The a16z Market 100: 2020

Click here for 2021 edition of the Marketplace 100.

In the present day we introduce the Market 100, a rating of the biggest and fastest-growing consumer-facing market startups and personal firms.

Over the previous few a long time, marketplaces like eBay, Airbnb, Uber and Lyft, Alibaba, and Instacart, have turn into a number of the most impactful firms on the earth economic system. Collectively, hundreds of thousands of people and small companies make a dwelling working on these platforms, the place a whole lot of billions of {dollars} of products and providers commerce arms every year. In the present day, ridesharing platforms alone account for roughly 1 % of US family revenue and there are an estimated 75 million gig employees within the US, and rising, in line with the Fed. By possessing highly effective community results, marketplaces can turn into enormous economies themselves. Over time, such firms have revolutionized a sequence of various industries, from journey to meals to childcare. Marketplaces are on the heart of lots of society’s most necessary tendencies—the gig economic system, the brand new era of inventive work, microentrepreneurship, and past. There’s rather more to return. As buyers in Airbnb, Instacart, and many others, it’s no secret that we’re bullish on (if not obsessed with) market firms.

Most are acquainted with probably the most profitable and established firms within the business, however for the Market 100, we deal with startups and personal firms. In spite of everything, our focus is the long run: What’s subsequent? What are the brand new, rising market startups that may outline the business panorama within the coming years? What industries are more likely to be revolutionized by connecting individuals via market platforms? Which classes are probably the most aggressive, with a number of gamers, and that are already dominated by a lone big? 

To reply these questions, we turned to the info—on this case, anonymized, aggregated US client spending knowledge captured by way of bank cards, debit playing cards, and financial institution transfers, which has turn into a well-liked instrument for analyzing high-growth startups. For the Market 100, we use knowledge from an organization referred to as Second Measure, a agency that analyzes billions of purchases to trace real-time client habits and relative gross sales throughout 4,500 retailers. (See the methodology under for extra particulars.) We collected this anonymized knowledge from hundreds of thousands of shoppers and analyzed their spending. This knowledge lets us see which marketplaces are capturing probably the most {dollars}, what’s trending up and down, and which classes are rising quickest. The businesses on this listing have been then ranked utilizing a standard business metric, Gross Merchandise Worth (GMV), which is extrapolated from what number of complete {dollars} shoppers are spending towards every firm. This offers an approximate measure of a market’s scale and its significance within the economic system, based mostly on how a lot income is buying and selling arms between consumers and sellers.

After all, there are a lot of caveats and limitations to this method: Notably, it leaves out most B2B marketplaces (although there are a lot of we’re enthusiastic about), and understates firms which may obtain funds principally by way of money, examine, or EBT. Some merchandise are hybrids of marketplaces and different enterprise fashions; in these circumstances, we’ve used our greatest judgement. Second Measure’s transaction knowledge is restricted to the USA, which excludes many high-growth startups that do enterprise internationally. 

Listed below are our key takeaways from the Market 100, which we’ll unpack in additional element:

• We have been stunned by a variety of startups that made the listing, together with many comparatively unfamiliar names
• A small variety of market startups—4 of them—account for 76 % of client spend
• Journey, meals, and groceries are the biggest classes, by lots
• A number of rising classes are intriguing, together with native indie manufacturers, superstar shout-outs, streetwear, health memberships, and even automobile washes
• The quickest rising marketplaces are rising actually quick—3x to 5x year-over-year

The a16z Market 100: 2020

View an itemized list of the companies in the Marketplace 100: 2020 here.

Key Takeaways From the Market 100: 2020

1. A handful of firms dominate.

The largest market firms are huge—actually huge. The highest 4 firms (Airbnb, Doordash, Instacart, and Postmates) account for 76 % of the listing’s complete noticed GMV, despite the fact that there are 96 different market firms on the listing. Apparently, three of the 4 are methods to get meals delivered to your own home. Equally, virtually all the businesses on the listing harness expertise to work together with the offline world—utilizing cell apps to make meals, healthcare, childcare, and health extra handy and accessible. 

The list-topping marketplaces have been round for fairly just a few years. The highest 4 firms on this rating have been began between 2008 and 2013, making them 7 to 12 years outdated as personal firms, with billions in income and 1000’s of workers. Distinction that to the late-‘90s, when the common time to IPO was round 3 years, with tens of hundreds of thousands of income—huge distinction! There’s additionally an apparent distinction between the highest 4 and the handfuls of true startups on the listing—these based throughout the final three years—that are more likely to climb the chart with time.

The biggest marketplace companies are big—really big. The top 4 companies account for 76 percent of the list’s total observed GMV, even though there are 96 other marketplace companies on the list. Click To Tweet

It’s notable that whereas practically each firm on the Market 100 ought to have robust community results, solely a handful of them have achieved enormous scale. However as soon as they hit crucial mass, they get huge, exhibiting an influence legislation distribution within the excessive. It’s not the 80/20 rule, it’s the 80/4 rule. It reinforces the concept that community results, although highly effective, are extra apt to speed up what’s working, moderately than propel a small, up-and-coming firm to dominance.

2. The quickest rising classes exemplify why marketplaces could be so highly effective for shoppers and suppliers: they create new channels in markets with pent-up demand, unlocking new transaction behaviors. 

Faire (#53) is a wholesale market that enables boutique retailers to search out and buy distinctive merchandise from native indie manufacturers. By aggregating this community of artisan manufacturers, {the marketplace} empowers small retailers to supply honest commerce, typically handmade stock for his or her shops and offers creators entry to a brand new and profitable distribution channel. 

Within the circumstances of superstar engagement and streetwear, there has all the time been a willingness for followers to buy intimate experiences with celebrities and influencers, or for sneakerheads to commerce their collectible footwear, however the means to take action have been restricted, offline, or untrusted. By providing celebrities a straightforward solution to earn cash and construct rapport with their followers, Cameo (#67) unlocked a tidal wave of demand amongst shoppers craving to buy superstar shout-outs for buddies, household, even themselves. 

Massive-scale and fast-growing startups like GOAT (#16), StockX (#10), and Stadium Goods (#60) present shoppers with new and authenticated channels for getting and promoting collectible streetwear, specifically sneakers. Incumbent channels resembling eBay and Craigslist have been profitable aggregators of provide and demand for streetwear, however struggled to construct belief amongst shoppers. In response to this slew of startup success within the streetwear house, eBay not too long ago waived all vendor charges for sneakers priced over $100, in an try to incentivize gross sales on its platform.

Whereas superstar engagement and streetwear are emergent market classes, meals & beverage continues to develop quickly, regardless of its already large scale. DoorDash (#2) continues to take market share from the likes of Grubhub, UberEats, and Postmates (#4) within the large $22 billion food delivery market. (As public firms, the latter aren’t included within the Market 100.) Within the adjoining order-ahead takeout house, emergent platforms like Ritual (#32) and Snackpass (#81) are buying massive swaths of city professionals and faculty college students with intelligent social options like food-gifting and group ordering.

3. The fastest-growing startups reveal emergent client classes. 

The standard lifecycle of a market is that startups develop rapidly within the early years—typically >3-5x year-over-year. In later years, their progress charge often slows right into a extra comfy vary. We see this borne out within the knowledge, the place the highest 10 fastest-growing firms are rising at a prime charge of 5x year-over-year. These up-and-coming firms supply the most effective indication of future market classes.

Apparently, these firms are emblematic of rising classes amongst millennial and Gen Z shoppers, together with native and indie manufacturers, superstar engagement, and streetwear.

The top 10 fastest-growing companies are growing at a top rate of 5x year-over-year. These companies are emblematic of emerging categories among millennial and Gen Z consumers: indie brands, celebrity engagement, & streetwear. Click To Tweet

The 4 fastest-growing firms (by year-over-year relative progress):

• Faire (#53) is a wholesale market for boutique retailers to search out and buy distinctive merchandise from native indie manufacturers.
• Cameo (#67) is a video-sharing market the place followers can guide personalised shoutouts from their favourite celebrities. 
• GOAT (#16) is a peer-to-peer market for getting and promoting authenticated streetwear and sneakers. 
• EverWash (#66), probably the most stunning firm of the highest 5 fastest-growers, gives automobile homeowners entry to a members-only community of automobile washes. Much like the Masterclass mannequin, EverWash prospects have entry to limitless automobile washes for a flat month-to-month membership charge.

4. Some classes are aggressive and fragmented, whereas others have a transparent winner.

When grouping startups into their respective classes—tickets, transportation, schooling, and so forth—we see a extremely concentrated sector, as nicely. Twenty-one of the Market 100 belong to both the journey business or the meals & beverage business, which collectively account for 63 % of the listing’s complete GMV. A more in-depth have a look at the GMV breakdown inside these classes reveals two fully completely different market dynamics. Throughout the journey phase, Airbnb (#1) is the runaway chief, accounting for 95 % of phase GMV—in fact, lately, Airbnb’s major aggressive set contains massive, public firms targeted on journey, versus different startups. 

Then again, the meals & beverage class is rather more fragmented, with a number of startups vying for management: Doordash (#2) and Postmates (#4) have all gained materials GMV share, accounting for 72 % and 23 % of their phase’s GMV, respectively. Much like Airbnb, Postmates and Doordash’s largest opponents are public incumbents, like Grubhub and UberEats.

In evaluating the 2 classes, our idea is easy: There’s a giant distinction between community results that span world and continental areas, versus city-by-city networks. Airbnb’s world community impact spans areas, since potential friends guide lodging exterior their dwelling base and hosts anticipate to obtain guests from all around the world. It’s a single, world community, which offers a robust defensible moat that, so far, opponents have struggled to repeat. Then again, Doordash and Postmates each have native networks results, that means that transactions inside their 2-sided networks exist inside particular cities, not throughout them. Consequently, profitable in a single geography, like Los Angeles, doesn’t confer a bonus in one other location. Metropolis-by-city community results are naturally extra fragmented and endure from extra extreme competitors. In different phrases, winner-take-all-dynamics are nonexistent.

For meals supply and different marketplaces the place fragmentation is the norm, competitors is extreme. There may be little to no value for customers—each eating places and shoppers—to hitch a brand new platform. Eating places are incentivized to hitch a number of platforms to faucet into extra potential demand, that means no platform’s provide is exclusive. When shoppers can order the identical meal from a number of platforms, the suppliers then compete on worth and expertise (most notably supply time). 

5. Scaling the mountain is way tougher than you assume.

The Market 100 reveals a variety of themes—the power of community results, differentiated provide, client behavioral tailwinds, defensible distribution channels, and extra—that gas a enterprise’s long-term viability and permit sure marketplaces to flourish. 

The scatterplot under displays a stark actuality: Even probably the most promising startups, by progress, should show their endurance and endure a tumultuous climb to rival the size of leaders like Airbnb, Doordash, Instacart, and Postmates. Not one of the prime 4 quickest rising marketplaces—highlighted in orange under—have but damaged into the highest 50 by way of GMV. A categorical view illustrates why two of the highest 4 marketplaces fall into the meals & beverage class—it’s a number one class in each scale and progress. As with the fastest-growing firms, fast-growing classes should additionally show the longevity of their underlying client behaviors.

Market startups signify a large cross-section of rising client habits, from uncommon streetwear to superstar shout-outs to on-demand…the whole lot. However past macro tendencies, the info behind the Market 100 offers key benchmarks for firm constructing, together with engagement, consumer acquisition, and retention. As well as, the ensuing evaluation gives insights into the forms of enterprise fashions that work for several types of merchandise.

Over the next week, we’ll be delving deeper into this knowledge to discover frequent questions that encompass market firms. What separates merchandise which can be used typically—these apps you examine obsessively—from those who you faucet extra like every year? What makes some merchandise notably sticky amongst customers over time, and others much less so? What’s the distinction between homogeneous and heterogeneous supply, anyway—and why does it matter?

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Methodology

A market is any platform that connects consumers and sellers of products/providers with one another and facilitates a transaction.

Market categorization: When the vertical-specific subset of a bigger class accounts for greater than a 3rd of the general class’s GMV, it’s damaged out right into a separate class. For instance, “streetwear” and “trend” are subsets impartial from “purchasing” as a result of they every account for at the very least one-third of all GMV within the higher class. 

Information supply: Second Measure, an organization that analyzes billions of anonymized, aggregated credit score, debit and ACH transactions to trace real-time client habits and relative gross sales throughout 4,500 private and non-private retailers. {The marketplace} 100 is drawn from firms in Second Measure’s protection listing.

• Second Measure knowledge is made up of billions of nameless U.S. shoppers’ bank card, debit card, and financial institution transactions. It excludes non-U.S. shoppers, enterprise spending, receipt-level info, and funds made by way of money, examine, or EBT.
• Second Measure can’t reliably attribute bundled income streams.
• Ideas aren’t reliably differentiated from purchases on marketplaces and could also be included in some retailers’ GMV.
• Second Measure doesn’t observe income from third-party retailers or different B2B income streams.
• Second Measure doesn’t observe spending made with reward playing cards.
• Second Measure can’t reliably attribute purchases financed via third-party firms like Prosper and Affirm to {the marketplace} related to the acquisition.
• Second Measure can’t reliably observe spending financed via credit from promoting on a market.
• Second Measure doesn’t observe income from company advantages partnership applications.
• Transactions correspond to some firms’ Gross Merchandise Quantity, a good portion of which isn’t income to the corporate. 
• Second Measure doesn’t observe on-line funds via iTunes or the Apple Retailer.
• Second Measure can’t reliably observe market charges.
• Second Measure doesn’t observe market income generated by third-party referrals.
• Corporations that not too long ago turned on on-line funds—versus on-line transactions—will look like rising extra rapidly than it’s, in actuality. It is because funds processed by that service provider is rising, not the entire GMV. We included such circumstances as a result of on-line transactions are basic to a market’s skill to cost a service charge and monetize. 
• There might exist firms that meet the factors of the Market 100, however they aren’t included as a result of they aren’t on Second Measure’s protection listing.

Timeline: Noticed gross sales are calculated over dates spanning December 2018 to November 2019. 12 months-over-year progress charges are counted as gross sales between December 2018 via November 2019 vs. December 2017 via November 2018.

Charts: To account for knowledge anomalies in our progress charts, we exclude the underside 5 % of firms by way of 2018 GMV, in addition to companies that started processing funds with the previous 12 months.

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The views expressed listed here are these of the person AH Capital Administration, L.L.C. (“a16z”) personnel quoted and aren’t the views of a16z or its associates. Sure info contained in right here has been obtained from third-party sources, together with from portfolio firms of funds managed by a16z. Whereas taken from sources believed to be dependable, a16z has not independently verified such info and makes no representations in regards to the enduring accuracy of the knowledge or its appropriateness for a given state of affairs.

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