There are many investment opportunities in the B2B space, many of which boast substantial growth potential. B2C operations tend to be easier to understand and therefore attract a greater amount of attention and coverage. However, the global B2B market is both wide and deep, and there tend to be significantly more IPOs in this sphere than in the B2C sector. It is valued at over $11 trillion globally and has significant room for growth, with experts predicting it will exceed $18 trillion by the end of 2026. Exploring investment opportunities in B2B marketplaces is therefore a very worthwhile strategy.
The B2B marketplace sector in particular is often overlooked, seen as not very innovative or as having limited opportunities. But the global pandemic accelerated the move to virtual spaces for B2B transactions, and the efficiencies these marketplaces create mean that they are quickly growing in popularity. The shape of B2B transactions is changing swiftly, which means there are many opportunities for disruption.
Why Invest in B2B Marketplaces?
B2B companies are a popular target for investors, making up over two-thirds of businesses backed by VCs. Marketplaces that facilitate transactions between these businesses have many advantages when it comes to growth and generating returns.
1. Volume of Business
As mentioned above, the B2B sector is a very large one, with numerous companies operating across industries and around the world. Business ventures that interact with these companies therefore often have a large market of potential customers to draw from, and there are many opportunities to serve specific niches. VCs view B2B operations as tending to be more capital-efficient, with a wider reach and higher margins than B2C companies, as well as better retention rates and higher average order values. The B2B sector is also currently growing at a faster rate than B2C.
2. Bringing Efficiency to B2B Transactions
B2B marketplaces in particular provide significant advantages over traditional B2B business dealings. The B2B purchasing process tends to take much longer than B2C transactions: relationships are developed, terms are thoroughly negotiated, and there are often multiple stakeholders involved on one or both sides. There may be many meetings, calls, and emails before any deal is reached. In total, it could take months before a contract is finalized.
At least half of all B2B transactions are done by phone, fax, or in person in developed markets, with that number reaching at least 90% in emerging markets. B2B marketplaces have the ability to streamline this process for everyone involved, and with so many companies still using the slow traditional process, there is much room for disruption and growth in the industry.
B2B marketplaces allow companies to start with a deal and build relationships afterwards. They often provide in-depth product and service information and easy ways of contacting sellers and making purchases. This saves both parties considerable time in terms of finding a business partner and negotiating a deal, and also gives them access to a broader range of companies and opportunities from around the world. Marketplaces typically earn money by taking a percentage of each transaction made, while some may offer services on a subscription basis, which provides a predictable income stream.
3. The Transition to E-Commerce
Although virtual marketplaces make B2B transactions more efficient, necessity has also been a key driver of their growth in recent years. The global pandemic forced companies across industries and around the world to adapt their processes in order to work around lockdowns and physical distancing requirements. This has given the B2B sector the momentum needed to drive a transition into online sales and opened up opportunities for a variety of B2B marketplaces. An increase in e-commerce platforms also allows for more data collection and analysis, which can benefit many processes such as marketing and demand forecasting.
4. Getting in on the Ground Floor
Because the B2B marketplace sector is relatively young, now is a very opportune time for investors to get involve. The potential for growth is high, and businesses that build up their presence now could become cornerstones of the industry.
There are numerous different sectors serving business customers, giving companies the chance to provide specialized platforms catering to specific industries or needs. This means that there is a considerable amount of room for businesses in this space without necessarily competing directly with each other.
B2B platforms are also typically able to scale up easily to meet demand. Because their services are being delivered over the internet, there is minimal infrastructure needed to maintain them, and growth can be relatively inexpensive. This ability to grow is one reason these marketplaces are becoming attractive B2B investment opportunities.
Finding the Right Partner
Every business venture involves some amount of risk, especially when that venture involves investment. A good business partner can make a sound investment — or help you identify a sound investment opportunity. That’s why Bizvibe’s B2B platform provides detailed insights on close to 200,000 finance companies along with tools for comparing and connecting with potential business partners, all available to try for free.