get 15 percent of the profits,” Kotch explained. “The most we ever get is 25 percent of the profits. So the [business owners] are always getting the lion’s share of the profit.”
In other words, if the underlying business doesn’t grow its sales and profits as a result of the capital injection, AccrueMe doesn’t get any return on its investment, either. “We’re different. We’re investing money that is staying in the business. We’re not taking over the management or the expenses or the branding, the way the aggregators are. We’re just participating in some of the profits,” Kotch said.
One other unique thing about AccrueMe is that, unlike lenders and aggregators, it will work with any type of Amazon seller as long as they are profitable. “We are the third path,” Henig explained. “We will double a seller’s capital, let them grow as fast as they can over the next year or two, and don’t require them to make any payments so they can put it all back into growth.”
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