The B2B Marketplace Funding Napkin 2022
What does it take to raise capital, in B2B marketplaces, in 2022?
If you’ve been following Point Nine for some time, you’ll know that we’re strangely fond of napkins. Every year, we ask investors in our network to share some data with us about the SaaS and marketplace companies they invest in f̶o̶r̶ ̶C̶h̶r̶i̶s̶t̶o̶p̶h̶’̶s̶ ̶p̶e̶r̶s̶o̶n̶a̶l̶ ̶l̶i̶b̶r̶a̶r̶y̶ ̶o̶f̶ ̶m̶e̶t̶r̶i̶c̶s̶ to help shed light on what it takes to raise capital in a given year and at a given stage. If we’re lucky, we get enough data to dig into individual equity stories in more detail and say something about the “bar” for the best b2b marketplaces out there — which is the case this year (more on this later).
Last year, we shared our very first napkin focused on B2B Marketplaces. The category is still fairly nascent compared to consumer marketplaces or SaaS, and the mixed bag of business models under the B2B marketplace umbrella makes it difficult to generalize our findings. Still, as marketplace nerds obsessed with the supply/demand dynamics and “tipping the market” potential behind the best B2B marketplaces, we’re inclined to keep this one going. Plus, given we just announced Rooser’s €23M Series A led by Index and GV and shared our thoughts on why we’re excited about their kick-ass marketplace for the seafood industry, this feels like the right time :)
Before digging in, a few notes:
- For the 2022 edition of our B2B Marketplace Funding Napkin, we’ve collected data on 51 funding rounds from our own portfolio + our friends at Creandum, General Catalyst, Nosara, Balderton, Molten Ventures, Cherry, Alven, GFC, Bowery Capital, Project A, Bain Capital, Emergence, and Stripes. Thanks to everyone who participated!
- These 51 rounds gave us a healthy number of data points for each funding stage:
– Seed: 10 rounds
– Series A: 15 rounds
– Series B: 21 rounds
– Series C: 5 rounds — we focus less on these in our analysis
- As in previous years, much of our data comes from European funding rounds. That said, big thanks to our friends at Nosara, General Catalyst, Bain Capital, and Stripes for helping us add more US data to the mix.
Hover over any of the data points below for more details:
A few notes on our findings from this year’s data:
Compared to the data we collected last year, round sizes and pre-money valuations were ~2x for roughly the same traction.
Note that most of the data we collected is actually from rounds that took place in 2021 (same for last year: the 2021 napkin is mostly 2020 data). Valuations were up across almost every stage and sector of VC investment last year, so the uptick in our data shouldn’t be a surprise to many.
Given that the reason we decided to start collecting and sharing this data in our annual napkins is to help founders and investors calibrate their funding expectations, we’re obliged to urge caution in reading too much into this (last) year’s numbers. Public markets — in particular recent IPOs and unprofitable companies — have taken a beating in recent months. If this tells us anything, it’s that we should expect some dip from the red-hot pace and rounds we saw in 2021. We are already seeing this at later stages, and we believe it’s only a matter of time before early stage deals also return to planet earth. Exactly how long this will take is another debate, but for now we recommend applying a healthy discount to the orange figures below.
The bar for growth at Series B is high.
50% of the Series B deals we received data on were growing GMV >4x YoY (!!!). More broadly, the distribution of GMV growth for these deals looks more like their Seed-stage counterparts than Series A, where > 33% were in the 2.5–3x range — see the chart below for a side-by-side comparison. There are many ways to interpret this, and we don’t have all the answers. We do, however, have a few questions that we are asking ourselves in light of these numbers:
- Do investors simply want to see high GMV growth to feel comfortable writing large checks into Series B-stage marketplaces? Given that prices have doubled, this could make sense. :)
- Are Series A figures skewed by higher competition or VC deployment pressure at this stage than at Seed or Series B? Without going into another deep data exercise here, our impression is that Series A is where multiples really exploded in 2021.
- Has the growth of b2b marketplaces as a category driven round sizes up as founders and investors have a better grasp of (i) what makes a good b2b marketplace and (ii) how to put capital work to fuel marketplace growth? This would mechanically drive pre-money valuations up as well.
If you have other questions or thoughts on this, we’d love to hear from you :)
Some (equity) storytelling
This year, we thought it would be useful to share a more detailed take on a handful of b2b marketplaces that have raised capital in the last 12 months and that we feel set the bar for outstanding growth and fundraising.
Note: we’ve intentionally withheld the name of the companies and approximated the numbers :)
Company 1: a wholesale marketplace
- Fundraising: Seed to Series C in just over 2 years, >$400m raised, $1.5–2B valuation
- Growth: pre-traction at Seed, >4x YoY GMV growth at every subsequent round
- What makes them special?
– In our data: Top 5 highest take rate
– Qualitatively: Extremely fragmented supply and demand, high friction transactions typically subject to high minimums, global market with demand for localization.
Company 2: an industrial marketplace
- Fundraising: Seed to Series B in 2 years, >$100m raised, $500m-1b valuation
- Growth: >3x YoY GMV growth at Series A, >4x at Series B
- What makes them special?
– In our data: Top 10 AOV size, furthest “up and right” AOV vs take rate scatter plot (see below)
– Qualitatively: From Series A to Series B, they doubled their AOV with a take rate in the 5–10% range and moved from commission-only to commission + financing. This is likely part of how they grew GMV substantially in the few months between Series A and Series B.
Company 3: a goods marketplace
- Fundraising: Seed to Series C in 5.5 years, >$100m raised, $500m-$1b valuation
- Growth: <2x YoY GMV at Series B, >4x at Series C
- What makes them special?
– In our data: Nothing
– Qualitatively: Unlocking >4x YoY GMV growth at their scale is wildly impressive. While their multi-year journey is perhaps slower than Company 1 and Company 2, they went from 2 years between Seed and A to ~9 months from A to B and ~6 months from B to C (!!!) At >50k implied transactions/month with a <1% take rate, they are a good example of repeat transactions for mission-critical products resulting in a very successful marketplace :) They also seem to have added payments/financing from Series B to Series C, which like Company 2 likely boosted their growth.
These companies are quite different from each other when you compare industries, AOVs, and take rates side by side. Without over-generalizing, they share at least 2 marketplace fundamentals that we think are part of what makes them so great:
- Good AOV/take rate/transaction frequency trade-offs:
– Company 1: “decent” AOV in upper hundreds, high take rate
– Company 2: Very high AOV (>$50k), mid-range take rate
– Company 3: “decent” AOV in upper hundreds, low take rate, very high transaction frequency (50k/month by Series C)
- Room to build on top of marketplace and unlock even bigger TAM: Company 2 and Company 3 both added financing/payments that at least partially contributed to their big uptick in growth at Series B/C
PS: if you saw the growth expectations at Series B on our napkin above and thought “no way,” re-read the growth sub-bullets for these rocketships :)
To wrap things up, we wanted to share a few more qualitative insights from the responses we received. We asked investors a very general “any final learnings you’d like to share?” question to wrap up the survey, and we’re quite pleased that most took the time to write down a few thoughts. 2 highlights:
Macro variables in favor of b2b marketplaces: covid helped accelerate the need for digitalization in many industries, and technology is making it easier and easier to build and scale b2b marketplaces: b2b finance infrastructure makes adding fintech on top significantly easier (though we would add that we see many b2b marketplaces deciding to build the fintech layer internally due to various difficulties in using off the shelf products, e.g. for BNPL), and more generally API-driven architecture lowers the barrier to integrating external data sources and other applications that add value to buyers and sellers. Big P9 thumbs up on this one to mystery respondent #3!
Importance of repeat transactions and SoW: ok, we admit that we’re biased here :) we love marketplaces that tap into repeat purchases (insert another Rooser plug here ) for many reasons, among them the chance this gives you to (i) quickly grow your share of wallet of a buyer’s transactions and (ii) establish daily/weekly usage that makes it more likely you’ll find a value-add service/offering to put on top of the marketplace itself. Glad to see our fellow investors agree.
That’s all for this year! If you have any questions or comments on the above, or if you’re running a kick-ass b2b marketplace and want to have a chat -> email@example.com.
PS especially for marketplace founders, if you’re reading this and have a few ideas about what would be most useful for you to see in future iterations, please reach out!
PPS thanks again to all the funds who participated!
-Alex, Louis, and the whole P9 team
And in case you missed the links above: