If you've been following the news this week, you've undoubtedly heard of Vinted, the second-hand clothes marketplace that is now valued at a whopping $4.5B valuation, up %350 since its last round at the end of 2019.
With more and more people paying attention to sustainability and a global pandemic disrupting the world economy, the circular economy is one of the most exciting market trends of this decade. And with startups like Vinted growing at an amazing pace, it is no coincidence that we see more and more marketplaces starting every single month.
But should we invest in marketplace startups? Yes, but not at the seed stage. I reviewed hundreds of pitches on three different platforms this month, and at least 10% of them were marketplace companies, with many of them working on the exact same idea.
I reviewed two startups working on a gig marketplace (just like Fiverr but for non-digital gigs), two working on a rent-anything marketplace (just like Vinted but you rent instead of sell), one working on a rent-a-boat marketplace (just like Airbnb but for renting boats instead of apartments), and the list goes on.
Marketplace companies can be amazing businesses that generate incredible shareholders value, but only after they generated the required Network Effect to became market leaders. So while I love having leading marketplace companies in my GARP stock portfolio, I would never invest in a marketplace startup at the seed stage because there is no rational reason to invest. Anyone can start working on a marketplace—there are no barriers to entry, the execution risk is incredibly high, and the risk of failure is just too high to justify an investment.
Back to Angel Notes, I'm still working on due diligence of Vin Social and Place Technology (both raising on WeFunder). I have a call scheduled with both founders—we're going to meet Vin Social's founder this Wednesday, May 19, and PlaceCPM's founder on Wednesday, May 26. If you are a premium member, make sure to check your inbox because I'm about to send you an invite to join the google meet calls so that you can ask them directly anything you want. If you are not a premium member yet, you can upgrade before this Wednesday to join both calls.
I hope you enjoyed the reading.
Let's get back to work.
As always, see you next Saturday!