The Speedinvest Network Effects team shares proven tips to help founders of online marketplace startups improve their pitch decks and increase their chances of receiving VC funding. The information is tailored specifically to pre-seed, Seed and Growth startups.

1. May 2021 | Speedinvest Network Effects
From Good to Great -
How to Ace Your
Marketplace Fundraise
1

2. Defining the Stages
Pre-
Seed
Pre-Revenue
Early Product
Early
Seed
Initial phase of
revenue
generation
Late
Seed/
Series A
> 12 months of
revenue
generation

3. Pre-Seed
Stage

4. Market Size & Monetization Potential
Common practice: Focus on GMV
GMV
Monetization rate in %
Net revenue potential
Estimated gross margin in %
Gross margin potential
$ 180 B
2020
How to ace it: Assess gross margin potential
Annual spent on bunker fuel in 2020

5. Competitor Analysis
Common practice: Analysis on two axes How to ace it: Detailed competitive analysis
Category Competitor 1 Competitor 2 Competitor 3
Annual Revenue $ 2.5 M $ 3 M $ 7 M
Total Funding $ 6 M $ 2 M $ 15 M
Users 45.000 60.000 250.000
Employees < 20 > 30 60
Full Service Yes No Yes
Target Market DACH USA UK
Provide key take-aways why your approach is superior
and you will beat competitors. Can also be done in
short memo.

6. Market Research
Common practice: Quoting selective study results How to ace it: Comprehensive market insights
of buyers say their
procurement is still done
via fax, email or phone
65%
Provide data room with most relevant
studies, articles and research papers
Explain market structure and
fragmentation
Suppliers
Suppliers
Suppliers
Suppliers
Suppliers
Buyers
Buyers
Buyers
Buyers
Buyers
Broker
Broker
Suppliers
Buyers
Trader

7. Customer and expert insights
Common practice: Simple customer survey How to ace it: Interview (audio) - transcripts
Conduct many interviews with experts and both
prospective suppliers & customer n > 50
Use service provider to increase speed or size
Not interested
Would pay for it
Would service xy be of interest to you?
Audio record interviews and use software to transcribe

8. Achievements & Product validation
Common practice: First screenshots from MVP How to ace it: Systematic, user-centric testing
14 Testing Tools for Mobile UX – Neil Patel

9. Network Effects
Common practice: No comment on Nfx How to ace it: Show in depth understanding of Nfx at play
Explain marketplace dynamics and different network
effects at play (direct, two-sided, data nfx etc.)

10. Forecasts
Common practice: Long term revenue forecast How to ace it: Detailed 18 month budget
Category Q1 ’21 Q2 ‘21 Q3 ‘21
Revenue
Forecast
$ 0.5 M $ 1.3 M $ 2 M
Cost Staff $ 0.1 M $ 0.2 M $ 0.4 M
Cost IT/ Tech $ 45 k $ 60 k $ 95 k
Cost
Marketing
$ 0.2 M $ 0.3 M $ 0.6 M
Cost G&A $ 20 k $ 26 k $ 31 k
... ... ... ...
Budget should reflect Monetization, Hiring Plan and
general cost assumptions such as G&A or other.
Revenue in € M Net Income € M

11. 📈 Number of waitlisted Users
📈 Number of sign ups
📈 Relevant actions take (e.g. profiles created)
📈 Engagement/ Repeat rates of beta-testers
📈 Pilot agreements
📈 Pipeline of advanced conversations
If possible, include relevant Pre-Seed KPI’s

12. Early Seed
Stage

13. What matters most at the early seed stage?
Core focus in early seed-stage marketplaces: product-market fit
➔Engagement
➔Repeat Rate
➔Stickiness

14. Example 1: Customer Retention

15. Example 1: Customer Retention

16. Example 1: Customer Retention
Show cohorts with absolute numbers... … and with percentage figures
Number of active customers Customer retention rate

17. Example 2: Number of orders and average order value
Number of Orders by Cohort AOV by Cohort

18. Example 3: Revenue Retention
Revenue Revenue Retention Rate

19. It is important to look at both the demand as well as supply side!

20. Late Seed / Series A Stage
Stage

21. What matters most at the late seed/ Series A stage?
Additional focus topics in late seed/series A stage marketplaces:
growth, relevance for customers and efficiency
➔Top-line KPIs
➔Share of wallet
➔Growth efficiency metrics/ Unit Economics (CAC vs. LTV)

22. Share of Wallet tells you how vital you are becoming on both the
demand and supply sides
Assess share of wallet = actual demand / potential demand of customer
Example: How do you assess the cohort below? (GMV per month)
Answer: Retention looks great, but still hard to evaluate relative product-market fit.

23. CAC: Common Pitfalls
➔Not looking at fully-loaded CAC including salaries, overhead, tools
➔Not including non-media costs, i.e. referral costs, free trials, etc.
➔Only considering demand-side acquisition, but neglecting supply-side
➔Only looking a blended CAC and not distinguishing paid CAC vs. blending CAC
➔Looking at numbers in aggregate rather than by channel

24. Breaking Down CAC
Paid
acquisition
costs
Organic
acquisition
costs
Supply
acquisition
costs
➔Fully loaded
Fully-loaded
acquisition
cost

25. Breaking Down CAC
➔Most people stop here...
Total
acquisition
costs
Total
customers
acquired
Blended
CAC

26. Breaking Down CAC
➔Paid CAC shows the cost acquiring a new
customer through paid channels. It is a better
representation for the true cost of acquiring a
marginal customer.
Paid
acquisition
costs
Paid
customers
acquired
Paid CAC
...but we recommend showing paid CAC as well

27. Breaking Down CAC
FB acquisition
costs
Total customers
acquired from FB
FB CAC
We also recommend looking at CAC by channel:
Google
acquisition costs
Total customers
acquired from
Google
Google CAC
SEM acquisition
costs
Total customers
acquired from
SEM
SEM CAC
➔CAC by channel helps illuminate which channels are more
scalable vs. not, and where to accelerate / pullback spend

28. Organic, Product-Led Acquisition is the most durable and efficient growth
Social ? Content ? ?

29. CAC: What we are looking for
➔Diversity of acquisition channels
➔At least one paid channel that is performing well and scalable
➔Increasing share of organic often a good indicator of organic growth loop(s)
➔Stable CAC as absolute marketing spend grows

30. LTV: Common Pitfalls
➔Assuming an “infinite” customer lifetime versus capping at a defined period
➔Looking at revenue LTV instead of gross margin LTV

31. Breaking Down LTV
Average lifetime
number of
orders per
customer
Gross margin
per order
LTV
Account for all
cost of sales and
variable costs
associated with
generating
revenue
Apply cut-off
times (24-36
months is
usually
acceptable)

32. LTV / CAC is strong to measure unit economics and growth efficiency
LTV CAC
2 - 3 X
= OK
> 3 X
= Great
1 - 2 X
= Needs
Improvement
< 1 X
= BAD

33. Payback period is an equally important metric!
Payback time = Length of time needed to recoup customer acquisition cost
➔Typically, the shorter the payback period the better
➔Most investors will look to < 12-month payback periods
➔But: It is dependent on the type of business you run...

34. Not all businesses are created equal…
Clearly articulate your type of business
12 month
Once a year
Instant
Daily Frequency of transaction

35. Thank You
Philip Specht
philip.specht@speedinvest.com
Speedinvest
Munich