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The State of Marketplaces - 2019

Presented at the Marketplace Conference in San Francisco, Battery's Roger Lee explores the state of the marketplace company landscape.

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The State of Marketplaces - 2019

  1. 1. |Battery Ventures Company Confidential The State of Marketplaces – 2019 March 2019 Roger Lee, General Partner, Battery Ventures 1
  2. 2. Battery Ventures Company Confidential | The information provided in this presentation is solely intended for the use of entrepreneurs, corporate CEOs and founders regarding Battery Ventures potential financing capabilities for prospective portfolio companies. The information is current as of the date it was published. The contents are not intended to be used in the investment decision making process related to any product or fund managed by Battery Ventures. No assumption should be made that the investments identified above were or will be profitable. It should also not be assumed that recommendations made in the future will be profitable or equal the performance of the companies identified above. Content obtained from third-party sources, although believed to be reliable, has not been independently verified as to its accuracy or completeness and cannot be guaranteed. Battery Ventures has no obligation to update, modify or amend the content of this newsletter nor notify its readers in the event that any information, opinion, projection, forecast or estimate included, changes or subsequently becomes inaccurate. Battery Ventures provides investment advisory services solely to privately offered funds. Battery Ventures neither solicits nor makes its services available to the public or other advisory clients. For more information about Battery Ventures’ potential financing capabilities for prospective portfolio companies, please refer to our website. For a complete list of portfolio companies, please click here. This presentation is being provided for informational purposes only. Nothing herein is or should be construed as investment, legal or tax advice, a recommendation of any kind or an offer to sell or a solicitation of an offer to buy any security. 2 Disclaimers
  3. 3. Battery Ventures Company Confidential | Who is Battery? Stage agnostic $6.9B Battery’s global offices Capital raised since inception 3
  4. 4. Battery Ventures Company Confidential | Battery Marketplace Investments * Contains all Battery Ventures marketplace investments since the firm’s inception. No assumption should be made that the investments identified above were or will be profitable. For a complete list of portfolio companies, please click here. 4 E-Commerce @ Community & Content Services Travel Exchange $375+ million invested
  5. 5. Battery Ventures Company Confidential | 5 Why does Battery love to invest in marketplaces? ?
  6. 6. Battery Ventures Company Confidential | Shifting Consumer Behavior: A Day in the Life Source: Second Measure * Denotes a current or former Battery portfolio company. No assumption should be made that the investments identified above were or will be profitable. For a complete list of portfolio companies, please click here. 6 ~$50-$100 / transaction. Infrequent. Chloe, 25 1990’s Sarah, 23 2010’s ~$50-$220 / transaction. Monthly. Tommy, 21 Today: 2019 ~$700+ / month. Daily use. * * *
  7. 7. Battery Ventures Company Confidential | 7 What does this mean for investors? What does this mean for entrepreneurs? ?
  8. 8. Battery Ventures Company Confidential | The Equity Value of Marketplaces Over Time Source: CapIQ 8 EquityValue $10B 1998 Time
  9. 9. Battery Ventures Company Confidential | The Equity Value of Marketplaces Over Time Source: CapIQ 9 EquityValue $10B $36B Time 1998 2008
  10. 10. Battery Ventures Company Confidential | The Equity Value of Marketplaces Over Time Source: CapIQ * Denotes a current or former Battery portfolio company. No assumption should be made that the investments identified above were or will be profitable. For a complete list of portfolio companies, please click here. 10 EquityValue $10B $36B $1T 1998 2008 2019 Time * * *
  11. 11. Battery Ventures Company Confidential | * * * The Equity Value of Marketplaces Over Time Source: CapIQ https://www.cbinsights.com/research/unicorn-startup-market-map/ * Denotes a current or former Battery portfolio company. No assumption should be made that the investments identified above were or will be profitable. For a complete list of portfolio companies, please click here. 11 EquityValue $10B $36B $1T $1.3T 1998 2008 2019 2020 Time * * *
  12. 12. Battery Ventures Company Confidential | 12 How have marketplaces performed as investments? ?
  13. 13. Battery Ventures Company Confidential | Battery Marketplace Index Source: CapIQ * Denotes a current or former Battery portfolio company. No assumption should be made that the investments identified above were or will be profitable. For a complete list of portfolio companies, please click here. 13 +204.99% Battery Marketplace Index +156.18% NASDAQ Marketplaces 467.5B 34.8B 4.0B 5.9B 0.6B 6.6B 33.3B 8.4B 22.3B 29.0B 7.5B 8.1B2.8B 78.5B 22.5B 10.7B 17.8B 156.7B 1.6B 1.3B 19.1B 8.0B 7.1B 3.0B 25.3B15.0B1.9B 7.8B 7.4B 9.0B 6.7B 2.0B 40.4B -35% 15% 65% 115% 165% 215% 265% Mar2012 Jun2012 Sep2012 Dec2012 Mar2013 Jul2013 Oct2013 Jan2014 Apr2014 Jul2014 Oct2014 Jan2015 May2015 Aug2015 Nov2015 Feb2016 May2016 Aug2016 Nov2016 Feb2017 Jun2017 Sep2017 Dec2017 Mar2018 Jun2018 Sep2018 Dec2018 Mar2019 2.2B 11.7B 2.2B * * *
  14. 14. Battery Ventures Company Confidential | The Index Is About to Expand * From Marketplace Companies Sources: https://www.businessinsider.com/companies-ipo-public-equityzen-2018-11 https://money.usnews.com/investing/stock-market-news/slideshows/best-stocks-ipo-this-year https://www.cbinsights.com/research/unicorn-startup-market-map/ 14 16 Top Potential IPO’s in 2019 / 2020 $232B Total Pre-IPO Valuation* 50% Marketplaces 85% Total Equity Value*
  15. 15. Battery Ventures Company Confidential | 15 Why are we using marketplace services more often? Why are marketplaces creating so much value? Why are marketplaces out-performing the NASDAQ? ?
  16. 16. Battery Ventures Company Confidential | 2000s The Evolution of Marketplaces * Denotes a current or former Battery portfolio company. No assumption should be made that the investments identified above were or will be profitable. For a complete list of portfolio companies, please click here. 16 Horizontal Vertical Managed Lite 1990s 2010s * * *
  17. 17. Battery Ventures Company Confidential | The Evolution of Marketplaces * Denotes a current or former Battery portfolio company. No assumption should be made that the investments identified above were or will be profitable. For a complete list of portfolio companies, please click here. 17 Horizontal Vertical Managed Lite 1990s 2000s 2010s * * *
  18. 18. Battery Ventures Company Confidential | 1990s: Unmanaged Listings 18 Supply $ = Ads Marketplace Price $ Matching Payments Multi-Vertical Search ? Liquidity $ Demand Reputation / Trust Communication Authenticity / Quality
  19. 19. Battery Ventures Company Confidential | 1990s: Horizontal + Richer Features 19 Supply $ = Take Rate Marketplace Price $ Matching Payments Multi-Vertical Search ? Liquidity $ Demand Reputation / Trust Communication Authenticity / Quality
  20. 20. Battery Ventures Company Confidential | eBay Explodes… * Denotes a current or former Battery portfolio company. No assumption should be made that the investments identified above were or will be profitable. For a complete list of portfolio companies, please click here. 20 * *
  21. 21. Battery Ventures Company Confidential | 2000s: Vertical, Ad-Driven 21 Supply $ = Ads Marketplace Price $ Matching Payments Vertical Search ? Liquidity $ Demand Reputation / Trust Communication Authenticity / Quality
  22. 22. Battery Ventures Company Confidential | 2010s: High Touch Services 22 Supply $ = Take Rate Marketplace Price $ Matching Payments Vertical Search ? Liquidity $ Demand Reputation / Trust Communication Authenticity / Quality
  23. 23. Battery Ventures Company Confidential | Communication 2010s: Asset Light, Managed Marketplaces 23 Supply $ = Take Rate Marketplace Price $ Matching Payments Vertical Search ? Liquidity $ Demand Reputation / Trust Authenticity / Quality *Denotes a current or former Battery portfolio company. No assumption should be made that the investments identified above were or will be profitable. For a complete list of portfolio companies, please click here. *
  24. 24. Battery Ventures Company Confidential | Communication 2010s: Asset Heavy, Managed Marketplaces 24 Supply $ = Take Rate Marketplace Price $ Matching Payments Vertical Search ? Liquidity $ Demand Reputation / Trust Authenticity / Quality
  25. 25. Battery Ventures Company Confidential | Why is this happening?  New entrants hack the cold start liquidity problem by focusing on verticals vs. horizontal use cases  Marketplace needs to, and can deliver more services when focused on verticals vs. horizontal  Some markets are challenging to unlock without owning assets or hiring the service providers full time but there are trade offs: 25 lb • Lower upfront capital expenditure • Shorter payback period and higher return on assets • Able to rapidly scale • Greater control over the product / UX • Better gross margins • Great IP and process knowledge protection • Deeper moats Asset Light Asset Heavy • Shallow moats • More onus on marketplace participants • Slower to scale and generally inflexible assets • Enormous upfront costs PROS PROS CONS CONS
  26. 26. Battery Ventures Company Confidential | We’re just getting started… Source: CapIQ https://www.cbinsights.com/research/unicorn-startup-market-map/ * Denotes a current or former Battery portfolio company. No assumption should be made that the investments identified above were or will be profitable. For a complete list of portfolio companies, please click here. 26 EquityValue $10B $36B $1T $1.3T 1998 2008 2019 2020 Time * * * * * *
  27. 27. Battery Ventures Company Confidential | * * * * * * $6T Source: CapIQ https://www.cbinsights.com/research/unicorn-startup-market-map/ * Denotes a current or former Battery portfolio company. No assumption should be made that the investments identified above were or will be profitable. For a complete list of portfolio companies, please click here. 27 EquityValue $10B $36B $1T 1998 2008 2019 2020 Time 2025 $1.3T We’re just getting started… * * *
  28. 28. Battery Ventures Company Confidential | Download slides here: https://www.battery.com/powered/ 28 The Battery Team Roger Lee rlee@battery.com Jeff Lu jeff@battery.com Courtney Chow cchow@battery.com

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