People will often ask me, “So, what are the big tech trends right now?” In 2020, I gave 1.5 answers to that question. The obvious trend in startups (which has been going on for a year or two) is the idea of the “prosumer as the new consumer.” After Facebook and Snap, the next crop of startups that have taken off look a bit different — work productivity tools like Slack and Zoom, in particular, that have consumer product sensibilities but the ability to scale to enterprise-scale deployments. I’ve discussed some of these specific trends and properties in recent pieces on Superhuman and last year on Airtable, which are worth quickly scanning again for reference.
In addition to this trend, in 2019 I’ve noticed another one — a growing interest among VCs in B2B marketplaces.
Let me state upfront that the idea of B2B marketplaces is not new. Folks have talked about this model for decades. Yet in 2019, there seemed to be a renewed interest in these models from a venture perspective, and I will briefly detail below *why* I believe those conditions have come together recently. This has led to some very competitive financing rounds, which from afar is a signal various groups see the market potential of these models. In particular, I would highlight three red-hot companies in particular: Choco, Rekki, and Faire (disclosure: Faire is a Lightspeed portfolio company). These are examples of high-growth B2B marketplaces that earned competitive financing rounds — of course, there are others, these are not the only ones!
So, what makes these types of startups both possible and hot today?
1/ Consumer feels dry: I can’t prove this but simply based on how our deal flow has changed and frankly what is getting funded by the top institutional funds, consumer is increasingly harder to get right. I have a lot of respect for founders and investors who focus in these areas and try to go big. It has been brutal in recent years. As a result, I believe more founders are looking at variations on b2b models, and now more of those happen to be marketplaces. (Many of these founders generationally have been conditioned to the see the benefits of online/mobile marketplaces in their own lives, so it would make sense to want to apply this model to other problem areas or opportunities they discover.)
2/ Global markets and the Slack & Zoom effect: As I recently wrote about re: Superhuman, global mobile phone penetration has opened up markets 10x to 100x bigger than what previous generations could imagine. I often catch myself saying “You know, everyone in Malaysia could be on Slack and Zoom.” It’s kind of a wild statement, but also entirely plausible. As these productivity tools spread, so too do ideas about how to better architect industries using software and networks. For instance, Rekki is in Europe and Faire is expanding through North America.
3/ Generational change and adoption: Building on some points above, we now see buyers & users in these industries who are themselves digitally-native who are motivated to bring efficiencies to traditional industries. Additionally, this new crop of builders are bringing a sophisticated level of product design expertise (some from consumer-facing companies and products) to these newer marketplace models. That sophistication is critical because every piece of the stack — from the database, payment rails, and all the way to the actual user experience — has to be crafted with precision in order to lure and convince users to adopt these new workflows.
4/ Software- and fintech enablement: This is a topic on its own that warrants more investigation. At a high level, these new companies are using various techniques — such as giving away free software to attract and onboard supply; or using financial products like lending or factoring to monetize the GMV flowing through the system rather than taking a percentage rake. These entrepreneurs are able to build off of advances in SaaS and fintech technologies to help enter these new markets.
At Haystack, we are looking at a lot of companies that meet these criteria. We really like models like this and aspire to write more on this topic and make more investments in these new models and industries.