Angela Tran Q&A On How Investors Evaluate Recurring Revenue & GMV For Marketplaces

Hi, Angela. Thanks to you and Mike for a great chat so far. I'm Sean, co-founder and CEO of HopSkip. We're a B2B SaaS-enabled marketplace that simplifies how business conferences, meetings, and events get booked at hotels. We're about 3 years old. We've done just about $30 million in GMV so far.

Amazing.

Oh, thanks. Our current business model is based on annual subscriptions to the platform. So on the demand side, we're paid only. And on the supply side, where we operate on a freemium model. We've also experimented with a take rate in the past, but we've recently removed our take rate to reduce friction in exchange for increasing velocity of our flywheel. So my question is, when evaluating pre-seed and seed stage marketplaces, How do you think about marketplaces utilizing traditional SaaS subscription fees versus taking a cut of the transaction?

Yeah, this is, this is like the ever— this is the hardest thing, I think, for an entrepreneur to figure out. Listen, there's like, in the ideal world, you have both, right? That you're able to capitalize on both. And maybe over time, you can figure it out. But this is— so Patch, for an example, This was one of the things that we were thinking about because, and even one of our portfolio companies, Shippo, which is kind of like Stripe for shipping, you can picture it as like a marketplace where you have carriers are on one side and all these shippers on the other, right? And so we figured that over time, the transaction or the take rate actually decreases, right?

Mm-hmm.

And so how do we continue to capture value? Like, will people pay for the value of the platform, right? And then that way you get like repeatable revenue as well. And in Patch's case, this is— we thought about the same thing. It's just like, okay, how do we— like, obviously the GMV is where the real opportunity to become a billion-dollar business is, but it's also really— patchy, right? Like, how do you make sure that you get this continuous kind of like revenue flow? And so can you build value on the platform side? So I think if you're able to charge SaaS, that's wonderful because then you always have a baseline like working capital to deal with. The question is what, like, if you're gonna take it, like, I would just introduce the idea of like maybe payments. Right? So not enforcing it, but there probably is going to be a fraction of these people who want to purchase through the— through— or not purchase. Yeah, purchase or run transactions through your platform. But don't enforce it. Like, just don't force everybody, and you're going to start to see things happen. We even see this with our SaaS primary— like, SaaS companies primarily, where they start out with— like, one company is called Jobber. They're literally like SaaS for like lawn companies or snowmobile companies, like, you know, the field work. And they're, you know, they charge their monthly subscription. And now they have a pay— like, they can run payments. They didn't force it on anybody, but they're starting to see more and more people use it. I think now only like 30 or 35% of their vendors use it. But if you If you can imagine how much business and invoicing happening on the platform, that's like millions of dollars a month. And if they just take like 1, 2, 3%, they're golden. So I would think about it that way. I wouldn't force it. And I wouldn't even call it a take rate. It's just like, hey, do you want to run your payments through this, through, through, through HopSkip?

It's convenient.

You know, see, see what happens.

That's, and that's actually our plan. So I'm glad to hear that.

But I, I think it's awesome that you have people vouching for the, for the value of your, of the platform already and are paying monthly for it. 'Cause that's so predictable. I now think of it's like, oh, it's like cherry on top of like, like, you know, it's like cherry on top of the pie or whatever. Like, I'm, it's perfect now. Now, now you can just capitalize.