I wrote a post not that long ago about how take rate (or rake) is one vector for disrupting incumbent marketplaces. Recently I have seen a number of startups that have taken this to its logical extreme: charge nothing at all. Several of these companies are growing very rapidly. But there is an important catch here: how should they be valued? Several of the startups in question are raising rounds based on a GMV metric, i.e. the size of their marketplace. Now we have a lot of experience with ma...

A big part of our investing at Union Square Ventures is to find businesses that have network effects. Marketplaces fit with that because participating in a marketplace tends to become more valuable as the marketplace grows (that’s assuming the marketplace does a good job spreading liquidity among participants). The reason to be interested in network effects from an investor perspective is that they offer a source of defensible competitive advantage. That in return implies that a company that ...

Fred’s blog post today is about how new and powerful HTML5 apps are emerging, giving the new Kindle Cloud Reader as an example. The Cloud Reader is also an example of something else: if you tax a system too much people will find ways to work around it. This is highly relevant to anyone running or starting a marketplace. You can’t be greedy! (Sorry, Gordon). I had written a while back – in the context of eBook pricing – how Apple’s take rate of 30% was significantly too high. The Kindle Cloud ...