Version One Ventures Marketplace Metrics Template
Version One Ventures, which closed a $35 million fund in late 2014, is one of North America’s top early stage VC investors. With investments in marketplace companies like Angellist, Indiegogo, and HandUp they are experts in taking companies from growth to scaling. Recently, the firm released a Guide to Marketplaces compiling those insights and and learnings to help you build your business.
What Marketplace Metrics should I be tracking?
This metric template, which you can access within Visible is inspired by a post from Version One’s Angela Tran Kingyens who was herself inspired by Christoph Janz and his SaaS Metrics template. Here is a deeper look at some of the marketplace metrics we talk about in the video and how you can apply them to your own business.
Gross Merchandise Volume (GMV), Revenue, and Take Rate
Simply put, Gross Merchandise Volume (GMV) is the total dollar value being transacted through your platform during a given time period. So if in one month there are 100 transactions done through your marketplace with an average size of $50, your GMV will be $5000. Pretty basic.
As Andreessen Horowitz put it in the Startup Metrics blog post, it is the “real top line” for a marketplace business.
As a single number, GMV is useful in helping understand the high level growth of the business and looks good in press releases and investor conversations. From an operational perspective, GMV gives you a starting point to better understand all of the underlying aspects of your business to more effectively allocate growth-focused resources.
- GMV by time of year (think Airbnb and seasonal differences), time of day (Uber and rush hour vs. late night volume), and by location or market (any on-demand marketplace opening new markets)
- GMV by acquisition channel. Marketplace companies, especially in the on-demand space, are often reliant on customer referrals and other types of paid advertisement to get to initial liquidity. If you understand how that channel compares with others (social, organic, etc.) – assuming you also know how much it costs to acquire a customer through each channel – your GMV trends by channel play an important part in helping you allocate your sales and marketing dollars.
A word to the wise…GMV is NOT the same thing as Revenue for a marketplace business. This is something to be aware of when discussing the growth of your company with investors, potential employees, or partners. To calculate revenue for a marketplace company, multiply your GMV by your Take Rate. Take Rate is the % that your business “takes” from each transaction on your platform.
In recent periods, companies either ignorant of the proper terminology or looking to play sleight of hand in order to spur investor interest have come under fire for misrepresenting the size of their business by using GMV to mean Revenue. Don’t make this mistake.
Marketplace Activity Growth
As we noted above, marketplaces are all about efficiently matching buyers and sellers. When a marketplace is making these matches successfully at scale, it is said to have reached liquidity. Maintaining liquidity over time is not an easy proposition, as human (customer support for both sides), technical (matching or suggestion algorithms), and hybrid (how to price your offering) considerations bring about a daily balancing act.
To add even more complexity, some marketplaces have more moving parts than just a single buyer and seller. For example, DoorDash customers are buying a product from the end restaurant but also the service of having a DoorDash driver pick up the food and deliver it in a timely manner.
Net Promoter Score
Net Promoter Score was also featured in our recent Shopify Ecommerce Template and for good reason. Any time two parties are transacting, trust is a key element. Am I getting a fair price? Is the product or service going to meet my expectations? Do I have protection in the event something goes wrong?
As the conduit for these transactions, maintaining a high degree of trust from buyers and sellers is crucial for a marketplace. Net Promoter Score, which asks customers (and sellers in the case of a marketplace business) how likely they are to refer your product or service to a friend or colleague, serves as a proxy for trust. If people and businesses on both sides are having good experiences on your platform, it can be assumed that they are being treated fairly and finding the value they are searching for.
Visible Templates make it quick and easy to get started on the path to successful Data Distribution. Whether you are looking to raise money, send investor updates to your current shareholders, or just keep your team operating smoothly, Visible Templates give you a framework to tell a story around your most important key performance data.
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