Melbourne is the marketplace capital of Australia, having produced a stable of Australian unicorns including SEEK, Carsales, and REA Group. More recently, Envato and RedBubble, who IPO’d on the Australian Stock Exchange, have been steadily growing into global dominating positions. Current and future founders are inspired by these multi-billion dollar success stories. Talent has grown up in these businesses, and are now starting their own marketplace businesses.
In July, Onestack convened a group of 35 Australian investors in, and founders of, online marketplaces. An online marketplace is a platform where product or service information is provided by multiple third parties, with the transactions processed by the marketplace operator.
Invited investors from AirTree Ventures, Blackbird Ventures, Square Peg Capital, Bailador, and prominent family investment offices met with founders and executives of Australia’s established marketplaces including SEEK, Envato, EatNow and RedBubble, alongside the next wave of Australian online marketplaces, including Flippa, Employment Hero, HealthKit and Timelio.
Speaking about investing in online marketplaces, Craig Blair (Managing Partner, AirTree) said “We like investing in marketplace businesses because they have incredible lock in, genuine network effects and so they are ‘a winner takes most’ model. But they are very difficult to scale well and can require a lot of capital.”
“We like investing in marketplace businesses because they have incredible lock in, genuine network effects and so they are ‘a winner takes most’ model.” – Craig Blair
On Australian marketplace businesses and whether Australian marketplaces have any particular advantage, Blair said, “It depends on the model. If you are building a global marketplace from Australia then you have to be confident that you have world’s best practice in marketplace mechanics, and product development. In some markets, a local marketplace has a reason to exist e.g where there is physical exchange of goods. In these cases, founders and investors should think carefully about why a standalone marketplace has a right to exist versus a global brand with local execution. For example, you would clearly not build an Uber competitor in Australia now, but a TaskRabbit competitor may be possible (i.e. Airtasker).”
Blair said “We have had a long history of investing in marketplaces going back to Ebay Australia (Ecorp), Ourdeal (netus) and now several in our third fund, AirTree. In our portfolio are Design Crowd (design), Pawshake (petminding), 90seconds (video production), Tidyme (cleaning), and one more to announce shortly.”
Matthew Dyer, the founder of established marketplace EatNow, which was acquired in one of the biggest recent exits for AUD $855m, said: that the three key ingredients to his success were “timing, passion and being a technical founder helped establish a minimum viable product and product-market fit before exploring investment. I simply loved what I was doing every day, and I believe that passion breeds success.”
“I simply loved what I was doing every day, and I believe that passion breeds success.” — Matthew Dyer
Timelio founder and CEO, Charlotte Petris commented on the benefits of a marketplace business, saying, “creating a marketplace enabled Timelio to challenge traditional funding and distribution models and offer a much stronger value proposition to our customer. We can serve more customers and grow faster with a less capital intensive funding model. There is a lot of opportunity in Australia to shake up the inefficient and old-school business models using marketplaces to unlock value for both sides.”
Originally posted by Onestack