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How do you value early marketplace?
If you’re a founder of an early-stage marketplace, you should put your focus on two things: Growing GMV. Proving out take-rate….How we determine valuations for marketplaces
- Scale: > $1b GMV.
- YoY growth of at least 30\%
- Take rate of about 10-15\%
Why is it difficult to value an early stage company?
Start-up companies are difficult to value for a number of reasons. Revenues are small or non-existent with start-up companies, and the expenses often are associated with getting the business established, rather than generating revenues. Dependence on private equity.
How are GMV multiples calculated?
To calculate GMV, simply multiply the number of goods sold by the sales price of the goods.
Why is GMV a flawed valuation metric?
GMV is a flawed valuation metric as it does not consider incremental customer acquisition costs, excessive discounts and cash backs which are often the drivers responsible for generating a higher volume of orders flowing across the e-commerce platform.
Does GMV predict future valuation of e-commerce companies?
While GMV may be commonly used as a yardstick of performance, when it comes to the valuation of e-commerce companies, it doesn’t mean it is reliable; it just means it’s popular. Some academics have attempted to highlight correlations between GMV and Enterprise Value, advocating GMV as a predictor of future valuation in the e-commerce space.
How are marketplaces valued?
Early-stage companies are valued very differently. In this case, metrics don’t count – we’re evaluating the team, idea, and vision. Then as the marketplace starts to scale fast, the multiples are often very high because growth is high as well. But you need to understand that your marketplace will ultimately be valued at 1x GMV.
What is the difference between GMV and rerevenue?
Revenue is the portion of GMV that the marketplace “takes”. Revenue consists of the various fees that the marketplace gets for providing its services; most typically these are transaction fees based on GMV successfully transacted on the marketplace, but can also include ad revenue, sponsorships, etc. These fees are usually a fraction of GMV.