November 2021

FROM GOOD TO GREAT: HOW TO ACE

YOUR MARKETPLACE FUNDRAISE
Justin Da Rosa, Vice President, Battery Ventures
Philip Specht, Principal, Speedinvest Network Effects

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DISCLAIMERS

The information provided in this presentation is solely intended for the use of entrepreneurs, corporate CEOs and founders. The
information is current as of the date it was published. This presentation is being provided for informational purposes only. Nothing
herein is or should be construed as investment, legal or tax advice, a recommendation of any kind or an offer to sell or a solicitation
of an offer to buy any security. The contents are not intended to be used in the investment decision making process related to any
product or fund managed by Battery Ventures.

Content obtained from third-party sources, although believed to be reliable, has not been independently verified as to its accuracy
or completeness and cannot be guaranteed. Battery Ventures has no obligation to update, modify or amend the content of this
presentation nor notify readers in the event that any information, opinion, projection, forecast or estimate included, changes or
subsequently becomes inaccurate.

Battery Ventures provides investment advisory services solely to privately offered funds. Battery Ventures neither solicits nor
makes its services available to the public or other advisory clients. For more information about Battery Ventures’ potential
financing capabilities for prospective portfolio companies, please refer to our website. For a complete list of portfolio companies,
please click here.

As of Nov 2021
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DEFINING THE STAGES

Pre- Early Growth

Seed Stage Stage

 Pre-revenue  Seed / Series A  Series B and later

 Early product  Initial phase of  Scaling efficient growth
revenue generation

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PRE-SEED

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MARKET SIZE & MONETIZATION POTENTIAL

Common practice: Focus on GMV How to ace it: Assess gross margin potential

GMV

Monetization rate in %
$ 180 B
2020 Net revenue potential

Estimated gross margin in %

Gross margin potential

Annual spent on bunker fuel in 2020

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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 $3M $7M

Total Funding $6M $2M $ 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.

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MARKET RESEARCH

Common practice: Quoting selective study results How to ace it: Comprehensive market insights

Provide data room with most relevant

65% studies, articles and research papers

Buyers
of buyers say their Suppliers

Suppliers Buyers
Broker
procurement is still done via Suppliers

Suppliers
Broker
Buyers

Buyers
Trader
fax, email or phone Suppliers

Suppliers
Buyers

Buyers

Explain market structure and fragmentation

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CUSTOMER AND EXPERT INSIGHTS

Common practice: Simple customer survey How to ace it: Interview (audio) - transcripts

Would service xy be of interest to you?

Conduct many interviews with experts and both prospective

suppliers & customer n > 50
Not interested

Audio record interviews and use software to transcribe

Would pay for it Use service provider to increase speed or size

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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

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NETWORK EFFECTS
How to ace it: Show in depth understanding
Common practice: No comment on Nfx of Nfx at play

? Explain marketplace dynamics and different network effects at

play (direct, two-sided, data nfx etc.)

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FORECASTS

Common practice: Long term revenue forecast How to ace it: Detailed 18 month budget

Category Q1 ’21 Q2 ‘21 Q3 ‘21

Revenue
$ 0.5 M $ 1.3 M $2M
Forecast

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

Revenue in € M Net Income € M ... ... ... ...

Budget should reflect Monetization, Hiring Plan and general cost

assumptions such as G&A or other.

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IF POSSIBLE, INCLUDE RELEVANT PRE-SEED
KPI’S

📈 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

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EARLY STAGE

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WHAT MATTERS MOST AT THE EARLY SEED
STAGE?

Core focus in early seed-stage marketplaces: product-market fit

➔ Engagement
➔ Repeat Rate
➔ Stickiness

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EXAMPLE 1: CUSTOMER RETENTION

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EXAMPLE 1: CUSTOMER RETENTION

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EXAMPLE 1: CUSTOMER RETENTION

Show cohorts with absolute numbers... … and with percentage figures

Number of active customers Customer retention rate

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EXAMPLE 2: NUMBER OF ORDERS AND
AVERAGE ORDER VALUE
Number of Orders by Cohort AOV by Cohort

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EXAMPLE 3: REVENUE RETENTION

Revenue Revenue Retention Rate

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IT IS IMPORTANT TO LOOK AT BOTH THE
DEMAND AS WELL AS SUPPLY SIDE!

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GROWTH STAGE

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WHAT MATTERS MOST AT THE
GROWTH STAGE?

Core focus in growth-stage marketplaces: growth at scale and efficiency

➔ Cohort segmentation
➔ Share of wallet
➔ Growth efficiency metrics

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THE EVOLUTION OF COHORT ANALYSIS:
EARLY STAGE VS. GROWTH STAGE VIEW
Early-stage view Growth-stage view

 Set-up tracking infrastructure for cohorts as early

 Cohort data can become blurry when new
as possible (mention tools) customer groups or markets are tackled
 Evaluate cohorts regularly
 Need to start evaluating cohort data by customer
segment (remember: averages are misleading)
 Retention should be stabilizing, and cohorts
improving  Which markets, demographics, channels are
performing better vs. worse? This should inform
 Spot “tipping points”
where to amplify vs. pull-back growth
 Start to identify traits of power users and focus
on finding more of them!

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SHARE OF WALLET TELLS YOU HOW VITAL
YOU ARE BECOMING ON BOTH THE DEMAND
AND SUPPLY SIDES

Example: How do you assess the cohort below?

GMV by Month

Period Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7

2018-06 $7,171 $8,026 $10,010 $12,025 $11,601 $16,928 $13,358

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SHARE OF WALLET TELLS YOU HOW VITAL
YOU ARE BECOMING ON BOTH THE DEMAND
AND SUPPLY SIDES

Example: How do you assess the cohort below?

GMV by Month

Period Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7

2018-06 $7,171 $8,026 $10,010 $12,025 $11,601 $16,928 $13,358

Answer: Retention looks great, but still hard to evaluate relative product-market fit
→ Assess share of wallet = actual demand / potential demand of the customer

→ Call your customers to find out their potential demand, then compare how much is transacted via marketplace
→ Understand the reasons why a customer if fulfilling demand via other channels
→ The closer to 100% the share of wallet, the better the product market fit (in most cases)
→ Can you drive de facto exclusivity?

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CAC: COMMON PITFALLS

 Only including acquisition costs instead of a fully-loaded number 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 at blended CAC, and not distinguishing paid CAC vs. blended CAC

 Looking at numbers in aggregate rather than by channel

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BREAKING DOWN CAC

Paid acquisition costs Organic acquisition costs* Supply acquisition costs

Fully loaded

Fully-loaded acquisition costs

* Organic acquisition costs include cost of SEO, content, PR, etc.

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BREAKING DOWN CAC

Total acquisition costs Total customers acquired Blended CAC

Most people stop here…

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BREAKING DOWN CAC

… but we recommend showing paid CAC as well

Paid acquisition costs Paid customers acquired Paid CAC

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BREAKING DOWN CAC

We also recommend looking at CAC by channel:

Total customers acquired

FB acquisition costs FB CAC
from FB

Total customers acquired

Instagram acquisition costs Instagram CAC
from Instagram

Total customers acquired

SEM acquisition costs SEM CAC
from SEM

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ORGANIC, PRODUCT-LED ACQUISITION IS THE
MOST DURABLE AND EFFICIENT FORM OF GROWTH

Social? Content? ?

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CAC: WHAT WE‘RE LOOKING FOR

 Diversity of acquisition channels

 At least one paid channel that is performing well and scalable

 Stable overall CAC as absolute marketing spend grows

 Increasing share of organic often a good indicator of organic growth loop(s)

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LTV: COMMON PITFALLS

 Assuming an “infinite” customer lifetime versus capping at a defined period

 Looking at revenue LTV instead of gross margin LTV

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BREAKING DOWN LTV

LTV

Average lifetime number of

X Gross margin per order
orders per customer

Account for all cost of sales

Apply cut-off times
and variable costs
(24-36 months is usually
associated with generating
acceptable)
revenue

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LTV / CAC IS ONE OF THE BEST MEASURES OF
UNIT ECONOMICS AND GROWTH EFFICIENCY

<1x
= Bad

1-2x
= Needs improvement
LTV CAC
2-3x
= OK

>3x
= Great

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PAYBACK PERIOD IS AN EQUALLY
IMPORTANT METRIC!

Payback time = Length of time needed to recoup customer acquisition cost

Example:
Per Customer Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10
Revenue $51 $47 $59 $60 $85 $89 $122 $110 $80 $137
(x) Gross Margin 70% 70% 70% 70% 70% 70% 70% 70% 70% 70%
Gross Profit $36 $33 $41 $42 $60 $62 $85 $77 $56 $96
Cumulative Gross Profit $36 $69 $110 $152 $212 $274 $360 $437 $493 $588
CAC ($350)
Cumulative Contribution ($314) ($281) ($240) ($198) ($138) ($76) $10 $87 $143 $238

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NOT ALL BUSINESS ARE CREATED EQUAL…
CLEARLY ARTICULATE YOUR TYPE OF BUSINESS

12 months  In general, marketplaces that see higher

transaction frequency can afford longer payback
periods while lower transaction frequency
Payback Period

requires shorter payback periods

Instant

Daily Frequency of Transaction Once a year

Note: Logo placement is purely illustrative.

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GROWTH EFFICIENCY: REAL LIFE EXAMPLE
IN DOORDASH
DoorDash: Revenue and Adjusted EBITDA
 Although revenue is growing at a nice
clip, losses have mounted: the
$885
company had an EBITDA loss of
$475M in 2019 up from $158M in 2018

 For every $1 revenue generated, they

$291 lost >50 cents in EBITDA in both 2018
and 2019

 This does not appear to be a very

efficient business…
($158)

($475)
2018 2019

Revenue Adj. EBITDA

Source: DoorDash’s S-1 filing.

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GROWTH EFFICIENCY: REAL LIFE EXAMPLE
IN DOORDASH
Marketplace GOV by Cohort, Indexed to Year 1
 DoorDash customers are sticky and
spend more over time: cohort GMV
exhibits negative churn (i.e. net
expansion)

 Notice that retention has improved

with each cohort – a clear signal of
the network effect in DoorDash’s
business

Source: DoorDash’s S-1 filing.

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GROWTH EFFICIENCY: REAL LIFE EXAMPLE
IN DOORDASH
Adjusted Sales & Marketing and Promotions as % of
Marketplace GOV by Cohort  DoorDash invests into S&M early in a
cohort’s life cycle to acquire new
customers and encourage repeat
behavior

 Spend normalizes by the second

year cohorts are on the platform

Source: DoorDash’s S-1 filing.

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GROWTH EFFICIENCY: REAL LIFE EXAMPLE
IN DOORDASH
Contribution Profit (Loss) as % of Marketplace GOV by Cohort
 Contribution margin (gross margin
less S&M) is generally negative in
the first year of a cohort’s life, due to
upfront investment in customer
acquisition

 As cohorts age, contribution margin

turns positive driven by cohort GOV
expansion and operational efficiency

Source: DoorDash’s S-1 filing. Contribution margin is calculated as gross margin less S&M expense as a % of revenue.
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GROWTH EFFICIENCY: REAL LIFE EXAMPLE
IN DOORDASH
Marketplace GOV from New Consumers & Existing Consumers
 As consumers make DoorDash a
regular activity, repeat use results in
a greater proportion of GMV being
generated by existing consumers
(accelerated in 2020 by COVID-19)

 The growing proportion of existing

consumers (“aging base”) is
meaningful in driving operating
leverage

Source: DoorDash’s S-1 filing.

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GROWTH EFFICIENCY: REAL LIFE EXAMPLE
IN DOORDASH

➔ Cohort expansion over time (>100% revenue retention)

➔ S&M focused early in cohort life cycle (no ongoing reliance)
➔ Gross margin leverage
➔ Strong repeat behavior

Efficiency

Source: DoorDash’s S-1 filing.

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GROWTH EFFICIENCY: REAL LIFE EXAMPLE
IN DOORDASH
DoorDash: Contribution Margin and EBITDA Margin

29%
24% 24% 23%
19%
12% 10% 10% 9%
7% 4%
(3%)

(20%) (22%) (19%)

(35%)
(48%)
(52%)

(71%)

(108%)

Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21

Contribution Margin % Adj. EBITDA Margin %

Source: DoorDash’s public filings.

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 Philip Headshot
THANK YOU! Name
Email

Justin Da Rosa Philip Specht

jdarosa@battery.com philip.specht@speedinvest.com

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