✍️ WHAT CAUGHT OUR EYES
The future of marketplaces: coordination, capital, and creativity - Dan Hockenmaier from Reforge
When Airbnb and Doordash went public, they became two more data points in a long trend toward marketplaces with higher commissions doing more “work” to justify those commissions.
This “work” includes 3 things: (a) Coordination: making the product or service legible, matching buyers/sellers, establishing trust, (b) Capital: the full cost and risk of doing business, (c) Creativity: figuring out what to sell in the first place.
Light marketplaces are marketplace “1.0” like Zillow/HomeAdvisor that do just legibility/customer acquisition.
Vertically integrated "super suppliers" do everything. e.g. you can call Clutter a marketplace, but they're really a big, tech-enabled service provider.
In between these two, we have every type of marketplace under the sun. When a new marketplace model overtakes an old one, it is usually because they have taken on a new job that their suppliers used to do, and improved the customer experience. Let's look at a few examples:
Trust: eBay left a gap on trust that both GOAT and StockX exploited with their verification programs for collector sneakers.
Legibility: historically, local services marketplaces made intros and asked buyers/sellers to price the job. With their Instant Match product, Thumbtack is automating price discovery.
Risk: retailers previously relied on sales reps to help them understand what to buy wholesale. With access to more data, Faire is able to go a step farther and underwrite the transaction, offering net terms and free returns every time a retailer orders from a new brand.
Logistics: marketplaces are increasingly reaching farther into the supplier cost structure. By taking on responsibility for delivery, Doordash improved the customer exp. and expanded the restaurants they could bring onto the marketplace relative to Grubhub.
Creativity: In categories like transportation, personal services, & resale of existing goods, the thing being sold is a known quantity that rarely changes. Other industries have very high creative intensity (media, art, food, and much of consumer products and retail).
Marketplaces will ultimately figure out how to solve coordination problems like price discovery, matching, and supplier vetting and feedback.
Creativity yet is the only thing marketplaces won't entirely solve.
Here are a few implications for founders, operators, and investors:
If you’re building a marketplace model in an industry that doesn’t have one today, you must nail demand aggregation and legibility.
If you’re competing with an existing marketplace, look for an activity that your suppliers are currently doing today that you can do better to improve the customer experience.
Marketplaces in creatively intense categories will be more defensible. Categories where selection matters tend to have winner-take-all dynamics because the benefits of selection as you add supply take a long time asymptote, making it hard to catch up. On the other hand, those that compete mostly on speed/price/quality (Uber/Lyft) have network effects that asymptote quickly. This allows the market to support multiple competing marketplace models and destroys the profit pool.
The most important metrics to track when building a consumer subscription business - Lenny Rachitsky
B2C subscription businesses come in many shapes and sizes, but you can roughly break them down into three categories: Content, Software, and Physical Goods.
No matter the category, to succeed, a consumer subscription business needs to nail six things: (a) acquire new users sustainably, (b) get enough new users to quickly experience your value, (c) make sure enough users continue to find value, (d) make sure enough users decide to pay, (e) make sure enough users continue to pay, (f) be able to deliver the product/service profitably.
Important metrics to track for each type:
Software subscription businesses: (1). Activation rate: the percentage of free/trial users who hit a valuable milestone in the first X days after signing up (e.g. meditate, watch a show, listen to a song, find a match, sync a folder, etc.) (2). Intensity of engagement: L7/L30, (3). Conversion from free to paid: the percentage of free users who convert from free/trial to a paid subscription X weeks after signing up, (4). Cohort retention: the percentage of paid users who are still paying 1 month and 1 year later.
Content subscription businesses: (1). Cohort engagement: the percentage of users who are still doing something valuable (e.g. meditating, watching, listening etc.) X weeks after signing up. (2). Conversion from free/trial to paid: the percentage of free users who convert from free/trial to paid X weeks after signing up. (3). Cohort retention: the percentage of paid users who are still paying 1 month and 1 year later.
Physical goods subscription businesses: (1). Second-order retention: the percentage of users who don't cancel after their first order. (2). Contribution margin: incremental profit earned for each unit sold, subtracting all variable costs from a product’s price. (3). Cohort retention: the percentage of paid users who are still paying 1 month and 1 year later.
The future of physical retail
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👏 WHERE THE MONEY WENT
🇪🇺 Notable EU early stage Consumer rounds :
🇺🇸 Notable US early-stage Consumer rounds :
🔭 Notable later stage Consumer rounds :
🍭 Notable Consumer Exits
🖤 - HEARTCORE
GetYourGuide’s co-founder Tao Tao joins some of Germany’s tech leaders in founding 2hearts, a business community intended to support students and young entrepreneurs with immigrant backgrounds
Much 🖤 from Heartcore