Marketplaces – companies like auction service eBay, accommodation service Airbnb, and personal-loan service LendingClub – have the potential to create more billion-dollar businesses in the next five years than in the last 20

August 30, 2013 Leave a comment

Greylock makes $100 million venture bet on marketplaces

1:02pm EDT

By Sarah McBride

SAN FRANCISCO (Reuters) – In a big bet on marketplaces, venture capital firm Greylock Partners is promoting former eBay Motors founder Simon Rothman to partner, and dedicating $100 million to the sector. Marketplaces – companies like auction service eBay, accommodation service Airbnb, and personal-loan service LendingClub – have the potential to create more billion-dollar businesses in the next five years than in the last 20, Rothman said in an interview with Reuters.Unlike vendors, marketplaces do not hold inventory themselves but connect the sellers who have it with the buyers who want it. Innovations like the rise of smartphones, which make it easy for customers to jump online anytime to do business, are fueling marketplace businesses, Rothman said.

And unlike traditional businesses, where growth can create logistical problems, online marketplaces scale well.

“When they get bigger, they get stronger,” he said.

Silicon Valley-based Greylock has invested in several networked-marketplace companies, including Airbnb, ride-sharing service Lyft, and shopping service Wanelo.

The biggest to date is eBay, where Rothman created eBay Motors, which grew to a $14 billion business under his oversight. In a blog post, Greylock partner and LinkedIn founder Reid Hoffman said Rothman would focus on investing in marketplaces, other network-effects businesses, and transaction-based startups.

Rothman’s key advice: start small.

“A lot of entrepreneurs overreach early,” he said. “Having some restraint on the scope of the project drives success.”

The $100 million Greylock is committing to innovative marketplaces will come from existing funds, a spokeswoman said. It will cover early-stage investing through to later-stage companies.

Rothman has been working as an entrepreneur-in-residence at Greylock, where he advised marketplace companies.

Filed under TMT Trends

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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