Rainforest, a Singapore-based ecommerce roll-up firm, posted strong revenue growth for the second year running, according to its most recent set of audited financials.

In its financial year ending December 2023, revenue increased nearly 46% to US$54.7 million compared to the previous year. It had posted a 9x jump in revenue in 2022.

Rainforest’s revenue boost is notable, considering the ecommerce roll-up sector has been grappling with challenges such as a funding slowdown and rising interest rates. Even the segment’s pioneer, Thrasio, went bankrupt in February (but has since emerged from it).

Total expenses for Rainforest also grew but at a slower rate than revenue. This led to the company’s net loss narrowing by 54% to US$4.6 million.

Acquisitions reap returns

JJ Chai, co-founder of Rainforest, tells Tech in Asia that the company’s revenue increased as the brands it has acquired have continued to grow by expanding their product offerings and entering new markets. Some have also begun selling in new channels such as Target and Babylist, a marketplace for baby products.

Lilly’s Love, which Rainforest acquired in December 2021, has grown by 3x in top line and EBITDA since acquisition, reveals Chai. The brand creates toy organizers and other essential children’s gear.

Other brands in Rainforest’s portfolio such as Babbleroo and Comfy Bumpy have expanded their product lines with support from the ecommerce roll-up firm.

The company was co-founded in 2021 by Chai, Jason Tan, and Per-Ola Röst. The three previously held executive positions at companies like Ovo, Fave, and Airbnb.

So far, Rainforest has acquired 17 brands, mostly in the mom and babycare category. Generally, these brands have more than US$5 million in revenue and over US$500,000 in annual EBITDA when they are acquired.

Net profit rolls in

Ecommerce roll-up companies buy out online brands that have similar offerings and bring them under one umbrella. These aggregators rely heavily on borrowing money to fund their purchases.

This enables them to grow rapidly, but it also increases their debt levels and financial risk. Rising interest rates have pushed many aggregators, including Thrasio, to the brink of collapse.

Rainforest team / Photo credit: Rainforest

Rainforest was also not profitable at the net income level in 2023, primarily due to “interest costs from debt and some non-cash adjustments,” explains Chai. Notably, finance expenses rose by 60% year on year to US$3.7 million.

However, the co-founder says that the company has turned net profitable so far in 2024. It has also repaid all its debts.

“We have fully built out our operating platform and can integrate newly acquired, profitable brands with very little incremental costs,” Chai adds.

Rainforest has also shown cost discipline while continuing to acquire brands. Although the company’s total expenses grew by 34% year on year in 2023, this was outpaced by its increase in revenue.

The firm’s cash flow from operating activities also went from negative to positive, with cash and cash equivalents increasing by 68% year on year.

Selective acquisitions to continue

To date, Rainforest has deployed nearly US$55 million in investments to acquire brands. The company had set a target of US$100 million for such deals in 2022 alone.

“Our focus on mom and babycare brands as well as increasing the quality level of our portfolio meant that we slowed down on the number acquisitions completed versus what we would have liked to have done,” said Chai.

Rainforest will continue to make selective acquisitions in 2024.

Indeed, its financial statements indicate that in July this year, the company acquired a Singapore-incorporated home baby proofing brand for US$2.5 million. The brand has an annual profit of US$800,000, all of which was additive to Rainforest’s bottom line, according to Chai.

See also: Roll-ups 2.0: Changing winds prompt shifts in ecommerce aggregator model

According to Chai, many in the ecommerce roll-up space are facing challenges because of overleveraging and having a less cohesive brand portfolio. He sees this as an opportunity to continue acquiring brands “selectively … and making acquisitions that are synergistic with our existing brands in meeting the needs of parents and moms.”

With its brands currently selling their products in the US, Canada, Europe, and Japan, Rainforest intends to expand its presence in Asia over time, both through inorganic and organic means. It will also focus on brand building and making its products available offline, says Chai.

Which are the startups that are on the path to becoming the next big thing? One way to tell would be when they’ve raised a new round, though funding isn’t the full story. Using Tech in Asia’s data, we’ve generated this constantly updated list of startups in India who’ve recently raised funding.

The list only includes companies up to the series E stage.

Seeking more? Search the most comprehensive database of tech companies in Asia or read our Research methodology. For more auto-generated lists of rising startups, head here.

As businesses from Singapore and Malaysia turn to Johor Bahru in their quest for cost savings, the city is rapidly transforming into a regional hub and sparking a surge in the development of co-working spaces across Malaysia’s southern gateway.

Samuel Tan, CEO of Olive Tree Property Consultants, notes that the demand for co-working spaces in Malaysia’s southernmost state has increased in the last couple of years since the Covid-19 pandemic, with more local and international businesses setting up shop there.

“Although the rental for conventional office spaces is lower than [that of] co-working spaces, the flexibility, corporate solutions, and networking opportunities offered by co-working spaces are driving businesses to adopt the shared workspace concept,” he tells The Business Times.

Lee Sheah Liang, co-founder and CEO of co-working space operator Infinity8, said the total number of co-working offices in the Greater Johor Bahru area – which covers Johor Bahru, Iskandar Puteri, Pasir Gudang, and Kulai – surged to more than 60 as of July this year, compared to fewer than five in 2017, when the company was founded.

“Nearshoring from Singapore to Greater Johor Bahru is a key factor driving the demand. Companies that do business with their Singapore counterparts are looking at co-working spaces in Johor Bahru to maintain a presence closer to their clients,” he explains.

Infinity8 started with three co-working centers in Johor Bahru and has since expanded to eight, along with additional locations in Kuala Lumpur and Penang. The occupancy rate of these spaces are above 90%, says Lee.

This year, the company plans to open another co-working center in Tampoi, a suburb near Pasir Gudang.

Rising economic hub

The Johor state government aims to position Greater Johor Bahru as Malaysia’s second metropolitan hub, bolstering the state’s economic growth.

Vijayakumar Tangarasan, Malaysia country manager at International Workplace Group (IWG), says the state’s co-working space industry is thriving, with strong interest from local startups as well as from companies in other parts of Malaysia, Singapore, and beyond.

“We have received an increasing number of inquiries on our co-working spaces since last year. [Positive developments] such as the Johor Bahru-Singapore Rapid Transit System and the Johor-Singapore Special Economic Zone (JS-SEZ) have fueled the interest,” he shares.

Tangarasan also notes that many companies are waiting for updates on the JS-SEZ, and the demand for shared or flexible working spaces will likely accelerate once the two governments release more details. Last month, it was reported that a deal for the JS-SEZ was likely to be signed by November this year.

UK-based IWG currently operates two co-working spaces in the Johor Bahru city center, with plans to open a location in Medini, a township development in the state.

In terms of expansion, Tangarasan says the company is looking at ways to work with lessors through profit-sharing arrangements to operate co-working spaces within their buildings.

Tan Wee Tiam, executive director of Olive Tree Property Consultants, says co-working space operators can bridge a gap for office owners by acting as the main lessee and subleasing smaller spaces to tenants with varying needs.

“This arrangement provides tenants with flexible options, such as dedicated seats, hot desks, private offices and virtual offices, while offering perks like lounges and free drinks,” he explains.

Co-working space operators can also accommodate short-term occupants, with options such as hot desks and meeting rooms available on a per-use basis. These flexible arrangements also grant entrepreneurs access to top-notch office infrastructure, boosting productivity.

“Flexibility is the main reason that the majority of business owners [opt] for co-working spaces, and it’s something that conventional offices can’t offer,” says Tangarasan, who manages 41 co-working spaces in Malaysia. “Instead of worrying about Wi-Fi and finding a Starbucks, co-working space members [can] just bring their laptops and work at any location with IWG offices.”

Prices for co-working spaces in Johor Bahru are still generally lower compared to Singapore and Kuala Lumpur, where rents are much higher.

For example, an office for one person in Johor Bahru costs around 600 ringgit to 1,300 ringgit (US$137 to US$297) per month depending on the location. A similar-sized space in Kuala Lumpur easily exceeds 1,000 ringgit (US$228) per month, especially if it is in a grade A green building.

Value-added services

Industry players also note that beyond providing a location to work and hold meetings, co-working space operators also have value-added services that are helping to drive demand.

For example, Infinity8 offers a service for foreign companies to handle HR tasks such as recruitment and payroll.

“To date, we have hired hundreds of Malaysians and seconded them to foreign companies. Other than payroll, we also manage equipment purchases, working-space arrangements and other services as needed,” Lee says, adding that companies that opt for the service are billed monthly, inclusive of employee salaries and other charges.

Tangarasan observes that the demand for virtual offices remains strong in the post-pandemic era, particularly among businesses seeking a prestigious address while opting for a more cost-efficient option.

He adds that other services associated with virtual offices – such as mail- and call-handling, meeting-room access, and administrative support – are attracting startups looking to establish a professional presence without incurring the high overhead costs.

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.34 ringgit.

See also: Singapore startups seek Malaysia’s greener pastures

This story was republished with permission from The Business Times, which made the article available to its paying subscribers. It was moderately edited to reflect Tech in Asia’s editorial guidelines.