Episode 29: The Latest Marketplace Trends

In episode 27, I took a stab at which categories investors and entrepreneurs should focus on for the coming 5 years. In today’s episode, I wanted to cover the themes and trends that emerged in the last 12 months.

Ten trends clearly emerged as we saw them time and time again with a plethora of competitors in every geography. There was no unifying theme across all of them, but four of the trends cover startups that help SMBs and micro-entrepreneurs run their businesses better allowing their owners to focus on what they do best.

For your reference I am including the slides I used during this episode.


B2B FMCG Marketplaces

These marketplaces help bodegas and corner stores automate their operations and improve their sourcing, allowing the store owners to focus on what they do best. This falls squarely in FJ Labs’ thesis covered in episode 4 on B2B marketplaces and the future of work.

There are 50 million independent corner stores worldwide and a slew of marketplaces are helping them obtain better supply, better payment and delivery terms. We saw this emerge first in emerging markets with the likes of Jabu in Namibia, Alerzo in Nigeria and Chiper in Columbia and Mexico, but we are now seeing it in developed markets as well with companies like Vori in the US and Magaloop in Germany.


Superfast Ecommerce

The Internet has always been about better, cheaper, faster, and this trend is best illustrated by the emergence of 15-minute grocery delivery. These online grocers use hundreds of dark stores with typically 3,000 SKUs to be able to deliver in sub-15 minutes in major cities. This was first popularized by Getir in Turkey and Samokat in Russia but is now emerging everywhere.

After the food delivery, ride sharing and scooter wars, this is the new capital war with dozens of well capitalized players going after the space. New York has nearly 10 players jousting for dominance which makes it an amazing time to be a consumer. The user experience is delightful. I receive my orders on average in 8 minutes.

The economics of the business work at scale, however with so many players it’s going to be a bloodbath. We are already seeing consolidation with the shutting down of Fifteen Twenty and rumours of other players up for sale. That said, in the end a $100 billion player will likely emerge from the category.


Amazon 3P Seller Rollups

Amazon marketplace is huge with $300 billion in GMV in 2020 growing 50% per year and there are over 200,000 Amazon sellers earning over $500k per year. Thrasio took the category by storm. It started buying and rolling up independent 3rd party Amazon sellers at low EBITDA multiples (around 3x EBITDA) and bringing their marketing, operational and purchasing efficiencies to bear to improve their scale and profitability. They reached unicorn status in less than 2 years post their seed.

Since then, many others have replicated the model across many geographies and verticals.


Creator/Passion Economy

More and more people are realizing that they can monetize their passion with a small following of true fans. The category came of age with Twitch (video games), Patreon (artists), Cameo (birthday wishes) and Only Fans (porn). However, tools are now being created to help creators in every possible vertical: podcasting, audio content creation, newsletter writers, video course creators, virtual teaching and tutoring, and virtual coaches in every category, helping countless make a living pursuing their passion. There are so many players I did not list them here, but refer to slide 9 of my deck.

In addition, geographic specific equivalents are emerging of all these companies, and many are now harnessing Web3 for the creator economy.


SaaS-Enabled Marketplaces for SMBs

A vertical version of Shopify is seemingly emerging in every vertical to help store owners with their back office, point of sale, marketing, procurements etc. They typically monetize through a combination of payments and new demand brought by their marketplace.

Many companies have already scaled with this strategy reaching hundreds of millions of GMV or more such as Slice in the pizzeria space, Fresha for hairdressers, and Jobox for locksmiths.


Used Car Marketplaces

The pandemic and the supply shortage profoundly increased the willingness of consumers to purchase cars online. This primarily benefited Carvana in the US which saw its market share explode. As the stock multiplied by 15 since IPO, entrepreneurs and VCs everywhere tried to replicate that success with a few emerging leaders such as Cazoo in the UK, Kavak in Mexico, Clutch in Canada, and Spinny in India.

Online B2B car marketplaces also benefited with massive growth at ACV Auctions in the US and CarOnSale in Germany.


Accounting Software for Emerging Market Micro-SMBs

These startups help SMB founders to run their businesses from their cell phones offering free accounting and invoicing. This was pioneered by Khatabook in India which now has over 10 million monthly active merchants and $24 billion in monthly payment volumes. This was replicated in many other countries with companies like Treinta and BukuWarung also reaching meaningful scale.

Right now, none of them are monetizing, but you can imagine potential monetization though payments, factoring, insurance, catalogue and more.


Live Commerce Beyond China

In China, live video shopping makes up 20% of ecommerce with its unique blend of entertainment and shopping, mostly on the incumbent leading ecommerce platforms. Penetration is much lower in the West, but we are seeing a slew of companies attacking the space especially in three verticals: collectibles (Popshop Live, Whatnot, NTWRK), Make-up (Supergreat, Newness), and Fashion (The Lobby). It will be interesting to see if buying habits converge or if live video shopping remains a small percentage of commerce in the West.


Defi & NFTs

As I covered in episode 28, What’s the deal with crypto?, decentralized finance and NFTs both exploded in 2021 with tens of billions of dollars’ worth of transactions. Watch that episode for more details.

I am looking forward to observing the trends that emerge over the next 12 months!

If you prefer, you can listen to the episode in the embedded podcast player:

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My conversation with Ted Seides on Capital Allocators

I had a fantastic and far ranging conversation with Ted Seides on Capital Allocators about my path to entrepreneurship and investing, my love of marketplaces and all things FJ Labs.

Their Episode Description:

My guest, on the 4th episode of Venture is Eating the Investment World, is Fabrice Grinda, entrepreneur, angel investor, and founder of FJ Labs, a venture capital firm that backs a diversified portfolio of startups in marketplace businesses. The firm takes a founder-friendly, non-institutional approach, employing heuristics to formulate quick decisions.

Our conversation covers Fabrice’s path as a serial entrepreneur and lessons learned building and investing in marketplaces. We discuss FJ Lab’s unique investment process focused on four investment heuristics and expeditious decision making. We then turn to its position in the venture ecosystem and investable themes in the coming years.

You can listen to the episode in the embedded podcast player:

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2021: Best Year Ever!

The world remained mired in the personal and economic cost of the continuing pandemic, but my life reached a new pinnacle with the birth of my son, François Olivier Jean-Paul Grinda, May 18, 2021. I am blessed that not only it was the easiest pregnancy and birth ever, but he is also the most amazing baby ever. He is extraordinarily agreeable. He is always happy and smiley. He is willing to be manhandled and taken on crazy adventures. He never cries and has an awaken intensity that my mother says reminds her of me when I was younger. On top of that we really look alike at the same age.

I must admit these first 7 months have been way more fun and interesting than expected. I cannot wait for all the adventures we are going to have together!

In my 2020 year in review, I explained how Revelstoke pulled at my heartstrings and would make an amazing mecca for winter and summer mountain sports. I had no immediate plans to put that vision into action especially as the Canadian borders were closed March 2020 until September 2021. Back in the day I had chanced upon the one house I felt matched my personal contemporary aesthetics. I had envisioned visiting it when the borders re-opened. However, I heard the owners had received an offer they were going to take. I hastily organized a Facetime visit and ended purchasing the house. I closed in June and was finally able to visit it in September when the border reopened. I admit I was apprehensive as real estate often looks better in photos than in person. However, I was blown away. The house is more beautiful and grander than I expected, and I could not be happier with the purchase. We hastily furnished it and were able to come for a week of skiing the last week of the year and to ring the new year surrounded by snow.

Other than that life resumed its course as we learned to deal with the inconveniences of travel in the times of COVID. I discovered Nosara in Costa Rica. I went to visit my dad in Crans-Montana in Switzerland. I renewed my US visa in the Bahamas. I went to a vegan largely off grid retreat in Formentera. I explored Jackson Hole during the summer. I brought François to meet the family in Nice in July. It was great to go back after almost two years away.

Beyond the travels, I implemented my plan of living in alternance between New York and Turks & Caicos. New York came back to life, and once again became a haven of intellectual, social, professional and artistic stimulation. I even re-started hosting my in-person intellectual salons.

Turks provided the perfect balance by allowing me to work during the day, but kite, play tennis and padel, and really take the time to read, be reflective and recharge my batteries.

In 2020, I hosted a family Christmas reunion, rekindling my grandmother Françoise’s family tradition. 27 friends and family came for it and we had the time of our lives. This year, 43 of us came covering three generations of Grindas from 7-months-old to 85! All the joy and laughter warmed my heart and I intend to continue this tradition for years to come.

I was sad my mother could not join us for medical reasons, so I brought her François and went to see her the week before Christmas to make sure she knew we thought about her, loved her and missed her. I really hope she can make it next year!

Professionally, 2021 was extraordinarily busy. We did the first close of FJ Labs III and started deploying capital from the new fund. We partnered with my former OLX co-founder, Alec Oxenford, on a SPAC and with Greentrail Capital on another SPAC. We helped start 5 startups. We also find ourselves spending ever more time in crypto.

Overall, FJ Labs continued to rock. 2021 was our most prolific year ever. The team grew to 31 people and two of our longstanding employees made partner. We deployed $99 million. We made 281 investments, 180 first time investments and 101 follow-on investments. We had 41 exits, of which 24 were successful, including the IPO of Coupang on the NYSE, the IPO of Infracommerce on Brazil’s B3 exchange, the acquisitions of Drizly by Uber, Returnly by Affirm, and Apostrophe! by hims & hers.

Since Jose and I started angel investing 23 years ago, we invested in 835 unique companies, had 259 exits (including partial exits), and currently have 614 active unique company investments. We had realized returns of 45% IRR and a 4.4x average multiple. In total, we deployed $430M of which $148M was provided by Jose and me.

I was so busy professionally, that I did not have the time to write as much as I would have liked to. My best articles were:

Likewise, I did not have enough time to dedicate to my livestreaming show, Playing With Unicorns, but loved reflecting on what is happening in the crypto world and the technology trends for the next decade. I also had a fascinating conversation with my friend Christian Angermayer where we covered everything and anything: the meaning of life, happiness, spirituality, longevity, crypto, psychedelics and much more.

I was not as prolific a reader as I usually am, but the favorite books I read this year were:

I also read two very funny books on fatherhood: Home Game by Michael Lewis and Dad is Fat by Jim Gaffigan, the latter of which I listened to on Audible.

Last year, I worried that negative real rates with aggressive expansionary fiscal policies, while necessary to stave off an economic disaster, were fueling a bubble across every asset class. In 2020, it was most visible in SPACs and public markets. This is starting to correct as the expectation of interest rate rises is leading to multiples compression. The SPAC bubble burst in 2021 and 40% of stocks on the Nasdaq are down 50%+ from their 52-week high. However, I am still seeing a lot of frothiness in late-stage tech investing and a full-blown bubble in art NFTs.

In 2021, as the economy started booming and inflation started taking off, I worried that policy makers would not have the gumption to raise rates leading to a repeat of the 1970s, especially as some were calling for price controls which both economically damaging and ineffective. To some extent these worries have abated. I am more hopeful that we are going to be able to control inflation while keeping unemployment low as it reached 3.9% in December, near the 50-year low of 3.5% reached in February 2020.

This is not to say that we are necessarily in for a soft landing. The extraordinary levels of public debt accumulated will have to be dealt with. In the near term, historically low interest rates are making the record levels of debt manageable. However, the massive debt overhang will require delicate macroeconomic management to avoid a massive financial crisis. Governments and public attention are a bit like the Eye of Sauron: it can focus on one thing at a time. For a long time, it was Trump, then it became COVID, with a sprinkling of inflation and supply chain disruptions more recently. At some point that focus will switch to managing the public debt. How we deal with it will probably set the stage for the macroeconomic conditions, good or bad, for decades to come. As I mentioned in Welcome to the Everything Bubble, there are many ways out of a public debt crisis. There are precedents for managing it effectively as the US did after World War II, however worse alternatives are also possible.

It is worth mentioning that while the emphasis is on economic policy, we are not sheltered from geopolitical risk and its economic consequences. An accident with China over Taiwan or Russia over Ukraine, while low probability, remains a possibility.

Crypto may also be in for a shock. The recent correction in crypto prices suggests that crypto is still highly correlated with other speculative asset classes and sensitive to US interest rates. Everyone in crypto expects a crypto winter. This has become consensus to the point the contrarian in me suspects it may not happen. However, there may very well be endogenous shocks (the collapse of Tether? Busting of the art NFT bubble?) or exogenous shocks (general macro shock? counter-productive US regulation on stable coins?).

We are still seeing supply chain disruptions as Americans have switched from ordering services to buying physical goods at an unprecedented level, especially when coupled with under investment in our infrastructure. I had hoped that COVID would be over by now, but it was not to be. However, Omnicron being so contagious, yet less deadly is accelerating the transition from pandemic to endemic. I am hoping that in 2022, we can finally put COVID disruptions behind us and return to a semblance of normalcy. An increase in the consumption of services would alleviate supply chain problems and help lower inflation. Technology can also play a role. Ryan Peterson, the CEO of Flexport, one of our portfolio companies, notably made many suggestions to remediate the situation.

Beyond that, as COVID moved our lives online, we are seeing an unprecedented wave of innovation in categories heretofore untouched by the technology revolution with strides finally being made in education, health care, public services and B2B. It is amazing that we are finally able to bring to bear the deflationary power of technology and its better user experiences to more categories than ever before. I am ever more convinced that we are going to rise to the challenges of the 21st century and use technology to tackle the three main issues we face: climate change, inequality of opportunity/social injustice and the mental and physical health crisis. It is also amazing to see more people choosing to become entrepreneurs and creators to lead a more purposeful life.

I am extremely grateful for the year I had, with the birth of my son, countless adventures, and to participate in helping create a better world of tomorrow. I am hopeful that 2022 will bring more extraordinary adventures. I am looking forward to seeing my son grow over the next 12 months. It will also be interesting to see what I think of my new distributed life between Revelstoke, Turks, and New York, with a month in Nice in the summer. 2022 should finally mark the end of my renovations in New York. I am excited to move back in!

I am also excited to return to Burning Man and to start training for a 2023 cross-country ski adventure to the South Pole. I am also hopeful that my little family will expand by a new member this year. I was devastated by the loss of Bagheera in 2017 to the point I could not envision getting another dog. However, I feel that the time has come. With a little luck, I look forward to welcoming Angel, a white German Shepherd in my life, in the summer of 2022.

I am privileged to be presented with so many amazing opportunities personally and professionally. In 2022 I need to get better at saying no to focus on what truly matters.

Happy New Year!