Founders building B2B marketplaces must apply the same fundamentals as consumer platforms: supply fragmentation matters most, followed by transaction frequency, CAC, AOV, and take rate. Faire's FAIR Direct model shows how shifting sales to one side and using referrals can improve take rates. Deep industry expertise helps founders spot inefficiencies and design growth models that generate liquidity.
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You know, we're seeing the rise of B2B marketplaces. There are a few great examples of those that, you know, kind of have broken out, as you mentioned one earlier, you know, Faire, then also another being Flexport. So, you know, what do you think are some of the, I would say, like kind of requirements or sort of like checklists for B2B marketplaces?
I think a lot of the first generation of these companies like basically forgot to read Bill Gurley's Marketplace Factors before they started their companies because Like just because it is a B2B marketplace doesn't mean you can escape the fact that supply fragmentation is like generally the most important thing. So when you look at companies like FAIR or Incredible Health or Upwork or more recently companies like Heave, they have supply fragmentation as a core of why they're able to create value in a marketplace. But a lot of these other companies that were created during Like the zero interest rate environment, like Node or Material Bank, like it wasn't really clear that they had that. And when you don't have that, you try to do all this fancy SaaS work to try to unlock a marketplace value prop. And even when you do it, you can't monetize it well because there's just very little incremental demand to be driven. And a lot of times the frequency also isn't high on that demand. Like people do bulk orders every 6 months or whatever. So So yeah, you kind of still need to go through the same sort of checklist, right? Of do I have supply fragmentation? Do I have high frequency? If I don't have high frequency, am I getting my cost of acquisition really low? Because I have some sort of insane edge there in data or content that I can leverage. Usually that's hard in B2B because you're doing sales. So then you're like, okay, can I Have a very high AOV, usually easier in B2B, but then it's like, well, can I have a high take rate? And it's like, probably not, especially if supply fragmentation is low. It's generally hard to have a good take rate. So I think one of the insights of FAIR, right, is they took a B2B marketplace that normally would do sales on both sides and they made it sales only on one side using this FAIR Direct program to make referral the primary lever on the other side. So that's the type of thing you're looking for. I'd say what's different about consumer marketplaces is generally B2B marketplaces require the founder to have deep industry expertise before starting the company. So the Fair founders all worked at Square for years before starting Fair. They've been working with small businesses a ton. The Heave CEO was the COO at a construction company before starting a construction technician marketplace. You know, Iman, who I think, you know, has been on the chat, right, was like doing healthcare consulting and startup work for like many years before she started Incredible Health. Like, you generally need to be deep in that space to understand why it's got a stable equilibrium the way it works today. You got to want to change it, which some people in the industry don't want to because they're making too much money the way it works now. And then you need to have the insight on how it could work better and how you can apply a growth model to that. That can actually get initial liquidity and scale it and all that kind of stuff. It's just hard to learn all of that in like 3 months of research.
