Autobutler and the Six Characteristics of a Successful Online Marketplace

Today we announced that Index Ventures led a €5.8m investment round in Autobutler. This marks another investment for our firm in a Danish company following our previous successful investments in Just Eat (IPO April 2014), Zendesk (IPO May 2014), Milestone Systems (acquired by Canon June 2014) and Trustpilot. All of these companies managed to become global category leaders following initial success in Denmark and we believe Autobutler can continue this trend. This flurry of tech exits also underscores the strength of the Danish startup ecosystem, which is now on par with the activity levels we have seen in Sweden and Finland.

Another trend this continues for Index Ventures is a commitment to backing innovative businesses that are online marketplaces, connecting local suppliers and service providers to consumers either globally and or locally. Other Index Ventures portfolio companies that squarely fit this theme are FarfetchETSYJust EatBlablacarDrivyNotonthehighstreet and Funding Circle.

The approach Autobutler has taken is to provide garages with a sophisticated order management solution where they can quote on car repair or servicing jobs. For consumers, after providing relevant details of the car and repair work needed, they can request up to three proposals from vetted local garages. They can assess the responses they receive and then make an informed choice taking into account price, speed and availability, guarantee levels and other variables. Both the consumer demand and supplier business case have been validated by rapid growth in Denmark and the Company is now pushing into Sweden, UK and Germany.

Building an online marketplace is a challenging endeavor. Firstly there is the technical challenge to build a product that addresses all the needs of consumers and participating businesses and can scale quickly if needed. In parallel the company must build up the network of suppliers and generate customer demand and always keep these two sides of the network in balance to ensure all participants benefit. Therefore successful founding teams need to have great product insight, an effective sales and marketing appraoch and operational skills to ensure efficient growth and high service levels. We are confident in Christian, Peter and the Autobutler team the ingredients are all there.

Besides the quality of the team – which is always critical in startups – when we look at online marketplaces specifically, we seek out those whose proposition fulfills six key criteria.

Firstly for the consumer we have 3 C’s – Convenience, Choice and Clarity. Consumers are using the internet and mobiles to organize virtually every aspect of their lives and making an order of magnitude time-saving in any task is very compelling. Obviously in the case of Autobutler, reasearching all the possible garages by calling around and visiting multiple websites takes vastly longer and is less effective and convenient than the service Autobutler offers.

Consumers love the range and choice that online marketplace businesses can provide. Finding new products or alternative service providers is an empowering experience for consumers and keeps them coming back to use platform. The last one is clarity, predominantly but not exclusively, around price and service level. Online marketplaces often bring new participants into an ecosystem and stimulate more competition and higher service standards from existing players, all of which ultimately benefit the consumer.

As important as engaging consumers is getting suppliers to engage with the service. The attributes we find which are important to them are 3 P’s - promotion, productivity and practicality.

Many local businesses traditionally have no ability to market themselves to customers, beyond dying media formats such as yellow pages and local newspapers. Otherwise small retail and service businesses rely on walk-in traffic for most of their trade. Autobutlerand other online marketplaces enable suppliers to promote their service in a much more targeted and efficient way to highly qualified potential customers. Increased productivity or utlisation is also very attractive for merchants. By tapping into online marketplaces to generate extra business, suppliers make much better use out of the contracted labour and business assets they have.  One of the reasons Autobutler is able to offer great value to consumers is because garages are offering attractive rates to ensure they are fully utilized. Finally practicality – businesses can only leverage online marketplaces if they have designed a good solution that is easy to use and fits into the supplier’s workflow patterns. That is why many of the best online marketplaces provide free software and other services that help companies manage their overall business, not just the custom they may generate through participating in the marketplace. Providing a great software-as-a-service business management offering for garages both small and large has always been at the heart of the Autobutler model and carries equal importance to simply providing leads.

If you haven’t already tried Autobutler, please try it out and if you don’t want to take my word for it, check out their score (9.2) and read the reviews on Trustpilot!

WSJ Article: A Different Tech Model in Europe

 

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Where is Europe’s Silicon Valley? This is the inevitable opening question the U.S.- tech media has for a European venture capitalist. The same question also haunts every technology conference in Europe with different panelists, speakers and participants attempting to cobble together coherent rebuttals to this loaded question. One New Year’s resolution that I am still clinging to is not to walk into the trap of answering this question head-on again.

Yes, Europe doesn’t yet have a tech company the scale of Google, Facebook, Amazon or Apple. Nor does it have a pool of capital as deep and free-flowing as Silicon Valley has. However the outlook for European technology has never been more positive. There are increasing signs that a different model is emerging in Europe that can produce tech companies that will compete and succeed on a global scale.

What underpins this optimism is the rapid reconfiguration of the European startup ecosystem around a handful of key tech clusters or hubs. When I started in venture capital in 1999, technology entrepreneurs in Europe were rare and spread diffusely over the continent. There were relatively few events or forums where ideas could be exchanged and tested. Recruiting young developers and marketers into a startup was challenging against the strong gravitational attraction of Europe’s then- booming financial capitals.  Fast-forward 15 years and the well-documented emergence of thriving technology clusters in London, Berlin, Stockholm and Helsinki has transformed the landscape. Graduates are beating a path to work in startups and tech events are oversubscribed and ever more bullish in tone. Rival clusters are also forming in Paris, Copenhagen and Tel Aviv.

There are various factors and trends that have fostered the development and continue to drive the growth of these tech hubs in Europe. Mobility of labor has definitely played a part. The free movement of labor laws enacted by the EU, and extended to Eastern Europe over the last decade, have meant cities like London can attract ambitious founding teams from across Europe.

Government support has also definitely been helpful. Though the UK government did not spark the creation of London’s “Silicon Roundabout,” their active sponsorship of the tech city initiative has definitely legitimized and raised the international profile of what started as very local phenomenon. It is notable at tech events like Slush in Finland, the Prime Minister Jyrki Katainen was an engaged attendee. Similarly David Cameron, the UK Prime Minister has attended Founders Forum events in London and enthusiastically championed the role tech can play in driving the economy.

Most countries in Europe have made the wise decision to stop short of running large state-sponsored direct investment programs. These typically crowd out private sector capital. Instead governments have opted for tax incentives to stimulate investing in startups such as the UK’s Enterprise Investment Scheme (EIS) or co-investment funds like Finland’s TEKES program, which both complement private sector investment.

Beyond supportive government and a thriving event scene, another factor that is critical for the sustainable growth of tech hubs are marquee companies. These generate wealth for founding teams, employees and their venture capital backers. Much of this wealth gets recycled into seed and angel investor activity.

In many of the European tech hubs, notably London and Berlin, there is a vibrant angel investing scene often fuelled by the wealth generated from exits. Both London and Stockholm lay claim to Skype*, which was one of the first major exits for a European tech company when it was acquired by eBay in 2005. Paris had its first major success since Business Objects, when Criteo* listed on the Nasdaq last year. Criteo’s invention of the smart advertising banner and their global leadership in this ad format was further validation that European tech companies could become global leaders. Their Paris office is very much the epicenter of the city’s emerging tech scene.

In the Nordics, Stockholm seemed to be the winning tech cluster, where Spotify is the clear global leader in music streaming and Klarna, an innovative payments company, has reached major scale and attracted capital from Sequoia Capital of the US. However in the last couple of years, Helsinki has burst onto the scene as major global hub for mobile gaming. First the success of Rovio with its Angry Birds franchise and now Supercell*, the company behind Clash of Clans and Hay Day, that is 2013 was part-acquired by Softbank in a transaction which valued the Company at $3 billion. From the ashes of Nokia, Helsinki has emerged as a thriving tech ecosystem which is now home to more than 50 mobile gaming startups.

Of all the technology clusters in Europe, London is the most developed and has recently cemented its position with two major IPOs. First there was King*, the London-based company behind Candy Crush which listed for more than $6 billion on NYSE. Just Eat*, a global leader in online and mobile food ordering, soon followed when it was the first company to list on the newly formed High Growth Segment of London Stock Exchange, where it was valued at £1.5 billion.

While Berlin may not yet have had the billion dollar exits of other European startup hubs, it has some very promising emerging winners. Zalando is now one of Europe’s biggest ecommerce companies. It was founded by the Samwer brothers, legendary in Germany for a string of successful tech exits. Germany is also home to SoundCloud*, the world’s largest online archive of recorded sound and music. The company’s founders left Sweden to become one of the pivotal companies behind Berlin’s growing startup scene and succeeded in attracting multiple rounds of investment from leading European and US venture capital firms.

Beyond a growing roster of very successful tech companies another aspect of Europe’s more federated tech ecosystem has been that distinct clusters have often developed a unique vertical specialization. While Helsinki has great talent and multiple success stories in mobile gaming, London is leveraging its status as a world financial center to create an exciting crop of financial services startups.

London even has its own dedicated incubator, Level39, exclusively devoted to supporting entrepreneurs developing disruptive financial services companies. At the edge of Europe, Tel Aviv in Israel has also had some successful exits and many promising emerging companies focused around software security and mobile security, such as Lacoon* and Adallom*.

How long it takes for European’s startup clusters to produce winners to match Silicon Valley’s biggest companies is hard to predict. However in its emerging model of distinct regional tech hubs, each with their own unique vibrant startup atmosphere and areas of specialization, Europe’s startup culture is rapidly changing for the better. Most importantly entrepreneurs need no longer be lonely in Europe. In Europe’s tech clusters, they are sharing their journey and sharing experience with bigger and tighter networks of founders and investors.

With each successful exit, the ambitions of European founders are also step-wise elevating toward those of Silicon Valley founders.

Mr.Holmes is a general partner at Index Ventures in London. He focuses primarily on Internet and games sectors.

*= Index Ventures investment

This article originally appeared in the WSJ Print and Online - http://blogs.wsj.com/accelerators/2014/04/08/ben-holmes-a-different-tech-model-in-europe/

 

 

A special day for @indexventures

Delighted to see Index Ventures companies (Supercell and King) filling the 1,2,3,4,5 top grossing positions in Android Charts today. Also Swiftkey holding up strong in the paid charts.

You hear people say it’s pot luck which apps make it to the top of the chart. Maybe there is a repeatable formula for creating winning apps and at least a little science to finding and backing winning companies…

Index Mobile

How Shapeways landed a landmark $30m financing round

Delighted to report that today Shapeways announced a $30m fundraising led by Andreesen Horowitz. You can read more about it here >> (Shapeways, New York Times, AllthingsD, Wired, GigaOm, Venturebeat). Index Ventures first invested in Shapeways in October 2010 after many months of negotiations to spin out of Philips. The Company was based in Eindhoven in the Netherlands and had low revenues and a small but committed customer base comprised of a pioneering bunch of 3d modellers. The business model at the time is in essence the same business model that exists today. Firstly Shapeways offers a 3D printing service for 3d modellers who want to realise their own designs. Secondly Shapeways operates a marketplace where any consumer can browse and customise existing 3d designs and get them printed. In this case the original designer earns money on the designs they have contributed to the Shapeways marketplace.

 

Since 2010 a lot has changed both for the Company and more broadly in the 3D printing industry. Firstly 3d printing has received enormous attention and coverage in the media as people wake up to the fact that 3d printing is no longer science fiction but a very practical technology for a broad range of applications from healthcare to fashion. The Company has also made great strides over the last two years. The HQ has moved to New York, the team has grown substantially and the Company has also invested in its own manufacturing facilities which are now up and running in New York and Eindhoven. Over this period the Company raised additional financing both from inside investors and Lux Capital. This round however is a landmark financing for a private company in the 3d printing space and a very substantial venture round for any company at this stage. There are lots of compelling reasons to like Shapeways but for Index Ventures there were three key factors which underpinned our desire to invest again:

 

  • Emerging Leadership in high potential industry. By any measure we could look at, whether it was number of models uploaded, production volume or overall size of community, Shapeways was emerging as the clear leader in consumer 3d printing. As with any marketplace business model, the bigger the marketplace becomes the greater the gravitational pull it exerts on new buyers and sellers. In addition to network effects there are also substantial scale effects in 3d printing as machine utilisation increases, materials costs fall and more experience is gained on optimising production processes. Cheaper production can feed into lower prices which makes for happier customers.
  • Exemplary cohort and customer acquisition dynamics. At Index Ventures we always have a strong bias towards businesses that can attract consumers with little or no marketing. If a business is dependent on acquiring customers all the time through paid acquisition, however profitable this might be there is always the risk (or in most cases a likelihood) that at some future point in time, customer acquisition costs shoot up making it impossible for further profitable growth. The vast majority of Shapeways growth is driven by events, PR and the Shapeways community itself that operates globally though meetups. Also when you look at how customers behave over time through cohort analysis, there is a very steady pattern of spend over time with no sign of deceleration. In other words Shapeways effectively becomes a utility for its customers as sites such as Amazon have become.
  • Passionate and multi-talented team. Growing Shapeways has required an unusually broad range of skills compared to the typical tech startup. To galvanise the consumer 3d printing industry has required the Shapeways team to be evangelists, educators and visionaries. In addition there is a highly complex production and logistics operation where the Company has had to apply lean manufacturing methods to relatively immature and fast-changing production technologies. Lastly the company has had to develop and rapidly scale the online community and eCommerce operation. There have certainly been many challenges and setbacks, but each one has been approached head-on and dealt with by an exceptionally committed and creative team.
Congratulations to Peter, Marleen and everyone at Shapeways and welcome onboard to our new investors.