V1 Guide to Marketplaces
Version One, a Vancouver-based VC, published the third edition of their Guide to Marketplaces, last week, and it’s a fantastic resource for anyone interested in building and investing in marketplace businesses.
Here are some of the highlights from their full guide:
- eBay (1995) started the first wave of product marketplaces, and Uber (2010) started the second wave of services marketplaces
- Now VCs are investing in the third wave of marketplaces which include managed marketplaces, community-driven marketplaces, B2B marketplaces, and decentralized marketplaces
- According to a16z, the top four private marketplaces account for 76% of total marketplace transaction value
- Key strategies for scaling a marketplace include (1) focus on trust and safety, (2) support “power sellers” who make a living on your marketplace, and (3) develop a partner ecosystem
- Here are all of the KPIs and metrics Version One uses to evaluate and track marketplace businesses
- Marketplace valuations converge at 1x GMV or 6-8x revenue (about the same thing if you assume a ~15% take rate)
- Here’s a “funding napkin” explaining what investors want to see at the Seed, Series A, and Series B for marketplace startups