Fundraising Framework for Marketplace Startups in 2016

Two months ago Christoph attempted to answer the question on what it takes to raise money in SaaS in 2016. The result was a table outlining ballpark indicators across startup development stages that need to be met to get to the next financing stage in SaaS, i.e. from Seed to A, from A to B, etc.

It seems the SaaS fundraising napkin, as Christoph called it, was very helpful to SaaS founders out there. The feedback from the community was very good and many interesting discussions evolved.

Given that marketplaces are also a strong focus area for us, we immediately thought that it would be great to have a fundraising napkin for marketplaces too. After thinking about it for a bit, we came to the conclusion that this might be a bit more tricky, due to marketplaces being a less homogenous group than SaaS startups. Here are a number of areas in which the differences are visible:

  • Geography - SaaS startups tend to be global from day one, frequently go after the US market and raise funding from the same group of international SaaS investors. Marketplaces, on the other hand, are frequently multi-local, scale country by country - and have to raise funds, especially in the early stages, from local investors - who might vary in standards.

  • B2B vs B2C - when we talk about SaaS we typically talk about startups selling software to businesses. In contrast, marketplaces can be B2B, B2C, B2B2C..

  • Business model mechanics - marketplaces can have varying take rates, some own some do not own the transactions that happen on them, some are platforms for trading products versus others are about services and may or may not involve a SaaS component.

Nevertheless, we had a shot at it. We teamed up with the great folks at Version One to make it happen - they focus a lot on marketplaces and their input has been very valuable. Below, you can find the result of our work. We hope you find it helpful and are eagerly looking forward to any feedback you might have!

You can find a google docs version of the marketplace fundraising napkin here.

Many thanks to Güimar of FJLabs and the Point Nine team for reviewing a version of this and providing feedback.

18 responses
Thanks Pawel. :) Converted your work in a spreadsheet. Here is the link if people are interested.
thanks - but there was a spreadsheet already, right? the ling is below the napkin :-)
Oups... :)
Hi Pawel, can provide the saas napkin link? Thanks
It is in the first paragraph :)
Very nice and useful post, Pawel. Thanks!
Thanks, Niklas!
Great post Pawel! It's been hard to find any credible info on this area besides the equityzen blog post some time ago. A couple of short questions; Your GMV Vs. Net revenue numbers seem to imply a very high 'take rate'. How do you feel about marketplaces with lower 'take rates'? Also, how would you look at startup pursuing a marketplace by creating a product for 1 side first? (I.e. work market, open table)
Thanks for your comment Kaspar. The implied take rates are around 10% which seems to a popular order of magnitude (the Series A bracket suggests a higher rate, true). There are marketplaces with significantly lower and higher take rates out there too. Low take rate is not a problem imo, as long as the unit economics make sense. Super high take rates can raise questions on their sustainability. I do not understand your question re 'pursuing a marketplace for 1 side'.
Thanks for your answer Pawel! What I meant by pursuing 1 side first is to try to solve the 'chicken & egg' problem of marketplaces by creating a tool that work for supply or demand side alone, and then switching to a marketplace once either supply or demand side is onboarded. WorkMarket seem to have done this by creating a SaaS solution for workforce management first, and then switching to a marketplace model later on. I think this strategy can be relevant for some marketplaces, but obviously makes it harder to evaluate a startup on 'normal' marketplace metrics (Transactions value). Was interested in hearing if you have any experiences with this type of startup from an investor perspective?
Thanks Kaspar - I do think you always have to hack one side of the equation somehow initially. Creating a tool and adding a network on top is a viable strategy, as explained by Chris Dixon here:
How do you calculate the "net revenue" metric?
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