Micro firms need software too. Introducing the “business in a box.”
The world’s smallest businesses are the next consumers to come online.
Small businesses are the bedrock of the American economy.
Nearly half of all employed Americans work at one. The very smallest of these firms, with fewer than 20 employees, employ over 20 million Americans, with an average of less than 4 employees per firm. These “micro firms” are most common in industries like professional services, construction, healthcare/social assistance, retail, and food services.
Compared to larger enterprises, micro firms act more like consumers. The owner of a micro firm is the sole decision maker of the business. She also runs HR, finance, purchasing, IT, and every other “function” of her micro firm. In addition, she staffs the front office and interfaces with customers. In other words, she has all the functional distractions of a larger enterprise, but she also needs to provide impeccable service her customers.
Simply put, a micro firm owner doesn’t have time to play around with complicated software. She expects anything she uses in her business to take work off her plate and allow her to focus on her customer and the service she provides. She is looking for products that feel more like Facebook, Uber, and the other consumer apps she’s accustomed to. And, she really doesn’t want to talk to a salesperson before using it.
The first software companies to embrace the micro firm were horizontal, providing a solution that scaled across different small business sectors. Websites (Wix, $7B market cap), point-of-sale (Square, $26B), CMS (Shopify, $31B), and marketing automation (Mailchimp, $600M+ revs) are all good examples of horizontal technology that micro firms can easily access today.
As horizontal technology has become more common, micro firms are demanding vertical solutions that directly take on core functionality of the business itself. An early example that took hold a decade ago is online scheduling. OpenTable ($2.6B acquisition) pioneered this model in food services two decades ago. Mindbody ($1.9B acquisition) applied a similar playbook to boutique fitness.
In recent years, however, we’ve seen companies providing even deeper integrations into the core functionality of micro firms. In addition, these platforms bring customers, earning them a valuable cut of transactional revenue. At Lightspeed, we call these “business in a box” platforms, and we’ve invested in a few of them.
One example is OYO Rooms, which has built a hospitality platform starting in India, and now spanning 230+ cities. Its partner hotels are effectively franchisees of the OYO brand. OYO provides audited quality standards, markets the inventory online, and enables bookings and payments on its platform. Essentially, OYO provides everything a franchisee needs to run a small, professional hotel, including the customers!
ezCater is another example of a business in a box. Over 60,000 caterers rely on its platform to sell food to businesses who want to order meals to their offices. In addition to managing business customers, ezCater gives caterers a standalone website and menu, an ERP for managing orders, and programmatic connectivity to local delivery providers.
Faire is a business in a box for independent retail and artisan makers. It provides connectivity between both sides of the marketplace, as well as financing for retailers to purchase inventory. Micro firms tend to have little access to traditional sources of capital, but because Faire observes millions of transactions through its platform, it knows which maker is the best match for a given retailer. It uses this data to underwrite purchases and enable better marketplace liquidity. Like OYO and ezCater, Faire earns a take rate of the transactional revenue in its marketplace. I’ve written extensively about Faire on my blog.
I anticipate that we will see additional business in a box platforms for other categories of micro firms, including healthcare, construction, education, and professional services. If you’re working on a business in this area, or know someone who is, we’d love to speak to you!
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