SaaS and marketplaces have both been individually praised in the startup ecosystem for their attractiveness as business models that reach scalability and replicability of revenues in a very short amount of time compared to other approaches. However, a new wave of startups is emerging leveraging the advantages of both models making it possible for these online businesses not only to quickly attain customers, but also to retain them, taking into account that churn rate is the biggest challenge for the long-term growth of every tech venture out there.
Something extraordinary is happening in the interception of tech & trade and it is emerging at an unforeseeable pace. Technology advancement along with rapidly changing consumer behaviour is creating an appealing value proposition and an extremely lucrative business in the face of on-demand marketplaces.
But despite the fact that the on-demand economy is the inevitable result of the new and younger generation, which is tech savvy and likes to get things immediately, the booming on-demand marketplaces are actually influencing consumer behaviour beyond early adopters to embrace the advantages created by this new model of trade.
This shifting behaviour among early majority because of the convenience of on-demand marketplaces sets an unprecedented pace of technology adoption that can only be compared with that of social networks. And while the previous decade was all about social networks, this one will definitely see the dominance of on-demand marketplaces beating the likes of big data, fintech & VR/AR.
A couple of months ago, Tom Goodwin from Havas Media wrote a notable article for Techrunch. Tom noted: “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”
Indeed, these online businesses, which also happen to be some of the most successful startups in the digital history with billions of funding and behemoth valuations, have achieved this status due to the way they affect consumer purchase behaviour.
The travel/hospitality industry has long been underestimated by investors mainly due to the reluctance of many leading players to adopt technology approaches similar to other sectors in order to improve margins or customer service. Indeed the travel/hospitality sector is considerably lagging behind other sectors where technology adoption and innovation is key to long-term success.
However, this is about to change. Actually, it seems it is already changing – in a good way, of course. According to a research by CBInsights travel startups have experienced 106% in exit growth on a yoy basis during the last 2 years – ranking 4th among other sectors such as Health & Wellness, Data Storage & Security etc.
Everybody is talking about the Internet of Things phenomenon, where “interconnected embedded computing devices” are literally flooding the market and the Internet. Certainly, the IoT industry will be one of the key contributors to the uprising economy and will eventually account for $1.7 trillion globally in 2019, according to data by BI Intelligence Estimates. In addition to these impressive figures, it is forecasted that device shipments will reach 6.7 billion in 2019, which represents a CAGR of 61% for the next 5 years.
Early-stage startup valuation is an important topic for both founders and venture capitalists. On one side entrepreneurs want to receive recognition for their achievements so far, while on the other investors require comprehensive and adequate pricing methodology for pursuing an investment in a particular startup. However, because of the nature of the startup business and the development stage it is at, most founders seeking seed funding from angel investors, venture capitalists, or corporate accelerators struggle determining the right value of their technology venture. In most cases attracting seed funding means that a startup has negative cash flows, does not have revenues (not to mention profits), maybe but rarely possesses intangible assets in the form of an established brand or a patent deterring competition from entering their niche. Thus, using traditional valuation methods (usually in the case of public companies with millions worth of revenues) is especially arduous. As a result, you should use a set of methodologies that are typical for the specific purpose of valuing a deal at the seed stage.