Masterclass On Marketplaces In The Age Of AI With Fabrice Grinda From FJ Labs | EM Group Chat #209

Welcome back to Everything Marketplaces, where we talk about founders and leaders on some of today's top marketplaces. So this is episode 209, which is really good group chat I just had with Fabrice Grinda, who's a partner at FJ Labs. FJ Labs is an early-stage venture fund that's backed over 1,200 startups, including marketplaces like Alibaba, Flexport, Clutch, and more. Fabrice is also a past group chat guest. This is great to welcome back on, where we started off with a quick overview of FJ Labs' venture fund and what they look for in marketplaces when investing. We did a deep dive into marketplaces in the age of AI. We discussed topics like how AI is making it easier for marketplaces to do more, defensibility, the current state of fundraising. Fabrice shared lots of tips for founders, and we also had a great group Q&A. I really enjoyed this conversation, and you're going to find it a great watch to the end. So Fabrice, it's great to have you join us again for the follow-up group chat today. You know, I feel like so much has changed since your past chat. That was only a few years ago. And we of course have a lot that we're going to dive into with this. And, you know, marketplaces in the age of AI, I thought it'd be great if you could start off with a quick refresher on your background for those that might not know you and that have just joined us here.

I've been a tech founder and investor since 1998, so 28 years. Built 3 large venture-backed companies, the last one of which I grew to 11,000 employees in 30 countries, over 300 million uniques. It was a Craigslist for the rest of the world. And throughout this entire time, starting in '98, I started investing in marketplaces. And so I, and I professionalized that in 2016, creating FJ Labs, which is a venture fund specializing in asset-light businesses that work back businesses and marketplaces writ large. And we've invested, I guess, in— yeah, probably should mention a few stats. We've invested in 1,300 businesses. We've had over 300 exits and so far compounding at like whatever, around 30% IRR realized.

That's really incredible background. Of course, that's so much that we're going to get into here. I guess it's a quick kind of refresher. Can you give us an overview about FJ Labs as a venture fund? And what you look for in marketplaces when investing?

So FJ Labs is really a reflection of my personality. I was a super angel before I became a venture capitalist, and I never did top-down fund construction. That's where I see a deal, I meet a founder I like that convinces me, and I invest. And so because I'm intellectually curious, and I think I see tech as solving the world's problems. So in the 21st century, I think there are 3 fundamental problems we're trying to fix. climate change, inequality of opportunity, and the mental and physical wellbeing crisis. And I think I like using tech, especially asset-light tech, to be better, cheaper, faster than alternatives. Now, what I look for hasn't fundamentally changed in any way, shape, or form. I have 4 selection criteria that are still the same. They are today, though there are a few things that have changed in the age of AI, but the 4 selection criteria are the same, which is, do I like the founder? Which for me is someone who's extremely eloquent? Because whether you want it or not, as a founder, you're a salesperson. You're selling employees, you're selling business partners, you're selling investors, you're selling the press, whatever. So it doesn't matter if you're introverted or extroverted, you need to be eloquent. And number 2, can you execute on said vision? And they're both necessary but insufficient if they're separate. So you need both of them together to make a great founder. And the way I tease that in a 1-hour call, If someone can execute is number 2, do I like the business? Which is a combination of total addressable market size, but more importantly for a marketplace, unit economics. What is your fully loaded customer acquisition cost, both on the supply side and the demand side? What is your net contribution margin per customer? What do your cohorts look like over time? What's your LTV to CAC on a CM2 basis? And whether regardless of the stage you're at, I expect you to be able to answer this even pre-launch. I want you to have thought about it. If you haven't thought about it, it's very unlikely you're gonna be able to execute the idea. Number 3, what are the deal terms? And I am price sensitive. And I don't mean I don't want anything cheap. I want it to be fair, fair in light of the traction, in light of the opportunity, in light of what you're solving. Number 4, just as fundamental, frankly, is Are you solving a problem that I care about that is making the world a better place from my perspective? Obviously that is biased, but I have a pretty clear sense of where I see the future of the world heading, the future of mobility, the future of robotics, the future of food, et cetera. And is your idea— and it's good to be aligned with megawaves, right? Like to be going with the current of history and not against it. And so is your idea aligned with the direction of history? And so these 4 criteria are collectively true, I invest and we invest pretty quickly. 2 1-hour meetings over the course of a week, we're in or we're not. So that hasn't changed. But yeah, that's great.

Now, the criteria are going to be very helpful here for everyone. So I'm sure it'll lead to quite a few questions when we get to that group Q&A. But, you know, I want to transition to, you know, talking about marketplaces in the age of AI that we're in, right? Of course, you've seen an impact on marketplaces. So I guess, I guess the starting point, you know, where are we at right now with things?

I would say we're in peak fear. from marketplace founders and public investors as to the impact of AI on marketplaces. They were like, oh, the top of funnel is going to move all over to the agents, and therefore you're not gonna be able to have margin. You're gonna have massive margin compression and disintermediation. Perhaps the short-tail LLMs like the GPTs and Claudes of the world are going to vertically integrate and they'll do everything, and there will be no room for marketplaces at all. And Perhaps the entire stack goes agentic commerce and there's no even a human in the loop and therefore marketplaces are irrelevant. And I could not more fundamentally disagree with literally every one of those statements. First of all, when I'm looking at the behavior of users today in marketplaces, I am not seeing a shift to the LLMs and I don't expect there to be one because There's 3 purchase behaviors on marketplaces. One is you're browsing for entertainment, you know, the equivalent of walking down on Broadway in SoHo and going from store to store. So if you're in one of these types of sites, so think of a Vinted in the used fashion category where it's really browsing as entertainment and you're browsing on average 20, 30 pages per visit, you're visiting multiple times a month. And you're not really looking for anything, but it's a pretty typically low average order value. You see something you like, you buy it, kind of an impulse buy. Again, there is no world in which that feed goes to the LLMs. Like, it's not in the top 1,000 priorities to create a feed of used, whatever fashion, at €30 average price point that you might want to buy in any of the LLMs. And they're organized for efficiency, not for someone who's like trying to browse. So in a world where you're not looking for efficiency, it doesn't work. Number 2, even— well, actually, I'll point out, I'll mention why even if the traffic moved there, I didn't think it would be a big deal. Number 2, if you know exactly what you're looking for, if you know exactly what you're looking for, there's also zero reason to go to one of the LLMs, right? Like the current behavior is you go directly to Amazon or eBay, or to a lesser extent, Google. You type in the model, whatever LG C3 65-inch OLED, and boom, you get it. And by the way, even if you went to Google, the amount of value they capture is pretty de minimis because 43% of the results are actually coming through Amazon and eBay. So the liquidity is still provided by concentrating people in the backend. Now, there's a third category of considered purchases, where I can make a case that LLMs will take more of the value. Because if you don't know what car you should buy in light of who you are, where you should live, etc., then a conversation with an LLM makes sense. And it could— and so for considered purchases. But then again, is Carvana going to be better positioned to tell you, or is it GPT? It's unclear. It's possible it's GPT. But even then, so let's say that's it. Let's say though, so I don't think, first of all, most of the traffic is moving to the LLMs. That said, LLMs now are about a third of the traffic of search, and it's free. So you should absolutely, no questions asked, index yourself in the LLMs, and you should do aggressive AEO. And the early adopters of AEO are going to be winning the free traffic war. And so you can get a lot of free traffic there. So absolutely index yourself there. Don't let them use you for training data, but index your listings such that you show up in the results. Okay, so now let's assume a worst-case scenario. For whatever reason, I'm wrong, and 100% of the top of funnel goes to GPT, and all the searches start there. Now let's think through what is the value— like, how much of the value is GPT going to be capturing in this worst-case scenario world versus the marketplace? And it comes down to, frankly, the job to be done, right? Like, so if you're telling me, You're booking an airline ticket and there are 5 airlines and they have 99% market share and they're oligopolistic. Okay. You're screwed. But then again, in today's world, how much money is Expedia making from airline tickets? Nothing, right? Like they're not really a marketplace. They're a distributor for agents. And by the way, this is true of any one of you building a marketplace out there. If your supply is concentrated, you are not a marketplace. You're a distributor for whomever you're selling, and they are all going to have pricing power over you, and you're not going to be able to have reasonable margin. Now, think of an Airbnb with millions of listings or DoorDash with hundreds of thousands of restaurants. That supply, which has been aggregated, is extremely hard to replicate. There is no world in which GPT is going to go do that. And by the way, the more work that you then do to match them with couriers, like, I mean, DoorDash has the 3-sided marketplaces, like the buyers, the restaurants, and the couriers. The more you do in payments, logistics, et cetera, the more value you capture. And let's not forget, most marketplaces are winner takes most. And most of these categories, you know, there's basically just Airbnb and then there's DoorDash and Uber Eats, but that's it. There's Uber and Lyft and that's it. The more there are these small recurring transactions with massively disaggregated supply, the more value you're going to capture. So The most I can see a GPT capturing would be the equivalent of a Google SEM at the top of the funnel. And that's assuming 100% of the traffic went there. And I don't think the traffic will go there. So I would not worry about like, what is the impact of like agentic commerce? So by the way, agentic commerce today is zero. I mean, it is nonexistent from a volume perspective. Like there are non-human directed purchases of items by agents is like De minimis. And will it grow over time? Yes. Do I expect it'll be more than 10% of commerce in the next 5 years?

No.

So number 2, so I would actually not worry that much about the threats I just mentioned, but instead worry on the opportunity. And to me, that's what people are underestimating is how much you can do today as a marketplace founder using AI. And it is mind-boggling. Let me give you a few examples, uh, like maybe 6 categories of things you can do. One is cross-border commerce. Now, it's maybe less relevant if you're selling in the US, uh, but in India, for instance, where there's like so many languages— Bengali and Tamil and Hindi, etc.— it used to be disaggregated marketplaces selling locally. Like, CDC did not— could not work. You could not sell from one consumer in one region to another because they didn't speak the language. And that was true in Europe. Europe was never Europe. Europe was France and Germany and the UK, and people, the French people don't speak English or German, and you could not be shipping across borders. But now Vinted, which is one of my, the fashion marketplace I mentioned earlier with over $10 billion in GMV, a billion in net revenues, hundreds of millions in free cash flow. Their genius is they're auto-translating the listings. They're auto-translating the conversations between buyers and sellers. And so they're using their French liquidity when they're— what were they— one, to then go to Spain, to go to Italy, and they immediately have liquidity and they immediately become a dominant force. Where investors in marketplaces, like even B2B marketplaces, use car— in cars like Car and Sale in Germany, which is now selling in France, and like within a year, 30% of sales. So you can basically go cross-border and inflect your business 30% in a year using AI. Number 2, listing on marketplaces, historically in most marketplaces, it's 1% seller, 99% buyers. And it doesn't matter what, whether it's services, whether it's products, et cetera. Partly because the barrier to listing is reasonably high. If I need to take 20 pictures and write a title and write a description and select a category and select a price, it's a fair amount of work and most people are lazy and are not willing to do it. And that's even Especially true for low average order value items. And it's also true for categories where the transactions are complicated. But now with AI, you can just take a photo, boom, price, category, description, boom, and you're done. And like even improved listing with higher conversion rate on the selling. So you absolutely should be using AI with the proper training, the datasets for your category, to simplify the listing process to the maximum to improve the percentage of Visitors that are sellers and generally improve the experience that improves the buy rate. Number 3, you can fundamentally inflect your cost structure. We're investors in a company called AceWaves, which does customer service AI for marketplaces. The marketplaces that have embedded it have lowered their customer care costs by 50% in 6 months. 50% while improving NPS. At the same time, by using vibe coding, you can improve your programmer productivity dramatically. So you should be able to improve programmer productivity, lower costs dramatically. Number 4, marketplaces these days have more and more revenue streams coming to them. Like it used to be, you take a commission and that's it. But these days it could be you have a SaaS subscription fee, plus you take a small commission, Plus you're selling, and one of the big ones is selling advertising, selling, and your own sellers buying advertising. So on Amazon, and by the way, most people don't realize Amazon is a marketplace. The vast majority of items sold on Amazon are third-party items. Amazon is totally a marketplace, which manages payments, picking, packing, and shipping. So logistics, returns, and customer care, but they're a marketplace. Buyers, sellers, their merchants buying ads on Amazon for sponsored listings is now a multi-billion dollar category. And the beauty of that, of advertising, is it's a 95% margin product. And so a company like Instacart, 5% of GMV comes from self-service ads, and it's like the vast majority of the profits. And so marketplaces as they scale should totally implement advertising, especially buyers of the market— sellers of the marketplace buying ads to promote themselves using companies like TopSort. And obviously AI, but the thing is, doing it is pretty hard. Like, you can't just be selling to the highest CPC because actually what you're optimizing for is not CPC, it's CPM. You're optimizing for the CPC times the click-through rate. And so you need to have really smart AI to figure out what ads you display where that is going to lead to the highest CPC times the highest CTR. Um, and so it's totally AI-driven on the revenue generation side. Um, and yeah, you know, there are millions of other things you could do, like, uh, tracking of the items. I mean, that basically your company should be built AI-forward and AI-first with integrated AI from the get-go, and this can inflect the business. So I would look at the opportunities of AI over the cost. Actually, no, no, one more, one more thing. There are many categories where marketplaces could not exist in the past because too much human labor had to go in making the transaction happen. And there are many categories where, you know, imagine you're a general contractor and you're doing a build somewhere. The number of subcontractors you're working with is mind-boggling and everything is in iMessage or WhatsApp and there's no Gantt chart, et cetera. Like now you can use AI and agents to basically replace the job of humans and like actually streamline workflows, lower costs. Like I know construction companies that are now, I mean, they're tech companies, not construction companies. They're selling tech to allow people that are like bidding for RFPs for building commercial or warehousing or replying to RFPs from cities. They basically build the RFP where the agent, I mean, they can get through the entire licensing process from a city. They compress the timeframe from years or months or a month to weeks basically. And so there are many businesses that could not be done before that you can build now in the age of AI.

That's a great breakdown, you know, how AI is impacting marketplaces. And I'm glad we also spent some time addressing how marketplaces can kind of do more and also the why now, right now for marketplaces as well. Those are topics that we're often discussing in the community. And, you know, another topic that I wanted to transition into talking about is some of the new kind of strategies because, you know, these AI-native marketplaces, you know, sometimes not taking the more kind of traditional approach to starting a marketplace. So what are some of these new strategies that you might be seeing that marketplaces are starting to use today that are playing out?

Yes, but I'd say they're tactical. So I know many marketplaces that right now, you know, they're using— well, I guess you could use Clock Cowork, but before Clock Cowork came out, they're using OpenClaw that like fed out all the leads of the supply and demand on LinkedIn, created a LinkedIn InMail account, you know, and, and, and reach out and basically with essentially zero cap— well, okay, underlying credits. So maybe not exactly zero. It was able to build both the supply and the demand of the marketplace in a category. I've seen examples where people coded their OpenClass to like basically do telesales where they were coding a voice interface like with Whisper or whatever, and then they would call where they'd get a Twilio number and they'd call and essentially be cold calling at reasonably low costs either supply or demand that they're trying to do. So there are many things you can do to hack liquidity using AI in today's world. So I, but again, to me it's tactical. So here you're using the tools in order to do interesting things or you're using agents to replace, to basically fill roles that would've not been economic and you could not create a marketplace for in the past where now you can make a marketplace work.

Yeah, definitely agree. It's, you know, tactical and nuanced as well. So, and you know, another thing with these kind of new AI native marketplaces, you know, starting, we're seeing, you know, we're seeing them, you know, kind of get off the ground and, you know, getting to liquidity and kind of growing faster than ever. So how does this potentially change how you evaluate them when investing and maybe what some of those benchmarks are for growth?

It's hard to raise for marketplaces today. And the reason it's hard to raise for marketplaces today, the A and the B, is because AI has captured all the oxygen in the room and they've had these examples of companies going from $0 to $100 million in ARR at 90% margin and the Lovables and Coursera, et cetera, of the world. When your measly marketplace goes from $0 to $3 million in GMV and then $3 million GMV to $15 million in GMV to $50 or whatever over 3 years, it's hard to get, you know, the bigger VCs that are writing the bigger checks excited. That said, you can do a lot more with a lot less. And so what I'm seeing more and more of is essentially marketplaces bypassing the pre-seed, right? It used to be your pre-seed stage was a million and whatever, 6-3. I mean, again, if you're in YC, it's gonna be 30 or 40, but so there's a range, but maybe it's 8, you know, these days or whatever. And you needed a million to get traction where you could get your seed round and your seed round. And by the way, the seed for marketplace businesses, the valuations haven't changed all that much. They've inched up a little bit, but Frankly, we're still seeing a lot of seeds where the company's doing $150K a month in GMV, 15% take rate with a 70% margin, and they're raising $3 at $12 pre, right? Like, and maybe they're raising $5 at $15 or whatever, but it's like not, you know, and maybe the median Series A now with a 15% take rate, right? So is maybe $10 at $30 pre with like a $750K million a month in GMV. So, I guess the traction expectation has gone up because you should be able to get more. And so, we're much more like, we don't do that much idea anymore. People come to us and it's kind of, even though they're 2, it's already live. They already have some traction. They already have their unit economics, et cetera, because you can build anything with like nothing. And in fact, if you are not capable to launch, you get traction with very little, with like peanuts money, it actually speaks to your inability to potentially execute in the category you're in. And so I'd say a big trend is bypassing of the pre-seed round, going straight for seed with traction. Now look, if you have— there's a few exceptions where people have been able to scale dramatically and they go from not The old school was you were at $150K a month, you raise 3, you go to $750K a month, you raise 10 or 7, you go to $2.5 to $5 million a month, you raise 15 or 20 or 25. Sometimes you can accelerate that. The thing is, I haven't seen that much acceleration in these businesses versus pure AI native type SaaS subscription companies. These have been able to scale insanely, insanely fast. I have not seen much of that. The only places where GMV scales like crazy is in the B2B marketplaces. But then again, if your take rate is 1%, I don't care, right? I care about the net revenue, not the growth, the GMV. And so if your take rate is, you know, so a million with 15% take rate is $150K net. And so if you're at 1% take rate, you know, I need you to be at $10 million, not $1 million to be at the same Series A level traction.

Certainly. And you did mention that you're seeing some kind of like skipping pre-seed and just being able to get much further. And so I guess like kind of related to that, how do you think AI will start to change the capital needs for startups and marketplaces specifically in the future?

AI itself has been extremely capital intensive, right? Like, so part of the reason it's hard to raise for marketplaces right now is all the oxygen in the room is being captured by AI, right? Like 95% of YC companies are AI companies, 75% of the funding in '25 was going to AI, and I mean AI LLM type companies, and almost all the capital went to like 5 companies. So not only is it all AI all the time, it's also Claude or Anthropic and ChatGPT capturing a massive percentage of that capital, followed by the whatever Lovables and Cursors of the world and ElevenLabs. And to a lot, well, and then defense tech, like things like Enduro, which is also AI adjacent with a big chunk of AI or whatever figure, which have like big AI components. The answer is pretty typical. It depends, right? I think it depends what your customer acquisition— like at the end of the day, marketplaces, as I mentioned earlier, are unit economic businesses. And so it's a question of how quickly can you make the unit economic work? And often the unit economics are not great in the early days. In fact, A clear signal that you have product-market fit and that you have— you're building an actual marketplace, network effects, is that your CACs are going down. You know, every more buyers bring more sellers, every more sellers bring more buyers. A clear sign that you don't is as time goes by, you're spending more and more to bring the marginal users, and then you're more of a sales-driven type of organization. And so to the extent that you have positive unit economics, lowering CACs, and you're able to automate more of the processes, Do I think you could go a lot further with a lot less capital? Absolutely. But again, to this date, and I've been about, you know, I'm still investing in whatever, 150 marketplaces a year. I haven't seen many examples of marketplaces that have scaled, you know, to extraordinary scale with very limited capital. Now I've seen them scale with very few people because they're now using agents to be much more productive. But they're still using capital essentially to scale supply and demand, right? And you always want to scale both in parallel. And it kind of doesn't matter whether it's sales-driven, it's marketing-driven, it's agent-driven. They all have costs involved or associated with them. And so I have not seen something go from zero to a billion in GMV with no capital raised, essentially. Maybe OnlyFans. Rather than OnlyFans.

Yeah, definitely. And you kind of, you briefly mentioned earlier as far as like, you know, the kind of market sentiment and then, you know, when it comes to, you know, fundraising. But I think, you know, a topic that right now that has been, you know, coming to light a little bit more is the note around defensibility, right? And then, you know, so how do you think about defensibility, you know, in the age of AI and specifically with marketplaces now?

So first of all, you should all go to my blog and watch episode 52, Marketplaces in the Age of AI. And I have a few slides there that look at What are the things that make you defensible against AI and long-term? So first of all, whenever you launch a marketplace, you have zero defensibility, right? So your moat is your liquidity. Say at the end of the day, it's liquidity, liquidity, liquidity, liquidity. And once you have liquidity, you're basically non-displaceable. I mean, just look at Craigslist, which is still shockingly still relevant in 2026 from a volume perspective in certain categories like blue-collar jobs. Despite being, you know, having the worst UX/UI, intentionally destroying liquidity, doing things like charging, etc. But the way I would think about it is, A, how much work are you doing as a marketplace, right? Are you purely a lead gen marketplace, whatever, Zillow, Angie, and you're not really doing anything? Or are you heavily managed, DoorDash, Amazon, you know, where you have like warehouses and customer care and returns and payments and managing third-party delivery? The more managed you are and the more fragmented your supply is, the less amount of impact, the more defensible you are. The other thing I would think about is how frequently are people buying the product and how much time do they spend thinking about what they're buying? And again, the less time they think about why they're buying, meaning it doesn't require research, and the more frequently they're buying the product, the more defensible you are. So Instacart, DoorDash, Uber, Amazon, Etsy, eh, not really worried. Now, if you're a high consideration purchase, so people are spending a lot of time thinking about whatever they're buying or someone they're hiring, and it's not very recurring, probably a lot riskier. And so I think there are a lot of things you can do to defend yourselves from the LLMs by just doing more and picking the categories where this is true. But ultimately, once you have liquidity, you know, you're not— it doesn't matter. Even if the top of funnel went to the LLMs, they— because the transaction would be happening through you, even if it's an agent executing it, you would be capturing most of the value.

That's gonna be a really helpful breakdown for us here. So, well, cool. So getting some questions from founders, and I promise, I promise I'm gonna save time for the, you know, group Q&A. But, you know, right before we jump into it, you know, do you have a few tips for founders, you know, starting on marketplaces today?

Yeah, use the AI tools in the ways I mentioned earlier. Be super capital efficient because capital is going to be hard to get to, to get by. Make sure you go as far further. Basically, make yourself default alive and default investible. If your traction is so indefutable and the business is so good that some VC is going to have to fund it no matter what, right? If you went from 0 to whatever, $10 million a month in GMV with very limited capital, the great unit economics, It doesn't matter that the next stage is $30 million a month and not $100 million. It's okay. You're going to be— someone is going to invest in this. And there's still VCs that like marketplaces because they are defensible. I mean, what people are not realizing is like 46%, I think, of AI companies ever created are already dead. You have companies that go to like $4 billion in value, like all of AI, and they die. So your companies are a lot more defensible, but in order to make it, use the tools, be capital efficient, have great unit economics, and really find liquidity. And the way I would find liquidity and prove your product market fit, you know, I'll share the biggest mistake I think marketplace founders make. The biggest mistake marketplace founders make is because sellers on the marketplace, it doesn't matter whether they're selling products, items, services, whatever you use, etc., or financially motivated by the marketplace, it's very easy to flood your marketplace with supply, right? Like anyone you go to, even though you said you have no traffic, you're like, hey, I'm launching a marketplace, you want to list here, it's free, and we'll decommission ourselves, everyone will say yes. The problem is that if you have infinite supply, and you have no, you have no demand, You're going to have zero engagement with the sellers. They're not going to be engaged. If someone actually by mistake buys something, they're not going to reply. They're going to have bad experience. It's way, way, way better to have like the best, highest quality, most curated supply. You treat them well, you make them happy, you bring them depending on the category. If it's items they're selling, maybe a used item they're selling, like a 25% probability of selling. That's like low end of liquidity. If it's a service, you want to represent at least 25% of their income, ideally 100%, you know, à la Uber, but maybe 25%. And then you start scaling the supply, then you add more demand and you scale them in parallel. You never want to flood your marketplace with so much supply that your liquidity goes down. It's liquidity, liquidity, liquidity, and when in doubt, more liquidity.

Yeah, that's going to be great. So I'm glad we're highlighting the importance of that. And then, you know, I can speak from my own experience myself, you know, grew kind of supply early on at the cost of demand. So, well, cool. We're going to get into the group Q&A. Hey, Lisa, I saw you raise your hand. Do you want to jump on here?

Yeah. Hi, Fabrice. Good to meet you. I'm Lisa. I'm building Buddy, a B2B recycled metals marketplace. I know you are an index fund and get a huge amount of opportunities cross your way and managed marketplaces and true marketplaces, right? So both of those exist, but I think you will have seen like revenue means, can mean completely different things in a true versus managed. For example, we're take rate based. Everyone else in our space is buying and reselling as principal. So—

Yeah, but we're not dumb. Meaning if someone buys and resells and they count that as revenue, of course, I still look at the margin that they have and also the capital efficiency if they have inventory. So at the end of the day, I'm going to be comparing apples to apples. So I will look, if your revenue is your take rate, I will look at what the margin structure of that take rate, I'll compare it obviously to what the other. So it's, so I would not overthink, I would do whatever is right for the business from a KPI, OKR perspective and would not overthink this. So investors are not, you know, marketplace investors understand the difference.

Thank you. And I know you're a marketplace investor, so you're very familiar with that. But our experience has been non-marketplace investors have you know, not maybe evaluated in the same way as you. And so I was wondering if you had any advice around the framing around, you know, being something that has the potential to become a transaction layer because it's, you know, the nature of a true marketplace versus, you know, only being able to take the revenue off the transactions that it captures.

I mean, you should, to the extent you track it, mention all the GMV that's going through the platform, right? Like then it becomes a lot more comparable to whatever the top line of the guys that are buying and selling.

Okay.

You know, try to index them to GMV. And then you can talk about like what percentage of the transactions you're able to monetize today versus you'll be able to monetize in the future and why, what the current take rate is and why you think that can trend upwards. In B2B marketplaces, the take rate you can take varies on the elasticity of supply and demand. And there's some categories where frankly you can't take anything, you could— it's zero. But there's some categories where, you know, you start at 1, 2, or 3, but Over time, as you have more liquidity and you provide more value, you can actually start trending it up to 7, 8, you know, 6, 7, 8, or 9. And then you can add things like financing, you can add things like insurance, you can add things like whatever other value-added services to get your blended effective take rate or whatever, 10 to 15.

Hey, Fabrice, I want to ask a question for a founder that couldn't join. And this is somewhat common as well in the community. And it was around transitioning to being AI native or, you know, considering like how AI is impacting your business. So we have a lot of you know, marketplaces that have previously, you know, say like a year and a half ago, kind of raised like a pre-seed round. So are there maybe any kind of like best practices or kind of tips that you have for, you know, businesses that have, you know, previously raised kind of pre-AI kind of era? And then, you know, today thinking about like how this impacts their business and potentially kind of transition it.

I mean, to me it's the exact same advice if you're building a startup today, like use the tools, integrate AI, like there is a BA for it. And if you need to rewrite your stack, Rewrite your stack. But then again, often you don't need to. And by the way, like a lot of our marketplaces, I mean, they're using off-the-shelf tools, right? Like using Shopify, because at the end of the day, it's less the tech layer, even though you are doing things like, you know, like single photo listing, et cetera. It's much more about unit economics and liquidity that is the differentiator than the underlying tech platform. But yeah, be beat tool forward and do AEO, uh, and index yourself in, in, in the LLMs.

Hey, Molly, sorry, raise your hand. Do you want to come on? Sure.

Yeah. Hi.

Um, so I'm the founder of Recess. It's like the Booking.com of kids' classes and camps. Um, we've raised $4 million to date. We have less than a year of revenue, but we're growing really fast.

So we're going out for our next round soon. One question that's come up in discussion with investors is around LTV.

Which our LTV is pretty long given sort of the age of child that we serve. Our ICP realistically have zero data to back up that LTV. Is there anything other than user research, research that's out there about when the purchase cycle normally is for your product that investors would accept for LTV? Imagine that you're in I didn't actually hear what you were selling, but to the extent churn is low and people are paying monthly, for instance, they're willing to buy your LTV because the churn is low, right? Like, so net revenue retention after 6 months, 12 months, 18 months, et cetera, actually speaks to— even though— so most startups that we look at at the seed have not been live for more than 18 months, and yet we can project an LTV to CAC over 5 or 10 years based on churn. So to the extent you have negative net revenue retention, or so you have 150% net revenue retention after 18 months or whatever, you can actually do, and you know what your monthly and annual churn rates look like, you can actually project that and we will buy it. We will buy what your long-term LTV to CAC looks like because it's driven by your cohorts. And as long as the cohorts keep looking good and the churn remains the same, it remains good, it'll be fine. So I don't need you to have been live for 10 years to buy that you have users that will be paying for 10 years as long as the data is there to support it.

Hey, Julius, saw you raise your hand. Do you want to jump on here?

Wanted to ask on CAC on the seller side, what would be like benchmarks you would have maybe, or say where you're saying CAC is actually quite good and also conversion rate, meaning that we onboard a seller and then he basically that lists something on the platform. We have 16,000 monthly active users. That's kind of like where we're currently at. I'm just curious on the CAC side, on the seller side. The CAC your support is driven by, that you're willing to support, is really driven by the LTV, you know, that the user, that they have. And so I can't answer the question not understanding average order value, how many items they're selling, Et cetera, et cetera. But you want good economics, right? Like, and usually the seller economics are much better than the buyer economics because one seller ends up selling a lot of items over a long period of time. So typically, because it's easier to get sellers than buyers, the unit economics on the seller side are much, or like 20 to 1 or 50 to 1 or 100 to 1 versus the unit economics on the buyer side are only 3 to 1 or 4 to 1 because you're spending a lot of money on Google and these guys buy, I mean, it depends on the category, but like once or twice versus the sellers keep selling over and over and over again. And so I would make sure that your seller economics or whatever, 10 to 1, you know, 20 to 1, like on a unit economic basis.

Hey, Godfrey, sorry I raised your hand. Do you want to jump on? We'll try to get one last question in here.

So Godfrey here, founder of a cross-border shipping marketplace that helps used car dealers and machineries abroad to find vetted freight brokers for shipping their cars from auctions in US and Canada overseas. So you mentioned that one of your 4 criteria for funding is good deals. And I was looking at the FGL Labs fundraising metrics. My question is, how have these fundraising metrics changed? It hasn't really changed honestly in marketplaces. We're still— maybe it inched up a little bit in both round size evaluation, but not all that much. The things that have moved the needle have really been the AI companies where you have like a company like AMI Labs that was raising a billion seed at like $3.5 billion pre or whatever. And then when you look at the averages, the medians in the industry, nothing makes sense because you have like these stupid deals in AI. that are completely inflating or conflating what the statistics are. But other than the fact that people are skipping pre-seed, for the most part, we haven't seen a very big change. But what we have seen is a difficulty in raising. And so, you know, you need to have a growth story at good economics that makes it basically so compelling that the VCs have no choice but to take you seriously and invest.

Well, it's a great way to wrap things up here for Reese. You know, I know we're out of time here, but, you know, I really appreciate taking the time to join us here today for the, you know, follow-up group chat. And I know you really packed it in. And, you know, some of the topics and questions are, of course, like really nuanced and it kind of— it depends, right? But I think this is great and it's going to be super helpful for everyone. And, you know, I had one last question and this is my typical kind of, you know, parting or closing question. So I'll slightly reframe it this time, which is that if you could go right back to, you know, pre-2026 and this kind of new era that we're in with AI, you know, what would you tell yourself about marketplaces specifically?

You know what, honestly, if there's one type of business that I think is going to be the most insulated from the AI revolution, it's marketplaces. And by the way, if there's a category where I think people are still underestimating how big it can be, it's marketplaces. Like right now, yes, in our consumer lives, we're actually very well served, you know, between Lime and Instacart and Amazon and eBay and And Uber and Airbnb, we have marketplaces covering 15%, 20%, 25% of commerce in each of the major categories. But then you're looking B2B and nothing's been done. We're like sub-1% penetration in most categories, definitely sub-5% in these categories that are trillions and trillions of dollars. And where I think because you could do much more work and because they're also slow moving, et cetera, you're going to have amazing defensibility. I still think marketplaces are the way to go. They're asset light. They're going to— you're going to build a moat. They're going to be defensible. Just use all the tools. Don't index yourself, but don't let them use you for trading data, to be clear. And yeah, you're still in the right place doing the right thing.

That's great. That's great parting advice. And you got lots of head nods with that. So, you know, we once again really appreciate you taking the time to join us. And of course, I share a link to, you know, your blog and, you know, to FJ, you know, so everyone can keep up to date and follow along if they don't and reach out as well. So really appreciate, you know, joining us and thanks everyone for the great questions today.