My name is Carmen.
I am an investor at Samaipata. I lead the UK office.
Basically Samaipata is a pre-seed seed-stage VC fund, investing only in
marketplaces and digital brands. We’re thematic by business model,
and we only invest in marketplaces and digital brands. If you think about it,
there are two reasons. One is that we need to build expertise if
we want to add value. But ultimately as
an investment thesis it’s because we invest in defensibility.
We believe that defensibility is the main driver of long-term value. Now in marketplaces,
defensibility can be made up of mainly three modes how we look at it.
One is network effects, and there are very different ways to
classify a network effect. But basically, the very basic idea is that
when a new user joins, the value that the service or product that
the company is providing to the new and existing users increases.
And that’s absolutely the key driver of defensibility for us.
You could even say that we actually invest in network effects, not even marketplaces
only. Now, another way to assess defensibility is to look at the power of
the brand. We really believe that the emotional connection that you establish
with your customer is a barrier of entry, it’s a very strong barrier of entry.
You need to create that community, that sense of belonging to be defensible
against competitors. And third, last but not least,
is switching cost. So because the more you’ve used our platform our product,
the more personalized it is, the better is the UX. It’s just you,
kind of, create barriers for your people to leave. On defensibility,
it’s very important to understand that we look at it from the demand and the supply
side, not just the demand. You need to build a defensible supply,
especially if you are a service marketplace, right?
Because without that supply, you cannot provide an experience.
We don’t like models where your supply is only defensible based on cash,
like it happens, for example, in Uber. Because if you have a better-funded
competitor, they will steal away your supply. With no supply,
no experience, and if you want to compete and get the supply, the issue you’re going
to have is your unit economics might stop working. So you need to build a
defensible supply. It’s absolutely key. Now also the second factor that we look
at on top of defensibility would be scalability. And again,
that comes back to demand and supply as well. So scalability takes
different answers, but first of all, is your total addressable market on the
demand side big enough, and is there enough depth of supply? Like,
can you build a business big enough with the supply that you’re going to need?
And how are you going to acquire that demand and that supply?
And there we look at the typical, you need economics. And then third,
what are the processes, like onboarding?
Can you really create a scalable onboarding process that keeps the quality
of the supply in this case, right? So I think scalability is key and another
concern. And then third, and we’re very, very focused on this as investors,
is retention and engagement. I always say, “If they will ask me for one single metric
that I look at, it’s the cohorts.” We look at cohorts both on retention and
engagement. So we look at both the Q, the quantity, and the R, the repetition.
And it’s absolutely fundamental on the supply and on the demand side again.
Also a problem that, especially on-demand and service
marketplaces have is leakage.
Because as soon as the interaction is human,
there’s this temptation from the supply and the demand to take the transaction off
the platform. So we look at cohorts to understand how that’s doing but then we
also try to figure out ways, and many of them are very sector-specific,
that you can add additional value to the supply and the demand
to decentivize that leakage, right? It might be, for example,
in the case of Airbnb, insurance is a great one,
but that doesn’t work for every one. Others create SaaS tools to remove the
admin trouble. So how do you make sure that the transaction happens on the
platform is absolutely key as well. So I think that that would be the key
three: defensibility, scalability, and retention and engagement,
the key three things. It’s a very good question and I’m happy
you asked, because I actually wrote a post about it.
I developed a customer love framework, so to say. I think it’s very interesting
to understand that some people think the brand is something intangible,
and it is intangible but it’s customer behavior,
and ultimately you can measure it. So there are a lot of metrics that you can
look at. So cohorts is an amazing indication.
If your customers want your product, they’re coming back and they’re buying
more and more, there’s clearly a brand going on. Another one is obviously
if your organic acquisition goes on, there’s word of mouth, there’s virality,
people are telling their friends, that also shows the power of the brand.
And then what that translates into is that your blended customer acquisition cost
goes down, right? So you have the acquisition side and then you have the
retention side. And I mean, there are many other softer ways to look
at it. I personally check Instagram. I check Instagram engagement,
because the followers is a vanity metric. You need to check the comments to get a
feel of, how engaged is that community, right?
Is there really that sense of belonging? And there are great examples of powerful
brands. I mean, you have Glossier in the U.S. who, through content,
created a trusted community around them, and then you can sell them anything,
kind of. So the idea of creating brand is very important, because also if you
think about it now how we order food, we order from restaurants but it’s
Deliveroo, in our case, or Uber Eats that we are actually ordering
from, right? So they’re providing a branded experience that they don’t always
control, which is another challenge. You need to make sure that the experience
is perfectly on brand. Well, there are many that are related to
startups in general, but if I had to think about two actually
from marketplaces it’s, first of all, not to think about your supply hard
enough, to just be very focused on the demand side. And then second and
most common is the lack of liquidity. And this is also about how you approach
the launch, right? In our thesis, we like founders that have a very clear
differentiation between their go-to market and their vision. And the vision can be to
own Europe, I don’t mind. But your go-to market should be saturate
nodes. You need to saturate nodes and then create liquidity there, and then, kind of,
replicate that playbook, right? I think Deliveroo is a great example.
They launched in Chelsea, which is a tiny neighborhood in London and
proved there. Because when you need liquidity,
especially in those marketplaces that need liquidity,
if you try and aim at launching, even if it’s just London overall,
and I go into a beauty app, for example, and want to book nails,
and I get into the app and there’s no liquidity, you’ve lost me.
But you’ve paid for me! So the risk is very high.
So my advice would always be: focus, saturate nodes, and then expand, you know?
It’s tempting to go very big from the beginning. And the third thing
that’s also not said enough, and it’s not necessarily only in
marketplaces but it’s very important for founders,
is be data driven from minute one. I always ask every founder I meet and I’m
going to do analysis on to provide me with a KPI dashboard that they use to look
at the business. And I don’t need to be linked to the software,
and I don’t even need it to be super updated at that time.
I just need to understand how they’re looking at the business,
because data-driven decisions are better decisions.
And if you don’t do it from the beginning, if you don’t build a very data-driven
business, it’s very tough down the road, right?
And you need to be able to understand where you’re putting the money,
the impact that that’s having, and iterate accordingly.