Venture Deep Dives: Marketplaces
Learn how online retail platforms create powerful — and profitable — network effects
Our “Deep Dives” series explores vital aspects of the burgeoning VC sector with one of AV’s ~50 investing experts. This week, Senior Associate Naren Ramaswamy explains how online platforms create powerful network effects not possible for offline retailers. Instead of manufacturing their own items, marketplaces like Amazon provide a convenient platform for buyers and sellers to connect, in turn fueling more transactions and higher profits.
I think any industry with buyers and sellers has potential for marketplaces. It’s one of the only venture investible sectors that can touch almost every industry.
This Deep Dive is presented by Naren Ramaswamy, a Senior Associate for Spike Ventures, Alumni Ventures’ fund for Stanford alumni and friends of the community.
Ramaswamy sees this as a promising time for marketplaces. To quote Battery Ventures Partner Roger Lee, “It is very hard to find categories that create trillions of dollars of value in a matter of a couple of decades.” Indeed, marketplaces “have become an indispensable part of life,” says Ramaswamy — and now offer even more investment potential with mobile-phone penetration and incredible computational power “really optimizing offerings for customers.”
He predicts new marketplaces will continue to create trillions in value over the next decade, especially in industries that have yet to be disrupted by tech but where the offline analog is inefficient. Those include the property-management and services sectors, as well as those in international markets.
Ramaswamy also points out key success factors, as well as warning signs, when evaluating potential investments in the exciting realm of new or growing marketplaces.
AV’s Deep Dive into Marketplaces
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