FJ Labs – NOAH19 Berlin

Now the next gentleman Fabrice Gwyneth is a famous serial entrepreneur from France residing in usually a B&B locations around the world and he is probably the Biggest expert I know in market places and we started our conference with marketplaces But we started his career his marketplaces. So who else could talk about marketplaces? Thank you so much Thank You Margaret. Rad to have you? Thank you. So I’m here to talk to you about the trends and the latest trends in marketplaces and Why basically were still at the very beginning of the marketplace revolution now? The reason that I’m somewhat legitimate to talk about this is over the years I’ve invested in over 500 startups of which over 350 of them or marketplaces Now the irony of this is I actually never set out to be a venture capitalist or an investor in that many companies It just so happens that When you’re a visible consumer facing Internet CEO A lot of young intrapreneurs come in ask for money and advice and so little by little I started investing but by virtue of being super busy running a you know 50 country 5000 employee company with like hundreds of millions uniques a month. I decided to create a set of heuristics to and theses to to evaluate companies rapidly and to decide to invest pretty quickly and when I sold Oh relax and when I left in 2013, I Basically decided I liked building companies I like investing in companies and so I was gonna create a structure which was going to allow me to do both So FG lives these days is a hybrid startup studio and venture funds where every year we build one company typically a marketplace typically in the US and Every year we invests in around 100 Companies most of which are marketplaces now the way we evaluate marketplaces Is as follows we have four key criteria one is do we like the team now? Most people will tell you? Oh, I only invest in amazing people but what really is an amazing team? so for us as someone who’s an amazing storyteller because someone who can Sell your story is gonna be able to raise money to higher valuations. They’re gonna be able to attract better people They’re gonna do better deals – if someone who’s completely numbers driven and analytical they know the unit economics They know the business. They’re in now the Venn diagram of amazing storytellers. Your arch also numbers ribbon is actually pretty small so first criteria people need to be amazing number two, is is this an attractive business and For many people there are a lot of metrics here. Like what’s the total addressable market size? What’s the capital efficiency? but ultimately for us it comes down to what are the unit economics or the business and For us good unit economics is one where you recoup your fully-loaded customer acquisition costs in six months on a net contribution Margin basis. Were you 3x at least your customer acquisition cost in 18 months. And ideally you have no idea what your LTV is because Even though you might have 50% churn the rest of your customers are buying so much more that you have negative Churn, and so who knows your LTV e 2 cap ratio is 10 and 115 and 122 one number 3 is or the deal trimmer is reasonable and light of the size opportunity and in light of The quality of the team where you are and your capital efficiency these three criteria or collectively required We need to like you the team and the deal trims and if so We invest now the fourth one is does it mean or thesis and we are thesis driven Now 70% of what we do is thesis driven 30% is not and I’ll talk shortly about what our thesis is now This has worked pretty well We’ve had as I said, we’ve made over 500 investments we’ve had over 170 exits since date We’ve had to realize IRR of over 60% and that’s over 21 years. So that’s so you pretty well now the reason I like marketplaces is I Like creating liquidity and transparency and otherwise opaque and fragmented markets and there are three big trends that we’re investing in right now The first one is the vertical ization of the horizontal sights So this is a slide that came out in 2011 by David Heber It’s how Craigslist was being attacked vertical by vertical by a lot of players now Mosby Caesar thinks oh that vertical ization of class white slice, that’s kind of done. But the thing is There’s many things you can vertical eyes other than Craigslist And so actually we’re still at the very beginning of it and we’re seeing all of the major Horizontal platforms being vertical eyes. So if you think of eBay so reverb it’s a music marketplace There are doing 600 million a year in sales and you would think oh me music instruments so niche How could that be that big and these categories can be a lot larger than you expect if you build the right user experience unit which in a way is a vertical of YouTube or You know block renovation is a better way to do you redo your your your bathroom as opposed to thumbtack? But even things for people that are like, oh there’s winners ready like, you know, ubereats would delivery in the food delivery space We’re now being verticalized with companies like slice, which is a pizza delivery app for a variety of reasons So this vertical ization trend it’s happening to up work. It’s happening to thumbtack is happening to every major horizontal player and it’s even happening to categories that seem already reasonably vertical, you know, so Is a transcription marketplace and now you see companies like robin which are our medical transcription marketplaces Second big trends is the reinvention of marketplaces with the old model where? You get a client in Zygon or craigslist and you say what you’re looking for? a lot of people apply and you need to agree and come to terms and that’s called a double commit marketplace where both sides needed to talk to each other the new model is one where you say what you need and the marketplace picks that person for you and so in Comment you just you know The companies say I need a developer and they picked up a developer for you or in Mero, you say I need a photographer No, and and they can mega and Mira takes the photographer or uber you don’t pick your driver, right? The old model would have been you have to you have to select amongst your suppliers Now the issue of that all models is it’s a lot of work the new models. You need to curate better But if you curate your NPS and use your insurance a lot better and the third interesting model is b2b marketplaces and b2b Marketplaces are emerging because in the b2b world. We’re still in the dark ages if you want to buy something It’s still doubt my rolodex or email or Excel and only now is they’re starting to be price transparency And so we’ve invested in everything from like freight forwarding market places to fish market places between the fisheries and fishermen and one side The restaurants and the supermarket’s to the other slide scrap metal marketplaces etc. And so that world is finally coming to the fore So these are the three mega trends and then they’re happening in pretty much every vertical so in food, for instance, we’re seeing a massive increase in off-premise ordering must both true of both groceries were the likes of instacart for the delivery or Of restaurants where the deliveries in ubereats or the world are driving a lot of revenues. Ah Good idea because they’re very good so The and even in this category the horizontals are now being complemented by the variety of vertical players So you’re seeing in as I said slice in the piece of space? But you have chai bus and Chinese food you have like stadium in the BTB Catering space you’re seeing people doing discounts for delivery in the same day So there’s a whole bunch of innovation and we’re still at the very beginning of that revolution in the food space now It’s so much cheaper to build virtual brands that are being built for off-premise delivery that you’re starting to see an entire infrastructure of companies being built around that so you have cloud kitchen or dark kitchen companies that Are allowing these brands like the honest foods or the world or the Keats to go and build and sell directly there? Plus you’re certainly see a lot of innovation and automated and vehicle delivery. So the zoom piece of the world where you have like robots that are cooking the pizza that are words being delivered or cooked to on the way to you in Real estate there’s been a lot of innovation in prop tack, you’re seeing marketplaces emerge and every every types of model We have the eye buyer model with the open doors of the world But you’re also seeing platforms like roof sock which a lot of people to invest in Investable real estate that degeneres yield you have like code living companies especially in the emerging markets and China and and in India that are doing really well like soullow says you’re seeing reinvention a guest’s of the short-term saying where the brains being created on top of the urban B’s of the world like sundering Tomio of these the most compelling is probably the open door one because it’s reinventing the way real estate transactions are happening and that’s why they’ve grown from zero to billions in gmv in a few years and they’re the I bar about all miss kateri is by far the largest in Cars kind of the same things happening. There’s Reinvention of all the different models you’re seeing things like fare on the used car leasing You’re seeing new car leasing models emerging the eye buyer model is also the one on the bus without a one in this country which is now being replicated many other countries where the wholesale markets reasonably or reasonably not developed yet and jobs receiving vertical ization and transactional ization in staffing In in frankly every major vertical especially with your reinvention of the models where you no longer need to do the interviews It’s happening as well as services where in the old days you’d good or like thumbtack? And you say oh I need this like plumber and you’d have to go and pick amongst 300 of them and it’d be late now you just say I need this done and a company like renovacell or Sutter will actually get the job done for you and Last but not least and lending We’ve had a first wave of innovators the lending clubs of the world and the funding circles that have coming started differentiating and in now These guys are also being verticalized and so you see companies like clear bank clear bank will login and SMBs Shopify account the log to their login in their Google AdWords account the look at the profitability on our I basis of the marketing into the profit. The marketing is profitable They’ll lend the money you can imagine deutsche bank will never do that Now all that to say that we’re at the very beginning of the marketplace revolution and all of us here as intrapreneurs and as investors We’re privileged to be in a position to bring about this better world of tomorrow a world of equality of opportunity and of planning Thank you You

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