B2B Marketplaces | Case Study
Investment Thesis 1.0 | Part 4 of 5: Case Study
Below is an example of a successful B2B Marketplace. This is an abridged case study that highlights some of the points discussed in the investment strategy. There is much more discussion we can have around enabling technologies, go-to-market strategy, competitive moats, organizational structure, etc that have likely driven ACV Actions to success. If you need to backtrack and gain more context on my thesis here is Part 1: Overview, Part 2: Sector Summary, Part 3: Investment Strategy.
ACV Auctions | Automobiles
ACV is an example of a company that has found immense success in good part to checking a lot of the boxes of previously mentioned success drivers and assessment metrics. While assessing B2B marketplace investment prospects, ACV would be a case study to examine against.
More than 20 million used cars are bought and sold wholesale every year. The majority of these cars have been bought through physical auction sites, which is where ACV Auctions comes into the picture. ACV has turned a traditionally physical transaction into a fully digital marketplace. Furthermore, they have shown impact across the value chain with SaaS products that help with other processes like title transfers.
Funding: BVP & Battery Ventures as notable leads and follow-on investors
- 2019: $150.00M Series E at $1.50B pre-money valuation
- 2019: $93.00M Series D at $475.00M pre-money valuation
- 2018: $31.00M Series C at $155.00M pre-money valuation
- 2017: $15.00M Series B at $24.00M pre-money valuation
- 2016: $5.00M Series A at $7.00M pre-money valuation
- 2015: $1.00M Seed at $3.00M pre-money valuation
Product: ACV is a full-service platform that has transformed the traditional in-person car auction into a digital marketplace equipped with both a web and mobile platform. With this digital service, ACV makes it quicker for sellers to move inventory and makes it easier for purchasers to access auctions across the nation and to assess multiple vehicles at the same time, and make more informed decisions. In addition to the vehicle bidding, ACV has enabled this marketplace with SaaS products that help with car assessment, payments, title transfer, and vehicle transportation. They have done well to enter a high fragmented vertical that has thousands of separate auction houses and dealerships and disrupt it with a digital offering.
Business Model: The pricing model for ACV’s marketplace is relatively simple. As of now, they simply charge a transaction fee to the buyer. This is a tiered fee that increases based on the purchase amount. The reported average AOV is likely around $7,500 with a transaction fee between 5–10%. Both of these metrics place ACV in the “best” category as outlined by BVP. They are currently not monetizing the SaaS products and providing them as free value with the marketplace.
Growth: ACV showed massive growth by tripling transaction volume from 4,000 vehicles monthly in 2018 to 15,500 vehicles monthly in 2019. Now, they are selling $1B in GMV annually with momentum to gain massive market share. ACV tetters into the “best category” for GMV in a $100B GMV market.
Team: ACV was founded in 2014 by co-founders Joseph Neiman, Dan Magnuszewski, and Jack Greco. As mentioned in the investment strategy, it is important to recognize that Joseph Neiman started the idea based on his experience as a former car dealer. Furthermore, ACV did well to supplement their team with strong prior startup growth experience. In 2016, ACV hired George Chamoun, the founder of public company Synacor and angel investor in ACV, as Chief Executive.
Other Highlight Companies
Below are star examples of mature B2B Marketplace startups that have raised later-stage investments and would be good candidates for future case studies.
- Convoy | Freight
- Faire | Retail Goods
- RigUp | Freight
- StyleSeat | Beauty
- Transfix | Freight
- Zenefits | Human Resources
