The marketplace business model has stood the test of time. Some of the largest public consumer tech companies are marketplaces, and marketplaces have produced a breadth and depth of small- and large-cap outcomes that rival software. However, the model has fallen out of favor with investors in recent years — marketplaces that went on to raise a Series A are down ~85% since the 2015 peak.
We set out to understand how the current sentiment towards marketplaces may or may not align with the opportunity. We analyzed over 30 public and 80 private marketplace companies to develop a data-driven source of truth on how marketplaces stack up to other business models, including public market and M&A analysis, a deep dive on the nuances between different types of marketplaces, and a forward look to how this may inform future marketplace opportunities. Some of what we found:
- Marketplaces are rewarded in the public markets even when they are not capital efficient pre-IPO
- Service and product-based companies can both be successful, though the latter is often worse off when holding inventory
- Marketplaces with supply variety as a feature are more common and typically have more compelling financials
Even if marketplaces aren’t known for their simplicity, they are sometimes the ideal, and perhaps only, model that to deliver certain consumer value propositions at scale.
Read the full report for analysis: