Wall Street investors seek out small business for profit

Column: Will’s Business Corner

By: Will Pembroke, Multimedia Show Manager

Small businesses are likely not the first thing that comes to mind when you hear the name Amazon, but think again. As of late, major players on Wall Street, Advent International and JPMorgan Chase & Co. have begun dabbling in the market of small business by pumping billions of dollars into startups, mom and pop shops and other currently unprofitable businesses. With their access to capital and business expertise, investors believe they can find popular products on Amazon and turn them into global brands. 

This new wave of high-risk gambling investment is often spearheaded by e-commerce veterans, backed by big money on Wall Street. These veterans of the e-commerce market, also referred to as Amazon aggregators, are essentially betting that they can propel up-and-comers in the vast Amazon market to the top. 

These Amazon aggregators claim to be able to identify the differences between sound business ventures with tenable products and sort them from the items that don’t appeal to Amazon buyers for long. 

Roughly 40 Amazon aggregators have emerged as serious investment opportunities for Wall Streeters in the past few years. Some of these aggregators still prefer to do their business out of the public eye in an effort to conceal their findings from non-investors. Others have gone public, with several reporting fundraising totals in the billions. 

Continued demand for these small businesses is also a sign of the maturation of Amazon’s third-party marketplace. Amazon has given small businesses the ability to reach millions of consumers and now places them in the eye of potential investors. 

Photo courtesy commons.wikimedia.org

Despite the risks that accompany Amazon aggregators, there are evident rewards. These aggregators are an outstanding opportunity for merchants who are burnt out, who are without the necessary capital to expand or who are in need of e-commerce expertise.

However, the risks presented by the Amazon marketplace are still very real. A few bad reviews on a product, faulty claims of counterfeiting or other malpractice take well-intended businesses off the market. It is very possible that profitable small businesses with well-liked products can wake up one day to find Amazon selling its own version of their product, even after establishing years of credibility in Amazon’s marketplace. 

Like anything on Wall Street, there are success stories to accompany the total failures in this wave of market integration. In developing a marketplace with a gross domestic product comparable to that of some countries, Amazon investments are not likely to slow down.