Hourglass Money Time – Free photo on Pixabay
Seven years ago, Amazon launched a marketplace for all businesses to make a profit from the rapidly increasing need for business-to-business (B2B) commerce. At present, Amazon Business genuine phenomenon. It provides a convenient way for organisations to sell their products. What’s astonishing is that an ever-increasing number of firms are choosing to build their own B2B marketplaces. New companies have business models that resemble those that have come to dominate the financial industry. Gartner estimates that 80% of enterprise marketplaces launched will serve business-to-business transactions by 2025. Put simply, the rise in digital interactions between buyers and suppliers will break traditional sales models.
Key contenders have emerged in several niches, including agriculture, car wholesale, cannabis tech, clinical trials, and more. If more investments are made in this sector, it’s possible to address the competition and expectations of the market. For the sake of clarification, the B2B marketplace has the potential to rise significantly. The current business-to-business model is supported by shabby investment capital, so it’s not sustainable. New structures are what allow buyers and suppliers to form solid connections while still enjoying the efficiency of e-commerce. There are plenty of opportunities that can deliver attractive returns. Hopefully, B2B marketplaces will make the same progress as their B2C counterparts.
What Explains the Escalating Investment in B2B Marketplaces?
If you have been monitoring the digital business ecosystem, you’ve certainly noticed that investors are putting their money in business-to-business commerce rather than business-to-consumer commerce. Technology providers, in particular, have raised millions of dollars from zealous investors. Some of the most valuable B2B SaaS companies to keep an eye out for are Slack Technologies, The SEO Works, Atlassian Corporation, TransferGo, and Snowflake. The list isn’t exhaustive, of course. It’s important for new B2B companies to have a good strategy in place. For the smaller companies, the best thing to do is to sell on marketplaces. Buyers like marketplaces because they can purchase from different suppliers and see lots of products in one place.
The COVID-19 pandemic urged B2B marketplace adoption. In other words, traditionally offline industries, supported by trade shows and in-person auctions, have done a fantastic job of digitalising on the fly. Business-to-business marketplaces and progressive web apps are among the technologies that will experience greater business adoption in the years to come. They attract massive investment from venture investors, who anticipate high frequency, high-value orders. Business is more predictable, which explains why many are willing to take the risk. With technological advancements reaching new heights, there’s a comfort of investing in the B2B markets.
Some Investors Are Naturally Drawn to The B2B Landscape
There are interesting and riveting technologies that solve the problems that take place on the enterprise level. Examples of ground-breaking technologies include AI and chatbots. It’s possible to set up chat for real-time engagement, respond to leads with lightning speed, and offer prospects a fast lane to sales. Marketers do their best to understand human wants, needs, and behaviours to deliver top-notch customer solutions. There are numerous opportunities to follow in the footsteps of venture capitalists by backing some of the most innovative B2B companies. Innovative firms do better for investors. Why? They have a superior stock market performance.
With regards to business-to-business, it makes sense to look into investments. B2B companies have better margins. It’s not about investing in a company, but about investing in a brand. To the casual eye, it might seem that one company innovates while others copy. Nonetheless, there are many businesses in the B2B landscape working hard to build a standout brand. If you take a closer look, you’ll see they share many things in common. We’re talking about a bold visual identity (Dropbox), use of real people and original images (Atlassian), and a simple, accessible language (Basecamp).
Here are some considerations for evaluating a potential investment:
- Solid management – Managers contribute to business goal attainment, so the best investment is in solid management. Ideally, you should look for executives that have built successful businesses, which have created shareholder value. Any organisation seeking capital investment should provide a list of experienced, qualified people who play an important role in its development.
- The size of the market – This helps estimate how much profit can be earned. Put simply, market size shows if there’s a good chance of making money. A venture capitalist will want to ensure that their portfolio companies actually have a chance of growing sales. It can be valuable knowledge to understand the odds the company is facing.
- Product with a competitive edge – Both investors and the general public expect great products and services, unique in the marketplace. If you want your investment portfolio to thrive, select a company that’s able to generate sales and profits before competitors. Investing in innovation leads to long-term commercial benefits.
Investors Need to Understand the Complicated Dynamics When Looking at Early Stage B2B Marketplaces
More often than not, investors underestimate the time it takes to achieve meaningful revenue growth. Teams aren’t always capable of doing more with less and reducing the amount of time it takes to set up the initial product. It’s necessary to have realistic expectations. Fundraising can supercharge a company’s growth, but it doesn’t happen right away. Despite this challenge, it’s still worth investing in B2B marketplaces. When they take off, they reach heights of success. When both sizes come to the marketplace, there are countless ways to monetize, so opportunities are substantial.
As the business-to-business e-commerce industry continues to grow, it becomes essential to get involved. The next years will be characterised by the rise of platforms that support it. What we’ll see is vertical online marketplaces and the fall of Amazon Business. For smart investors, B2B marketplaces represent a new revenue stream they weren’t aware of. They’re gems hiding in plain sight. Striking a deal with a company that’s set up for success is the best plan ever. Making this investment now will pay dividends now and, most importantly, in the future. There’s no better time than now to invest in the future. A seemingly stable economy can be turned on its head in a second.
Disclaimer: This content does not necessarily represent the views of IWB.