Fundraising Tips For Early Stage Marketplaces (Jeff Chat Clip)

8 Nov 2021 · 2 min

Watch on YouTube

2:04

In this brief interview, an investor with extensive marketplace experience outlines what early‑stage marketplace founders need to demonstrate when raising capital. The core message is that investors prioritize clear, data‑driven unit economics. Founders should either already have positive unit economics or present a credible, detailed path to profitability. The investor stresses the importance of understanding and articulating the margin structure, customer acquisition cost (CAC) versus lifetime value (LTV) ratio, and a suite of specific metrics: average order value (AOV), take rate, gross margins at multiple levels, net contribution margin, order frequency, and retention/cohort data over 6‑12 months and the true customer lifetime. Underwater unit economics—where founders merely assume future profitability without solid evidence—are a red flag. The advice is to be analytical, metrics‑driven, and transparent with all numbers to convince investors of a viable business model.

Chapters

So you have some really incredible experience, you know, on the, on the investment side with marketplaces. So do you have any kind of like tips or, you know, that you'd like to share with us as maybe early-stage marketplace founders that are fundraising?
We care a lot about unit economics. Even if you're very early stage, we'd like to make sure that you've thought through potential unit economics. And what we really care about is we want to understand margin structure, we want to understand CAC, the quintessential CAC to LTV ratio. Typically, we'd like to invest either if your unit economics are already working or you have a very clear path to working unit economics and you can make a credible argument that helps us see the light there. We do not like to invest in businesses with underwater unit economics where you basically claim that you're just going to kind of grow into working unit economics. And so I would— my advice to early-stage marketplace founders is really think through your unit economics, show that you're very analytical and metrics-driven, and make sure you're on top of all of your numbers. And so with the numbers that we— what we like to see, we like to see AOV, average order value, take rate, gross margins on your take rate, and then like the different layers of gross margins. We want to understand your, your net contribution margin, your order frequency, your lifetime value. We like to see it over 6 months, 12 months, and then like your true customer lifetime. We want to understand your recurrence, we want to understand your cohorts, we want to understand— I mean, your retention. I guess lifetime kind of covers that. And, and yeah, I mean, CAC, both paid and blended, and then how that's been trending over time. Unit economics matter a lot to us.