Privately held online marketplaces such as Cazoo and Gopuff have soared in value in the past year as private equity investors race to back the next Amazon, eBay or JD.com.
In the past quarter, a record US$28bn was invested by venture capital and PE groups into marketplace operators, according to research by Dealroom.co on behalf of Adevinta Ventures and Speedinvest.
This has contributed to the global value of marketplace ‘unicorns’ – those private companies valued above US$1bn – surging by more than 70% since the start of 2020, surpassing the Nasdaq Composite’s near-50% and the 26% for the MSCI World Index.
The first quarter of 2021 included a US$1.15bn fundraise for digital convenience store Gopuff in March, from investors including SoftBank’s Vision Fund, to give it a valuation of $8.9bn; this came just days after US$800mln was raised by UK used car marketplace Cazoo as it said it is listing on Wall Street via a US$7bn SPAC merger; there was also Finnish food delivery marketplace Wolt’s US$530m funding round as investors got excited about its expansion into retail and groceries and plans for a 2022 IPO.
Fashion has been one of the hot areas of investment and, just today, second-hand clothes marketplace Vinted was valued at €3.5bn (£3bn) in its latest funding round and fashion shopping app Lyst raised US$85mln, which followed IPOs for used clothing apps ThredUp Inc. (NASDAQ:TDUP) and Poshmark Inc (NASDAQ:POSH) in March and January respectively.
Overall, fashion marketplaces saw a 142% jump in valuations, according to The Future of Marketplaces report, followed by food delivery at 132% and digital health at 120%, while many of the deals in the past quarter focused on logistics and last-mile delivery services.
The Vinted fundraise is just one of several as the trend continues into the second quarter, with US$12bn of VC money pouring into the sector so far, according to the research.
Kry, a telehealth specialist, drummed up US$312mln last month; Travelperk, a business travel specialist, raised US$160mln in the same month; and BlaBlaCar, a French carpooling platform, topped up its coffers with US$115mln.
There are moves in the crypto space too, with blockchain venture firm Coinsilium today announcing that its Nifty Labs arm has begun developing marketplace for non-fungible tokens (NFTs).
“We are seeing increased investor interest in marketplaces because they have demonstrated how they are particularly resilient to economic developments and easier to scale upwards and downwards than traditional, more asset heavy companies,” said Speedinvest general partner Mathias Ockenfels.
A large part of Speedinvest’s tech portfolio is in marketplaces, Yardlink for construction equipment, Schüttflix for construction equipment in Germany, Shopup for Bangladesh’s SMEs, Byrd for ecommerce, Agro.Club for farmers, Sunlight for workplace learning, FinCompare for SME financing, and Kodit.io for residential real estate.
He said marketplaces have benefitted hugely from the overall push to digital solutions that has been accelerated by the pandemic and so Speedinvest is one of many that believe even with countries returning to normal there will remain a bigger appetite and customer base for marketplaces.
“Marketplaces have been able to grow so fast because of the network effects they exploit, and in the last 12 months more of them have become essential to our daily lives,” said Yoram Wijngaarde, founder of Dealroom.co.
Companies network effects, where the value of a product increases with every new user – as in with every new seller and buyer on eBay, Alibaba, etc strengthens the market overall, have been a key area for many private equity investors in recent years.
For small investors it can be difficult to access many of these companies because of the trend for ‘de-equitisation’, where manny fast-growth companies are eschewing public stock markets in their earlier and faster-growing years.
But access is possible via investment trusts that focus on private equity investing, such as HgCapital Trust PLC (LON:HGT), Pantheon International Plc (LON:PIN) and HarbourVest Global Private Equity Ltd (LON:HVPE)