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Dianthus eyes buys as it raises Series A

Richard Collings
Jul 18, 2022
Illustration of two people shaking hands on a giant stack of money.
Illustration: Aïda Amer/Axios

Dianthus, an AI-fueled e-commerce platform, is eyeing more acquisitions of digitally native brands this year as it nears the close of a Series A round, CEO Chris Litster tells Axios.

Driving the news: Most tech companies aim to sell their solutions to clients, but Dianthus is buying these businesses instead to better control the data, Litster says.

Details: Litster did not disclose the exact size of the Series A, but he confirmed the round will be larger than the $11.5 million seed round Dianthus announced in March, led by PJC, Underscore VC and angel investor Jason Calacanis.

  • The company previously secured a $22 million line of credit, which this new funding will increase the availability of.

By the numbers: Fresh funds will finance acquisitions in pet, home, beauty and sports/active lifestyle, he says.

  • Ideal targets generate between $2 million and $20 million in revenue and are EBITDA-positive (no distressed companies).
  • Valuation multiples for prospective targets have ranged between 4.5x and 5x EBITDA and in some cases even 4x EBITDA — compared with between 5x and 5.5x earlier this year.
  • In the second half of this year, Dianthus plans to acquire at least one and maybe as many as four more brands.

Flashback: Dianthus' first acquisition in January was of Cuddle Clones, which makes plush toy replicas of your pet and generated $15 million in revenue, Litster says.

  • Under Dianthus, this year, Cuddle Clones projects $26 million in revenue.
  • Dianthus recently acquired AirKayaks in addition to I Made Bogey, Litster says.

Yes and: Dianthus is looking for brands that have historically relied on customer acquisition growth by placing ads on Facebook.

  • "That channel went bump in the night due to privacy changes," Litster says, referring to a privacy change Apple made last year that heavily impacted Facebook's sales.
  • That could include expansion to channels such as Instagram, TikTok, and tried and true email marketing.

The bottom line: Dianthus wants to buy brands and accelerate their top-line and EBITDA growth through subject matter experts, as well as applying Dianthus’ AI and machine-learning tools.

  • Eventually, the company seeks to bolster its acquisitions in their fulfillment and operations functions.

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