B2B Marketplaces (B2BM) are one of our thematic focuses here at Newark Venture Partners (NVP). By being thematic and going deep in a smaller number of areas, we develop (1) a more complete network of B2BM founders, investors, and deals, and (2) a sharper, more opinionated point-of-view on what makes B2BMs successful. Over the last 18 months we have screened ~200 companies that leverage the B2BM model or significant B2BM characteristics. This approach allows us to recognize great B2BMs quickly, establish credibility, and add value immediately for those that we invest in.
Although it is a common notion that “Team” is of paramount importance in all start-ups, there is a unique team formation we have found to be particularly successful at building B2BMs. I am going to call it the “dynamic duo” – a founder with deep experience and connections in their industry, working side by side with a founder who has high-growth start-up experience. Let’s call them Batman and Robin; the founder with real industry-DNA and a founder with real start-up DNA.
Batman (from industry) has spent years at a legacy player and understands the ins and outs, knows the customers and suppliers, speaks the industry lingo, and understands what success looks like. He/She has worked in outward facing management roles: sales, BD, customer success, procurement. In short they are authentic, credible, connected, and high performing, from the perspective of the legacy industry and its players. But they are also truly frustrated. They have felt the pain of the legacy industry’s manual low-tech process where state-of-the-art is paper, phone, Excel, email and maybe some old clunky software from the ‘90’s. They are young enough (in age or spirit) to have grown up with iPhones and B2C tech with intuitive, effective software that just works. They know there is a better way; and they have the vision and motivation to build it.
Robin (from start-ups) has spent formative years at one or more start-ups that have built out new markets, experienced product market fit, and seen high growth. Even better if this experience was as a founder or early employee, and better still if the company was a marketplace model (that needs to serve both customers and suppliers to be successful). Best case scenario: they have also successfully fundraised in some context. An example might be someone who opened markets for Uber or Lyft, or was a founder of a restaurant software that raised money but failed. They know how to hustle, run through walls, get people on their platform and make them happy. Having significant practice pitching, they know how to explain a complex two-sided business, and make the opportunity clearly understood.
You can see this model working at B2BMs like GearFlow, a marketplace for heavy equipment parts (think: specialized parts needed for the machinery involved in crain work, concrete, or utility maintenance). Prior to Gearflow, Luke Powers grew up in the heavy equipment industry, dealing with challenges that owners face to keep fleets of these machines running. Dealing with this endless struggle to procure the right parts quickly, he began envisioning a better way. He teamed up with co-founder Ben Preston who spent almost a decade at digitally native businesses and in the venture world. Ben had the start-up experience and technical skills to help build the marketplace that Luke was driven to create. GearFlow recently raised a $5.5M Seed Round, and we believe they are on the path to great success.
While both Ben and Luke are credible and successful co-founders in their own right, together they have been able to grow a business that is adding real value to customers and investors. Together, the dynamic duo educate each other and are able to play to their strengths, dividing and conquering. Their approach, product, and traction embody that critical mix of legacy customers/suppliers willing to adopt, with results that demonstrate a real competitive advantage.
Our team at NVP is looking to connect with the next great Batman and Robin! If you are a B2BM founder, please reach out to Tom (TW@Newark.vc) or Sean (Sean@Newark.vc) to share more about what you’re building! Read more about our B2B Marketplace Thesis here.