Raising Capital for Marketplaces in 2016

By Angela, July 28, 2016

A question we’re often asked during conversations with early-stage entrepreneurs is “What do investors look for when considering a Seed or Series A startup?” At some point, this question might be followed by “What does it take to get to Series B?”

The expected trajectory takes a startup from Seed to Series A, Series A to Series B, and so on. But as our good friend Christoph Janz at Point Nine Capital points out, “financing rounds are obviously not a goal in itself. They are a means to a bigger goal.”

Two months ago, Point Nine put together a very helpful chart linking important milestones and fundraising stages for SaaS companies: “What does it take to raise capital, in SaaS, in 2016?”

We recently collaborated with them to create a similar framework for marketplace startups which you can access here as a Google Sheet or in stylized Marketplace Napkin form 🙂

Marketplace Napkin.001

 

Investing is part science and part art – as such, there will be exceptions to every rule here. Some startups can raise a big round early on (for example, when the founding team already has large exits under their belts), while other startups feel the frustration of struggling to raise money when they’re hitting every milestone on the chart.

Yet while it’s generalized, this chart can be a useful framework for founders to understand what benchmarks we as marketplace investors look for, and when we look for them.

  • Thank you.

  • Phil Vidal

    As a pre-seed Marketplace that is pitching later today, this is infinitely helpful Angela. Thank you so much.

  • Juan Padilla

    Wow! This is so good! Thank you!

  • Salvatore Svacant

    SavelGo was here.

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  • Rick Beckerman

    This is fantastic, Angela! As an early stage marketplace CEO, I cannot tell you how much value we’ve gotten out of your blog, and marketplace guidelines!

  • Cookie Bar

    Thanks a lot, Angela. This is really great content and a cool format too.

    Sorry for asking, but I’m not specialized in marketplaces: What does GMU mean? Something like the gross revenue conducted via the marketplace?

  • Micha? Rokosz

    Net Rev / GMV ratio at early rounds implies a 20-40% commission –> rather not a market standard…

  • bwertz

    Good catch – will correct!

  • Thanks – appears high indeed. But given that net rev is ‘less than’, it implies a take rate of ‘up to’ 20-40% in the series A bracket – high for sure, but I would not say unheard of…would you?

  • atkingyens

    GMV = gross merchandise volume, i.e. the total sales dollar value for goods sold or services purchased through the marketplace over a certain time. For more on marketplace metrics that we look at, check out this blog post: http://versionone.vc/marketplace-kpi/

  • atkingyens

    Thanks again, Rick!

  • I was confused about that as well. What take rate or net revenue are you looking for in Seed and Series A?

  • Sushma Sharma

    Thank you Angela. This was extremely useful as I wanted to understand the marketplace valuation metrics for my own marketplace.

  • Greg

    Hi Angela, can you let me know your revised net sales KPI’s. thanks

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