Below are some thoughts after attending the Marketplace Conference 2023 in Berlin.
Tl;dr:
- Little has changed since last year. VC activity declined as predicted. Where is the dry powder?
- Everyone loves traction, even when bought, not built.
- Big bet still on B2B, but winners remain rare.
- AI will shape, but not disrupt marketplaces.
- Gen Z: who knows what they want 🤷‍♂️.
1. European VC deals have plunged back to 2020 levels. Where is the dry powder?
As tradition dictates, Jeroen Arts from Speedinvest opened the conference by painting a high-level picture and outlining the private & public market situation. This one slide stuck out, especially when thinking back to Jeroens last year’s presentation.
VC activity has declined as predicted, with European VC deals dropping back to 2020 levels. Although it can be argued as a “return to normal”, it has left many companies that raised money at peak valuations struggling.
One question that remains unanswered is: where is the dry powder? Large funds were raised prior to the dip, but have yet to be deployed.
2. Everybody loves traction and owning the tech stack seems less important.
In line with point 1, traction is still highly coveted by VCs, but by speaking to some founders, I got the impression that what is considered "good traction" may have increased.
More surprisingly, although entirely logical, was that on more than one occasion there was the build vs buy discussion which I haven’t really heard/seen before at the Marketplace Conference.
In fact, there was an entire session “Marketplaces x Saas”, led by Katharina Wilhelm of Index Ventures about when to build versus when to buy. Katharina extracted three layers of a marketplace software stack, some of which founders could consider buying.
- Marketplace Platforms
Providers like Mirakl & Commercetools, and painfully missing: Sharetribe
- Infastructure
Where she considers services such as Weaviate, Strapi, Contentful.
- Applications
Where I believe she includes things like Fintech layers etc.
Obviously, at Sharetribe, we are very happy to see this perspective. We have always believed that the value & competitive moat of a marketplace is not in the tech, but in the liquidity of the network that the platform facilitates.
Previously, we’ve heard from founders using Sharetribe that some VCs they have talked to were concerned about using a service like Sharetribe, as they are worried about what IP there is to own. But I’m very glad this perspective is changing.
3. B2B is still the big bet but needs to check a lot more boxes than B2C
Pieter-Jan Van Haute from Northzone had a fantastic presentation, unpacking what needs to be checked when considering a B2B marketplace.
First of all, it was very nice to hear him address the big elephant in the room when discussing B2B marketplaces & VC: how come so few have succeeded?
Unlike with B2C marketplaces, discovery is not enough. There should be a clear strategy for retention, which often entails a building tools and processes, in order to create a lock-in to the workflow of businesses. This ties in with the difference in monetisation strategy required when compared to B2C. B2B generally have a low take rate, espcially early on, and monetisation is often multi-layered. Pieter-Jan distinguished the following monetisation/product layers:
- Product Discover: equals 1-2%
- Technical Know-how: equals 3-5%
- Logistics/Warehousing: equals 2-4%
- Compliance/Regulatory: equals 1-2%
By providing (a combination of) these, a B2B marketplace will eventually still able to set a sizable take rate. But it will likely take a marketplace a long time to have all those components in place.
This is important for founders and VCs to be aware of. More patient capital is required, and you should have clear alignment on the timelines.
4. AI in marketplaces: integration, not disruption.
Now that the dust of the AI hype is starting to settle, a clearer picture of the use cases of AI for marketplaces is to emerge. Jose Marin from FJ Labs outlined three ways in which they see AI happening in marketplaces. (Btw his entire presentation is a goldmine, worth the ticket alone).
1. Al-first networks and marketplaces
- Marketplaces where Al is the supply will be tough to scale → either generating unique data from participants or connecting two sides rather than replacing one
2. Re-defining enterprise software categories
Software categories where the dominant feature is Al gives new entrants enough runway to reach feature parity before incumbents catch up on AI → huge opportunity for founders and much larger
3. Co-pilot for services
Enabling software companies to go after spend for services, not just software, opens up massive markets >- annual US spend on services is much higher than spend on software
- Tome for Presentations, Runway for Video, Midjourney for Images, etc - replaces a marketplace, but it's not a marketplace!
I think the most interesting example was how Etsy has deployed AI in their search algorithm, which takes into account a wide variety of factors, such as a customer's search history, location and purchase history to provide personalized search results, making for a much better customer experience.
This example was very much in line with what Jeroen mentioned earlier in the day:
5. Gen Z: who knows what they want 🤷‍♂️ & the creator economy is skewed
A bit of an outlier, but I attended a very interesting session by Meera Clark (Redpoint) & Cecilia Zhao (Kinnevik), where Meera presented the outcome of research done on Gen Z by Redpoint, while Cecilia offered her own insights.Although Cecilia didn't always agree with the research's conclusions, her commentary was excellent. Unfortunately, I wasn't in a good position to take photos of the presentation slides, and I’m also still not sure if I learned anything conclusive. Definitely something I’ll be looking more into in the future.
A part of the discussion was about the creator economy, which was popular with investors before the rise of AI and Web 3. The excitement around it has since diminished. Cecilia coined (for me at least) a great phrase - "creator-platform fit" - which emphasizes that not all creators are successful on every platform. She also mentioned that she thinks the creator economy never fully took off because the unit economics don't work for most creators. This has led to a "winner-takes-all" model, leaving little room for smaller and newer creators to succeed in the market.
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That’s all for this year. Hopefully again next year!
And don’t be afraid to connect with me until then.
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