Collaborative Economy Markets: Platforms, Providers, and Partakers

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Marketplaces. They’re all the rage. In fact, the media can’t stop talking about thempeople can’t stop searching for them, and investors have deployed $2.4 billion in just the last seven months.

So what’s a marketplace all about? First of all, it’s not a new concept. It predates Airbnb and even the birth of the Internet. The ancient Greeks called them Agoras. Marketplaces go back to the earliest civilizations when farmers and villagers gathered at a common location, usually in a town square. We get the words “agriculture” and “agoraphobia” from the original koine Greek word.

Honeycomb
Above Image: Click to see a sample of dozens of marketplaces in six major verticals, read the full post.
These marketplaces can exist anywhere, through mobile, social, Internet of Things, and payment apps. Today, the most common marketplaces, like eBay, Airbnb, Etsy, Lyft, CustomMade and Lending Club, allow just about anyone to offer goods, food, services, transportation, space, and even financial solutions to each other. These are now called “two-sided marketplaces,” which means there are two distinct positions that anyone can take on each trading platform. In fact, any one individual or entity can actually take both positions on some platforms. For instance, people who sell on the eBay platform usually also are buyers on that same platform. The two sides in the two-sided marketplace are

1) Platforms, a system that enables this trade in an efficient manner
2) Providers of resources, someone who offers them.
3) Partakers of these resources, someone who receives them.


Marketplace Examples: Platforms, Providers, and Partakers
Here’s a few examples to help illustrate, using the same categories as the Honeycomb image above.

Industry Platform Providers Partakers
Goods eBay Merchants Buyers
Goods Etsy Makers Buyers
Food Feastly Cooks Feasters
Food Cookening Host Guest
Services Taskrabbit Tasker Customer
Services eLance Freelancer Client
Transporation Uber Driver Rider
Transporation Lyft Driver/Friend Rider/Friend
Space Peerspace Venue Host Guest
Space Airbnb Host/SuperHost Guest
Money LendingClub Investor Borrower
Money Kickstarter Campaigner Backer
Money Coinbase Merchants Users

 

You may wonder why these marketplace companies (the Platforms) are performing so well. It’s because they enable seamless transactions, regardless of locations or social relationships, and they take a cut of the revenues at scale. They have recurring revenue without owning most of the liability – they are efficient, money-making machines.

Additionally, these platforms offer a number of features that enable smooth transactions, including, but not limited to, inventory management, profiles and reputations of Providers and Partakers, payment systems like Stripe or Braintree, matching software, and marketing services to amplify all services involved. They also offer on-boarding services, customer care, insurance, and lobbying at the government level to further empower their business.

Big corporations won’t stand by idly and allow the market to displace them. We’re already seeing big companies host their own marketplaces, turning a two-sided marketplace, into a three-sided one (Providers, Partakers, and the Brand Product), offering value added service) like Patagonia’s Common Threads marketplaceGM and RelayRides enabling used cars to be shared, and Coca Cola offering a workforce marketplace with Wonolo.

In summary, marketplaces aren’t new, but they are now being created for just about every vertical niche, location, and need. They’re becoming more efficient as they utilize emerging, new technologies to find idle resources on demand. And they are heavily funded. Not all marketplaces will succeed. Recently, Menlo Ventures hosted an event where we shared the lessons learned regarding what works, and what doesn’t.

I hope this post provided additional clarity, to dissect how this growing market works.

Disclosure: Coca Cola is paying member of my company, Crowd Companies.

 

 

Why Investors are in Love with the Collaborative Economy

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Money Dollar
Continued analysis of market funding in the Collaborative Economy. Yesterday’s stunning news of European ridesharing company, BlaBlaCar prompted me to tally up the funding in 2014. Along with help from industry experts Lisa Gansky of Mesh Labs, Neal Gorenflo of Shareable, Mike Walsh of Structure VC and Michelle Regner of Near-Me. I tallied funding if the startup was over $1 million and there was a public record of the funding. I’ve published my analysis of funding in this movement before, from the banner funding month in Aprilthe frequency of top VCs and my larger body of work looking at funding in the Collaborative Economy and Social Business.

[2014 funding has increased 350% in deal size mainly due to large investments in Uber, Airbnb, Lyft, Lending Club, and BlaBlaCar] 

Exactly one year ago, the average funding amount was $29m. In July 2013, I surveyed a sample of 200 startups (read full report). I found that 37% had been funded, with startups receiving an average of $29 million in funding. The 200 had received over $2 billion in total funding, which is a very high amount for a largely undeveloped, pioneer market.  Interviews with several of the Venture Capitalists in this space indicated that they favor two-sided marketplaces that are scalable and have low inventory costs

[In 2013, average funding was $29 million. In 2014, the average funding amount is $102 million due to outliers, like Uber, receiving over $1.2 billion] 

In the first half of 2014, the average funding amount, is a whopping $102 million. The findings are stunning. I’ve not seen this much investment in tech startups for some time. Some data highlights: In seven short months, there’s been at least 24 distinct funding instances of at least $1 million or more in investment funding. Of those, Uber received the lion’s share of a whopping $1.2 billion in investment for global growth and product expansion. On average, $102 million is the common amount, but if you strip off the Uber investment, Airbnb, Lyft, and Lending Club are lower in investment amount, bringing the average closer to $52 million, which is still very high.

Collaborative Economy Funding 01

 



Last Seven Months of Collaborative Economy Funding by Date
You can access the Google sheet with this data by date, industry, and size. Please note the numbers are shifting as new data is being added.

Date and Source Startup Amount
1/10/2014 Sidecar $1,000,000
1/20/2014 Hailo $26,500,000
1/29/2014 Zopa $22,700,000
1/30/2014 Scoot $2,300,000
2/18/2014 Postmates $16,000,000
2/24/2014 Deliv $4,500,000
2/28/2014 SkillShare $6,100,000
3/20/2014 Pley $6,800,000
3/26/2014 CircleUp $14,000,000
4/2/2014 Lyft $250,000,000
4/8/2014 Airbnb $500,000,000
4/10/2014 Pivotdesk $3,600,000
4/14/2014 Storefront $7,300,000
4/26/2014 Yerdle $5,000,000
4/28/2014 OurCrowd $25,000,000
4/29/2014 LendingClub $115,000,000
4/30/2014 MakeSpace $8,000,000
5/4/0140 Prosper $70,000,000
6/4/2014 Sidecar $3,100,000
6/6/2014 Uber $1,200,000,000
6/16/2014 Instacart $44,000,000
6/24/2014 Cargomatic $2,600,000
6/24/2014 RelayRide $25,000,000
7/1/2014 BlaBlaCar $100,000,000
7/3/2014 Traity $4,700,000

Last Seven Months of Collaborative Economy Funding by Amount
Above image is the same data.

Uber $1,200,000,000
Airbnb $500,000,000
Lyft $250,000,000
LendingClub $115,000,000
BlaBlaCar $100,000,000
Prosper $70,000,000
Instacart $44,000,000
Hailo $26,500,000
OurCrowd $25,000,000
RelayRide $25,000,000
Zopa $22,700,000
Postmates $16,000,000
CircleUp $14,000,000
MakeSpace $8,000,000
Storefront $7,300,000
Pley $6,800,000
SkillShare $6,100,000
Yerdle $5,000,000
Traity $4,700,000
Deliv $4,500,000
Pivotdesk $3,600,000
Sidecar $3,100,000
Cargomatic $2,600,000
Scoot $2,300,000
Sidecar $1,000,000


Data Summary

  • Total investments from in last seven months: 24
  • Average deals per month in 2014: 3.4
  • Average funding amount in June 2013 study: $29 million
  • Average funding amount in last Jan-July 3, 2014: $102.6 million
  • Median funding in last seven months: $14 million
  • Average Funding Amount (excluding Uber) in last seven months: $52.6 million
  • Total Amount of Funding in last seven months: $2.46 billion
  • Increase in funding amount per investment in 12 months: 351%

Conclusion: Investors love the Collaborative Economy – But will it bust?
So, why are investors betting big on the Collaborative Economy? These scalable business models run on top of highly adopted social and mobile technologies. They offer a high frequency of transactions, with low operating costs. They are also disrupting traditional corporate business models, as they are more efficient by leveraging internet of everything, mobile devices, apps, and payment platforms. Neal Gorenflo reminded me that these startups cause the incumbents to wail in the media, creating incredible low cost PR value, which in turn attracts more customers.

In summary: Investors expect these startups to be highly profitable and are betting down big.

(Photo Credits, used with Creative Commons)

12 Collaborative Services for Success at Work

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This post was originally posted on Shareable, the leading website on the growing movement. Top photo credit: Yusuke Kawasaki.

The collaborative economy empowers ordinary people to share their unused resources, such as time and goods, often in a peer-to-peer commerce model. We tend to think of this model impacting us as individuals, as illustrated in the popular Honeycomb graphic. However, shared services (many of which I use) aren’t limited to personal use. The collaborative economy model is expanding to include these strategies and technologies at the B2B level. See my quick guide on how companies are integrating them into their own strategies.

This successful expansion of applications begs the question, “Can the sharing model work for individual professionals?” Not only will it work, it already does work. Now that these services are available for personal use, we’re also seeing them expand into the business world. These services help professionals outsource tasks in their work life so they can focus on their core responsibilities and competencies.

Here’s a list of collaborative economy services targeting business professionals. As you’ll see, this market isn’t just about ride sharing and home sharing. If you know of other similar services, please share them as comments below.


Fon hotspots in Paris, France. Photo credit: NRKBeta.

  1. AirPR: On-demand PR professionals in two-sided marketplaces of providers and communication buyers, AirPR tracks actionable insights into what is, or is not, driving engagement.
  2. CloudPeeps: On-demand community managers, ready to help your company scale up for launches or during seasonal periods. CloudPeeps provides the services of experienced professionals to assist with everything from startups and small businesses to mature enterprises on an as-needed basis at a fraction of the cost of a full-time manager.
  3. PeerSpace: Does your team need a creative or inspirational workspace? PeerSpace offers both sides of the unused space sector, bringing together those who need workspace with those who have unused space. There’s even an app for that.
  4. Zirtual is a virtual executive assistant service that matches busy people with dedicated personal assistants to manage details so that you don’t have to.
  5. Trunk Club: Are you a busy, male executive who wants to present yourself as stylish and professional?Personal stylists are available to help you look your best. Trunk Club sets up a profile for you, then saves you time by sending you a new “trunk” of clothes selected especially for you on a regularly scheduled basis. Keep and pay for what you like. Return the rest. It’s shopping at its best.
  6. Refashion your clothes. Female executives have access to a million dollar wardrobe, yet keep expenses low and closets manageable. See ThreadflipBag Borrow or Steal and Rent the Runway.
  7. CrowdSPRING and 99designs can help create your new website, microsite, logo, or PowerPoint presentations and make them look amazing using crowd-sourced experts.
  8. oDeskthe world’s largest online collaborative workspace, and Elanceproviding access to more than two million skilled, independent contractors, bring together savvy professionals and professional freelancers, offering a large market of workers that can help you with copy editing, online research, translating, digital production, programming, administrative work and much more.
  9. Breather. Need a place to work? Executives will like Breather, an online repository of beautiful, private places to work, meet, or relax in several big cities. This is a step up from the more pervasive Regus (over 2,000 locations worldwide) or a loud coffee shop.
  10. Sprig delivers inexpensive hot meals on demand to you or your employees, or you and your boss, or you and your family, within a few minutes in the San Francisco area. This is not fast food. These are hand-crafted meals created by former Google executive chef Nate Keller. And, yes, there is an app for this service, too.
  11. Fon offers free, shared Wi-Fi in over three million locations.
  12. Shapeways: Get custom-made, 3D printed, products, or gifts for your customers and colleagues including jewelry, miniatures, desk accessories, and art.

The collaborative economy is exploding, reaching into all areas of life and work. These services enable any professional to have access to a broad marketplace of talent without having to hire them on a full-time basis. On the flip side, it enables the providers to set their own schedule, work on projects they want, and have more control over their work life balance. Even the invention of sliced bread was not as good as this.

Tesla Lets Go, to Gain the Market

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Screen Shot 2014-06-14 at 7.55.09 AM

Can a corporation let go, in order to win it all?

Tesla has deployed a business strategy we call “Provide a Platform” which enables your ecosystem to design, build, enhance, fulfill, support your own products for you.

Tesla, who’s already a market leader in their category, made a surprising move, by releasing their patents as open source.  This move patterns co-innovation moves we see from companies in the Collaborative Economy that are partnering with their own customers to create products like GE+Quirky, Barclay’s Card Ring, and others companies that I share from my presentations.

This also show’s Tesla’s commitment towards social good, as Musk writes that most car companies only have a fraction (1%) of their sales as electric vehicles. He writes, “It is impossible for Tesla to build electric cars fast enough to address the carbon crisis.” In essence, he wants everyone else to help.

For Tesla, this fosters an ecosystem of makers, hackers, developers, and partners around their brand, growing their position in the ecosystem as Tesla will become the standard of the electric vehicle (EV) industry.  Why would a dominant player let go? This enables others to build on top of their platform in order to replicate, enhance, and improve existing Tesla vehicles.

What are the additional business benefits? commenters on Facebook point out that by securing the industry building off their spec, Tesla is in a dominant position to upsell other value added services such as batteries, super charging stations, and other services.

What all companies can learn from this unprecedented move:

  1. In this new world, partnering with your crowd is the tenet of the Collaborative Economy.
  2. Providing a platform so the ecosystem can build on top your specs enables new innovation.
  3. Companies can scale as the partners around them deliver additional capabilities.
  4. Companies can secure their place in the ecosystem by offering value added services.
  5. Demonstrate true commitment to a mission by enabling anyone to participate.

Tesla, by being open, secures their own architecture as the industry standard, assuring their place in the electric vehicle market. Companies who let go, gain new innovation from their crowd, securing their place in the ecosystem.

Incredible business move, and incredible potential for a collaborative planet.

 

 

Don’t Protest the Collaborative Economy –Lead It

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Step up

Yesterday, thousands of infuriated taxi drivers across dozens of European cities brought transportation services to a standstill. The taxis launched the “Escargot Protest” intended to stopped traffic in objection to Collaborative Economy startups Uber, Lyft and other similar startups. While they raised global attention, they lost a day’s wages, angered their own customers who were seeking to commute and, ironically, caused an 850% increase in Uber business, making Uber a trending term in UK, resulting in government officials mocking the taxi drivers.

The taxi protest against the Collaborative Economy backfired – it made Uber more popular than ever!

Cooler minds prevailed. Neelie Kroes, a VP of the European Commission, wrote a seminal post stating: “In the sharing economy – like drivers, accommodation hosts, equipment owners and artisans – these people all need to pay their taxes and play by the rules. And it’s the job of national and local authorities to make sure that happens.”

The Collaborative Economy movement is spreading to every industry: There are 9,000 startups in the space and they’re heavily funded, backed by the most powerful technology companies in the world, with a growing desire for faster and cheaper services. In fact, this recently published Honeycomb Framework I published shows the next verticals who will be impacted.

This P2P commerce is the most significant disruption ever seen in business. The people formerly known as a business’ customers – are now competitors.

The CEO of an SF Taxi company says they only have 18 months left. That’s just enough time to adopt the same strategies and technologies as these tech startups (which are financially backed by Google, VCs, and which use powerful technologies from Facebook, Apple, and Samsung).

So what should taxi companies do? They could continue to adopt the on-demand technology from companies like Flywheel (who I’m visiting tomorrow), but they also need to launch their own marketplaces of drivers and trucks using tools from Near-me or Localmotion, or build their own. They need to understand how to promote accountability by enabling customers to rate drivers and experiences. Then they need to retain and reward those who perform well and either retrain or release those who do not.

About a year ago, I published a research report that showed the business models needed to succeed in this market.  Six months ago, I launched Crowd Companies, which connects big brands to leaders, startups, and communities in the Collaborative Economy.

Let’s recap: European Commissioner Neelie Kroes’ final line in her post, which states: “It’s time to face facts: Digital innovations like taxi apps are here to stay. We need to work with them not against them.” I very much agree. If you’re protesting the Collaborative Economy, it is proof you’re late to the party. Change your business model now and lead this movement.

Dear Businesses: Don’t protest the Collaborative Economy – adopt it, then lead it.

Related: respected Robin Chase, founder of Zipcar and Buzzcar, writes about Cooperative Capitalism. Also, former executive at an auto company, Scott Monty shares how Taxis are fighting in an unconventional battlefield.

(image used via creative commons by George Pauwels)

 

Here Comes the Collaborative Economy Customer Score

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Screen Shot 2014-06-09 at 4.30.37 PM

Move over Klout. Move over Fico. The new score is the Collaborative Economy Customer Score.

Today, a ground-breaking deal was struck between Uber and Amex (a few days ago, they received millions of dollars from Fidelity). You can use your Amex loyalty points to pay for rides. When you use your Amex card to pay for transactions, these glean additional two times the loyalty points. But all that’s just table stakes. What is really important is that this pushes aside fuzzy and squishy social media metrics to reveal what really matters: finding out the metrics of behaviors and peer-to-peer trust, backed with factual financial data.

The Collaborative Economy is based on peer-to-peer commerce, which results in increased transactions at a local/mobile level and, likely, with higher trust. The collaboration between Uber and Amex enables the construction of metrics to measure the value of this new type of customer.

The new Collaborative Economy Customer Score provides insights never before combined:

  1. Customer ratings. Uber drivers rate passengers – we know who the best customers are – and who’s not worthy for a late night ride.
  2. Provider quality. Like Yelp and eBay, customers can rate the drivers, a social metric. .
  3. Local transaction data. Since these transactions are happening at a local level, they provide data regarding traffic routes and times, and can, therefore be used to accurately predict when and where people use Uber’s services.
  4. New loyalty data. Since Uber and Amex are sharing their data and rewards, they lock in a powerful new relationship.
  5. A new perspective. When combined with traditional financial data like loyalty points, credit scores, and net worth, we can have a powerful new insights into customer behaviors.

Putting all five data points together, it means we can marry traditional financial data with customer and provider ratings, and forecast network behaviors at a local level. The combined insights can help us predict who’s likely to spend more money, with less friction in the transaction –and for top brands that’s important.  This data is likely more accurate than Facebook data as it’s directly tied to actual commerce.

Just some other data points: Our recent research found that people that make over $100k are more likely to participate in this new economy. The CEO of American Express is on record as saying card holders spent “hundreds of millions of dollars” last year on Uber rides. Both of these statements indicate there’s money to be made here.

This is a great example of a “Crowd Company” i.e., how corporations and crowd-based businesses can work together within new business models. Get ready for the Collaborative Economy Customer Score.

Related: My prediction that Uber is the next Amazon, A timeline graphic of all corporate partnerships in the collaborative economy.