The $ 170 Billion opportunity in B2B service marketplaces & our investment in MyAdvo
Digital marketplaces have been fascinating entrepreneurs and VCs alike ever since the advent of the internet economy. Over the years many successful marketplace businesses have been built using venture money and more continue to get fresh funding.
Marketplaces can either be built around products or services, with the latter being more difficult to execute because of the human element involved. Currently, the way services are procured and delivered are rife with inefficiencies. A few key factors which illustrate the point —
- Highly subjective outcomes — no clear process in place to define client and customer expectations which often leads to poor customer satisfaction
- High barriers to tech adoption — service providers are comfortable with the highly inefficient status quo and lack the motivation to adopt technology to improve collaboration and service delivery
- Lack of transparency — in pricing and other aspects of service delivery acts as a hurdle to building trust
- Manual and cumbersome procurement — RFP process employed by enterprises is extremely cumbersome, manual and time-consuming
- Absence of feedback and review mechanism — makes it difficult to base a decision on data points based on previous performance; no incentive for a service provider to ensure best outcomes for the buyer
- Long duration — value delivered over a period makes it necessary to have active oversight/management to ensure quality and timely delivery
An easy route through which product marketplaces solve for expectation mismatch without incurring a major cost is by facilitating returns and QC checks. A service marketplace, on the other hand, does not have such an option and is left to choose between an unsatisfied customer or bearing the cost of service.
In order to create a successful service marketplace, an entrepreneur will need to have optimum solutions to these problems.
Global activity in B2B service marketplaces
Global VC activity in the B2B service marketplaces has been on the rise in recent times with funding rounds (USD 100M + in some cases) in companies addressing B2B enterprise services like recruitment, sales & marketing, legal, etc. through the marketplace model.
Globality — A horizontal B2B marketplace for professional services in IT, Legal and Recruitment services among others. It helps companies find suitable suppliers based on AI-based matching algorithms.
Scout Exchange — A B2B marketplace focussed on the recruitment agency vertical. Based on AI matching algorithms, it helps companies find suitable agencies for their recruitment needs.
The massive Indian opportunity
The services sector has been the backbone of India’s economic growth over the past 2 decades. With a ~54% share of the GVA (Gross Value Add) amounting to ~USD1300 B, the sector (& its subsectors) presents gold-mine of an opportunity for marketplaces to add value.
Business services or B2B services (incl. IT-BPM exports) is a USD 305B segment within the services space. If we exclude the export component of IT-BPM services (USD 135B), domestic B2B services alone is a ~ USD 170B opportunity.
While a lot of money has gone into Indian B2C service marketplaces, B2B service marketplaces are still emerging.
The core reasons due to which a service marketplaces makes sense —
- Non-core functions — already outsourced to a great extent and growing fast; habit-formation not required
- Highly fragmented demand and supply — need methods for efficient discovery
- Firms increasingly preferring to engage with multiple specialist firms over short engagement periods — repeated need for discovery
- Scope for technology to add value and enhance user experience in the process
- High margins — service marketplaces command high take rates
- Enable price discovery, transparency and establish the required trust between buyer and seller
- Enable service providers to increase their business
We at WaterBridge Ventures are excited about some of the segments within the B2B service marketplace wherein lies a huge potential to add value —
Our investment in MyAdvo (Legal Tech)
MyAdvo is a leading Legal services marketplace catering to both enterprise (B2B) and individual(B2C) customers. An average firm deals with 100+ cases on a given day and ~75% of firms deal with litigations spread across 40+ cities. With 672 district courts spread across the country, finding a suitable lawyer is often time-consuming and inefficient through the conventional way of references and networks.
In addition to having the responsibility of finding a suitable lawyer, an average in-house legal counsel manages hundreds of litigations, advisories, and regulatory compliances and is often overburdened with work. Diligence is rarely done and the lawyer’s practice area remains unverified.
Similarly, individual customers find it time-consuming to find the right lawyer at the right price and often find themselves engaging with unresponsive lawyers.
At WaterBridge Ventures, we had been on the look-out for a legal tech company that could solve for the above problems and MyAdvo fit the mould perfectly. Founded by Kushal Bhagat and Anil Bains, MyAdvo is helping corporates and individuals find good quality lawyers and manage their ongoing cases through a tech-first approach.
MyAdvo helps firms find the right lawyers through a pan-India network of ~10,000 verified lawyers who are active on its platform. Through its case management tool and automated case alerts, it helps counsels and individuals manage timelines efficiently and cut out delays.
Since our investment in 2018, MyAdvo has grown tremendously and as of Dec’19, has served 500+ corporate customers and 27000+ individuals. They serve some of the market-leading clients like Amazon, Ola cabs, SBI Cards, HDFC Ergo, Edelweiss and have a 100% retention rate among its top clients.
To summarise —
- Delivery and procurement of services are complex, inefficient and entrepreneurs can unlock value by solving for them
- Global VC interest has spiked in the B2B service marketplaces; funding rounds over $100M
- Indian B2B service marketplaces is a large opportunity at ~$170B; Legal, recruitment, advertising, IT-BPM are some of the leading segments that lend themselves to a marketplace model
- Entrepreneurs need to solve for horizontal as well as vertical-specific problems through innovative tech-led models
We at WaterBridge Ventures believe that there is a massive opportunity for tech-first B2B service marketplaces and would love to hear from founders who are building innovative businesses in this space. Please reach out to us here.
With inputs from Ravi Kaushik.
