The State of Marketplaces - 2019

|Battery Ventures Company Confidential
The State of Marketplaces – 2019
March 2019
Roger Lee, General Partner, Battery Ventures
1

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

Who is Battery?
Stage
agnostic
$6.9B
Battery’s global offices Capital raised
since inception
3

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

Battery Ventures Company Confidential | 5
Why does Battery
love to invest
in marketplaces?
?

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.
*
*
*

What does this mean
for investors?
What does this mean
for entrepreneurs?
?

The Equity Value of Marketplaces Over Time
Source: CapIQ
8
EquityValue
$10B
1998
Time

Source: CapIQ
9
EquityValue
$10B
$36B
Time
1998 2008

Source: CapIQ
10
EquityValue
$10B
$36B
$1T
1998 2008 2019
Time
* *
*

* *
*
Source: CapIQ https://www.cbinsights.com/research/unicorn-startup-market-map/
11
EquityValue
$10B
$36B
$1T
$1.3T
1998 2008 2019 2020
Time
*
*
*

How have
marketplaces performed
as investments?
?

Battery Marketplace Index
Source: CapIQ
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
* *
*

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*

Why are we
using marketplace
services more often?
Why are
marketplaces creating
so much value?
Why are
marketplaces
out-performing
the NASDAQ?
?

2000s
The Evolution of Marketplaces
16
Horizontal
Vertical
Managed
Lite
1990s
2010s
*
*
*

The Evolution of Marketplaces
17
Horizontal
Vertical
Managed
Lite
1990s
2000s
2010s
*
*
*

1990s: Unmanaged Listings
18
Supply
$ = Ads
Marketplace
Price
$
Matching
Payments
Multi-Vertical
Search
?
Liquidity
$
Demand
Reputation /
Trust
Communication
Authenticity /
Quality

1990s: Horizontal + Richer Features
19
Supply
$ = Take Rate
Marketplace
Price
$
Matching
Payments
Multi-Vertical
Search
?
Liquidity
$
Demand
Reputation /
Trust
Communication
Authenticity /
Quality

eBay Explodes…
20
*
*

2000s: Vertical, Ad-Driven
21
Supply
$ = Ads
Marketplace
Price
$
Matching
Payments Vertical
Search
?
Liquidity
$
Demand
Reputation /
Trust
Communication
Authenticity /
Quality

2010s: High Touch Services
22
Supply
$ = Take Rate
Marketplace
Price
$
Matching
Payments Vertical
Search
?
Liquidity
$
Demand
Reputation /
Trust
Communication
Authenticity /
Quality

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.
*

Communication
2010s: Asset Heavy, Managed Marketplaces
24
Supply
$ = Take Rate
Marketplace
Price
$
Matching
Payments Vertical
Search
?
Liquidity
$
Demand
Reputation /
Trust
Authenticity /
Quality

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

We’re just getting started…
26
EquityValue
$10B
$36B
$1T
$1.3T
1998 2008 2019 2020
Time
* *
*
*
*
*

*
*
*
* *
*
$6T
27
EquityValue
$10B
$36B
$1T
1998 2008 2019 2020
Time
2025
$1.3T
We’re just getting started…
*
* *

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

The State of Marketplaces - 2019

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