Building Enterprise Networks Top Down
Most people that are in the VC and startup sector know that USV likes to invest in networks. And most of the networks we invest in are consumer facing networks of people. Peer to peer services, if you will. The list is long and full of brand name consumer networks. So it would be understandable if people assumed that we do not invest in the enterprise sector. That, however, would be a wrong assumption.
We’ve been looking for enterprise networks to invest in since we got started and we are finding more and more in recent years. There is a particular type of enterprise network that we particularly like and I want to talk about that today.
Businesses, particularly large ones, build up large groups of suppliers. These suppliers can be other businesses or in some cases individuals. And these suppliers also supply other businesses. The totally of this ecosystem of businesses and their suppliers is a large network and there are many businesses that are built up around making these networks work more efficiently. And these businesses benefit from network effects.
I am going to talk about three of our portfolio companies that do this as a way to demonstrate how this model works.
C2FO is a network of businesses and their suppliers that solves a working capital problem for the suppliers and provides a better return on capital to large enterprises. Here is how it works: C2FO has a sales force that calls on large enterprises and shows them how they can use their capital to earn a better return while solving a working capital problem for their suppliers. They bring these large enterprises onto their platform and, using C2FO, they recruit their supplier base onto the platform. They also bring all the accounts payable for the large enterprise onto the platform. Once the network and the payables are on the platform, the suppliers can bid for accelerated payment of their receivables. When these bids are accepted by the large enterprise, the suppliers get their cash more quickly and the large enterprise earns a return on the form of a discount on their accounts payable. C2FO takes a small transaction fee for facilitating this market.
Work Market is a network of businesses and their freelance workforce. Work Market’s salesforce calls on these large enterprises and explains how they can manage their freelance workforce directly and more efficiently. These enterprises come onto the Work Market platform and then, using Work Market, invite all of their freelance workers onto the platform. They then issue all of their freelance work orders on the Work Market system, manage the work, and pay for the work, all on Work Market. Work Market takes a transaction fee for facilitating this and many of Work Market’s customers convert to a monthly SAAS subscription once they have all of their freelance work on the platform.
Crowdrise is a network of non-profits, the events they participate in, and the people who fundraise for them. Crowdrise’s salesforce calls on these events and the large non-profits who participate in them. When a large event, like the Boston Marathon, comes onto Crowdrise, they invite all the non-profits that participate in their event onto the platform. These non-profits then invite all the individuals who raise money for them onto the platform. These events and non-profits run campaigns on Crowdrise, often tied to the big events, and Crowdrise takes a small fee for facilitating this market.
I hope you all see the similarities between these three very different companies. There are several but the one I’d like to focus on is the “they invite all the ….. onto the platform”. This recruiting function is a very powerful way to build a network from the top down. And once these networks are built, they are hard to unwind.
We don’t see many consumer networks built top down, but we do see a lot of enterprise networks built top down. And we are seeing more and more of them. It is also possible to build enterprise networks bottoms up (Dropbox is a good example of that). That’s the interesting thing about enterprise networks. You can build them top down or bottoms up. And we invest in both kinds of enterprise networks.
The top down enterprise network is a growing part of the USV portfolio. We like this approach to building an enterprise software business and it does not suffer from the “dentist office software” problem. Which is a very good thing.
Comments (Archived):
Great way of looking at it. Top down or bottom up.
Check out http://kinnek.com/ which recently raised A from Matrix, based in NYC, and founded by former UPenn grads =) => even though it might trivialize the greatness of a company, I’m going to draw the following parallel: Alibaba for SMBs
thanks. will check them out
What are your investing thoughts on the power of “data network effects”? http://techcrunch.com/2012/…
We invest in that too. But you have to be careful. It is easy to overestimate the power of data network effects
got it – if you have a moment, would love to learn a little more about how one tries to estimate the value / defensibility of a data network effect.also, what are common pitfalls or examples of over estimation?maybe another blog post =).
Started reading your post and was certain you were going to quote Twillio’s CEO as covered by WSJ on Friday…The idea being that once a developer likes a technology, she or he will evangelize its use regardless of where she or he works. “You can acquire a developer (as a customer) like a consumer, but they have the spend of an enterprise behind them,” Mr. Lawson said.http://www.wsj.com/articles…
that’s the bottoms up approach
For sure
Good thing they are going for the IPO because one of the potential problems with that type of publicity is that it can greatly energize and make jealous your competition so that they work harder. Not that they aren’t already. But seeing something in print like that in the WSJ does have that downside.
True that
I vouch for that. ServiceNow is moving from an IT platform at work, to a Service Management platform across several lines of business mostly because I have talked it up so much (and it’s that good).
Great read!
I think the supply chain/enterprise networks offer the largest potential for a technology like Bitcoin to grab a foothold.
I wrote about this exact thing in a recent article on HBR: https://hbr.org/2015/02/the…In particular, I see this play out in a 5-step template:1. Offer tools to facilitate a new form of communication between two parties.2. Allow the two to communicate without formation of an explicit network3. Gather data about the two parties based on their exchanges4. Build out a graph at the backend using this data to identify affinity between two users5. Use the graph to enable explicit connections among usersMore at http://platformed.info/next…
oooh. that’s great. thanks for sharing
The real beauty of C2FO is that the “top” has the leverage to compel the “bottom” to join… and the bottom pays the bill. Maybe I am missing something but C2FO seems to me like an online SaaS tool with a one dimensional network aspect. I don’t see the usual network advantages of say a marketplace platform. Would the network aspect of C2FO deter someone from creating C3FO? Similarly, given the lack of a marketplace advantage, a purchaser might create its own C2FO and capture some of the spread.Sangeet’s site is a great resource for formalized thinking about platforms.
Saul – maybe C3FO would lead to a lawsuit with Disney :)Being serious though, all network effects have subtle differences, and the ones we encounter most in day to day life are B2C networks.The key to networks was touched upon in another post here – the concept of nodes. If you add a node what happens?In a marketplace network you have nodes on both sides of the market. This can be even more interesting than a non-marketplace network as value can be added to the network on both sides.For example, for C2FO, each time a supplier joins, they often supply more than 1 buyer in our market, so therefore two or more buyers can pay their A/P early (i.e. pay the supplier’s A/R early). This adds value to both the supplier and the multiple buyers.It also means that when we are talking to a potential new buyer we already have X% of their suppliers in our network (a recent example was over 95%). That is very hard to compete against if you form a new network – “C3FO”.On the other side of the market, each time a buyer joins, they are highly likely to mean that more suppliers will see an extra buyer in the market. As per the above example, this adds value to the network.Finally, we now also see a waterfall effect down the supply chain, when the buyer’s ‘supplier of supplier’ can now use our market as the original buyer’s supplier is now also a buyer in our market. This is extremely cool as it rapidly enables capital to flow down the supply chain to those who need it most acutely.These points are crucial to why a buyer cannot independently operate their own marketplace at the same efficiency as we can. If you are ‘Major Retailer 1’ it is not likely that other retailers will want to sign up to your marketplace, hence you will have a single buyer marketplace. We have suppliers with over 10 buyers in our market, and as we sign more buyers this aspect of the network gets more dense.This density simply beats single buyer markets.
Truth is there’s some blurring of the lines in the middle, where success lies.The bottom-up networks need revenues eventually, and that typically comes from enterprise accounts approaches.And these new top-down markets have an element of consumerization and ease-of-use/onboarding which is part of their value proposition.At the end of the day, if you don’t sell something, you’re dead.
that whole sales thing….what’s snapchat latest round investor going to do to monetize? the thing about SaaS business networks is they usually start out knowing they have to sell.
hang on. well, for snapchat, there’s a hype/coolness factor which gives them a premium on valuation IMO. for now, they’ve got the content providers going gaga on them, but it looks like an “attention play” like Facebook, i.e. advertising driven.on your 2nd point, true if they’ve got product/market fit, but reality is a SaaS is at the end of the day an enterprise sale. Those SF big accounts didn’t self-sign up on the web by their own accord. They were sold by hard hitting sales reps, just as it used to be 20 years ago, prior to SaaS. SaaS makes is easier to deliver and use the software, but doesn’t make it easier to sell it necessarily once you’re into the large enterprise revenue segment.
What I am saying is let’s say I am a late stage investor betting on an IPO or exit. Who can legit buy Snapchat? Facebook? Twitter? But at a $19B valuation they have to pay $35B for me to get any return given the risk. How about an IPO? Where does Wall Street value them with little revenue?Fred, Bill Gurley and others have said valuations are frothy. I think I have seen two interesting phenomena. Many VCs are avoiding risk not taking it-and plowing into name companies in later rounds so they can tell their LPs they were in. Too few companies with too much demand driving up prices of later stage rounds. Second, Fund of Funds are not investing in riskier places (outside of Silicon Valley) because if they do, their LPs don’t reinvest. Hard to explain to your LP that this fund you picked failed because it was in “pick your town” and not in SV.
Snapchat is definitely over-valued, in my opinion. Their valuation has gotten ahead of them.
1. Take an existing enterprise behavior / workflow2. Automate / improve that workflow with software3. Bring those enterprises on to your platform / workflow4. They will add their “supply-side” organically as they begin to use your productUntil the network of supply builds, however, it will still be largely a sales problem on the demand side of your network… assuming you don’t have some sort of X factor in your technology / data that drives away competition.
that’s right. its sales execution to build the network effect.
Do you see anything unique about a successful selling effort when the final outcome is getting the customer to “invite” others to the platform?
Correct – the great thing is that we don’t need that many sales resources to build the entire network. Take a company like Box (who had a great IPO recently) – they have 100’s of sales people, however we can sign up one major buyer and have access to 10,000s of businesses (i.e. suppliers). The suppliers talk to suppliers too – lots of different network effects that enable the network to become stronger.
the great thing is that we don’t need that many sales resources to build the entire network ….. we can sign up one major buyer and have access to 10,000s of businesses (i.e. suppliers).However that also means that there is less of a barrier to entry. In other words if all it takes is a great salesman and a platform then it isn’t as hard for a competitor to match that or enter the market. Good high level salespeople aren’t cheap but they are also quite identifiable as a resource.
The key though is that we already have X% of your suppliers in our network (one recent example was above 95%!), so who is going to win that ‘pitch’? It’s not a fair contest :)We can both have great sales people – and you are totally correct that they are not cheap.But we have the network already there – ready to immediately benefit the buyer.I’ve also not gone into the IP side – whilst C2FO appears simple, it has over 5 years of IP behind it, and serious technology. We touch c. 10 billion invoices per year. That is a lot in anyone’s book.You have to earn the right to work with the world’s largest corporates, and so references matter a lot. If you start now then you have none.Top down selling is hard (I often talk about JFK’s speech about going to the moon in this decade, not because it is easy, but because it is hard), but once you have cracked the code it scales wonderfully.
That is a nice advantage (and head start). [1][1] As is always the case when Fred writes about a company that he invests in, there are always many things that the talking heads and the peanut gallery (people who comment) are not privy to.
When you mentioned the dentist office software problem, I thought it was going to be about how any software specifically marketed toward dentists tends to suck. Having provisioned several small law offices myself, my bias is now to avoid buying any cloud solutions or other software that’s supposed to be “for lawyers” b/c it tends to have worse features than general purpose competitors, is 10x as expensive, and tries to lock me into a technology stack that’s outdated from day one.That said, there are a number of very interesting lawyer-specific networks in seed stage right now, and I try to remain open-minded as someone will eventually get this huge market opportunity right.
I think Casetext probably is on the right track for lawyer stuff. I also think that there are lots of interesting things happening in the world of discovery, document and contract review with natural language processing. https://lexmachina.com is fascinating to me.What cool ones have stuck out to you?
I’m thinking of CaseRails, and PlainLegal, although both remain to be proven. But they seem to be barking up the right tree. Rocketlawyer and Legalzoom are already proven successful, the WalMarts of the corporate legal world. I cringe at their shoddy work product and networks of uninspired hack lawyers, yet they are the only successful platforms I could properly consider to be “innovative” in any sense.Lexmachina seems like more of a pure service, not a network of engaged users as they say.
Great stuff.For me bottoms up consumer models invariably build momentum and discover their model out of it.B2b models almost always are a model from inception.We may market to consumers and enterprise similarly but we sell to them very differently.
I’m intrigued by the added complexity of figuring out the balance between B2B and B2C thinking in marketing and building product in a marketplace company when the supply-side still has a lot of resemblance to a consumer, but increasingly has the problems of a business.
This is an interesting point, taking a step back, you are correct that the B2B angle is relatively traditional in many ways from a sales perspective (although not traditional from a software perspective). The other side of the marketplace shares much more with B2C mechanics. Although, one interesting point is that businesses on this supplier side of our network could be a business of 3 employees, or 30,000.The latter cannot really be considered to be analogous to a consumer, it’s likely they have quite a lot of process within their business, so having a suite of ways to market to both types of business, plus those in the middle, is important.If a business network just had the really small side of the SMB market then it likely could be approached like a B2C network.
Do we really market to consumers and enterprise similarly though ? I tend to think it is quite different… Thanks.
It used to be very different. Predominantly through shows and through the sales force, even consultants.Not in the last 10 years.You market to people, you sell to organizations is my experience. Much more flexible on the marketing side, no difference or little on the sales side.
Thanks.
Once the network and the payables are on the platform, the suppliers can bid for accelerated payment of their receivables.This is a great idea however I think the marketing on the website fails to communicate exactly (in easy terms) the core benefit.The way it is presented (after reading what you wrote and what the website says) it seems as if what is being offered is the following:Fictional Hightool Manufacturing has 300 suppliers, one of them is fictional Wilsonart, maker of laminate counter tops.Wilsonart has sold $100,000 of laminate to Hightool and typically is paid in 60 days. Wilsonart is willing to take a 3% haircut on the invoice amount due (“the vig”) if they can get that money (once the invoice is approved) in 5 days. This is possible because c2fo has a platform that allows the two parties to communicate and negotiate the vig.
GE already do this in their terms and conditions. They will take an early repayment discount, skin your head and then pay you 240 days later……
No shit. So you are saying GE will pay you 240 days later with the discount terms for early payment?
Yup, GE have late payment down to a fine art because well….. They are GE. They have every single excuse in the book and some. I don’t see them signing up to c2fo anytime soon!
The caveat to this is that the experience for the invited party needs to be great.Too often I see such platforms where people are forced to import collaborators or suppliers, but the value prop is skewed super hard towards the party who the software was sold to.That means that the invited party is stuck with a solution that doesn’t cater to them and is forced to use it because it doesn’t have leverage. I think that’s a bad recipe.That being said, if you can solve for that, then it’s a total win.
This is a good point. We measure our supplier Net Promoter Score (NPS) to track this. We measure it quarterly, it’s around 70% right now. That is extremely high (the scale goes from -100% to 100% and anything over 50% is ‘worldclass’).You are correct that the experience for the invited party needs to be great. Suppliers are just two clicks to cash, it’s ultra fast, and of course if they don’t want to accelerate their receivables then that is absolutely fine. It’s optional for each supplier. Often they register and may not require working capital at that moment, however we see them popping up in 3/6/9/12 months time (for example).We see it has having a network of engaged businesses – they key word for us is engaged. If the software is skewed to one side of the marketplace then you will fail.
depends on the leverage of the inviting party. GE can dictate compliance by its suppliers. Obviously better if it is win-win for all.
The selling cycle for these types of markets must be quite long and involved. So there is a large upfront cost and expense for not only the salesforce pay and benefits but the travel and entertainment required to actually close a sale. All with no guarantee that it will ever close.Along those lines it would be interesting if there could be any synergy between current USV invested companies (that have been there and done “that” (have a contract)) and future companies that USV might invest in. In other words one of the hardest part of any sale is getting a foot in the door to be able to give a pitch. Once a company already has that foot in the door it would be a bonus if other USV companies had a product or service that could also be sold to that company (regardless of whether the specific contact is the target at that company or not). [1] Without obviously being in competition with the initial USV investment.[1] In a similar way this is one of the reasons why Berkshire Hathaway name appears next to many companies that they own (such as NetJets). They are using that to make the potential customer more likely to use the company because of that association (although the examples I’ve seen are all in consumer advertising).
You said “synergy”. Hehehe. But yeah, spot on.
Would certainly enhance the value proposition to a prospective investment and be another slant on network effect. 😉
You are correct that there is a relatively long sales cycle, luckily it normally closes! However the benefits of this top down approach vastly outweighs the cons. Signing up one major ‘Buyer’ (e.g. Costco, Amazon) gives us access to literally 10,000s of businesses (i.e. suppliers). This one to many (many many) effect is hugely beneficial for building a network of engaged businesses – like we have done (at C2FO). Like Fred said, top down is weird for B2C, but for B2B it’s the only logical way. We in-effect have a very low acquisition cost of building our network.As an aside, we have some Berkshire Hathaway customers too 🙂
gives us access to literally 10,000s of businesses (i.e. suppliers).If you care to share, exactly how do those “10,000” business find out about this?Do you use postal direct mail?Does the company inform them?What are the actual mechanics by which they are notified?I would imagine that simply getting the information into the right hands at the “10,000” companies is not trivial or easy. (Obviously you aren’t using a salesforce to do that..)
No problem sharing – we email and phone the suppliers on behalf of the corporate buyer (who gives us each supplier’s email and phone details). Also we do use post as well. Snail mail can be very effective!It’s a highly efficient way of signing up the supplier side of the network. If you tried to bottom up this then you would be toast as we have the right person to contact at the supplier, and we also have the buyer’s brand and credibility behind us. Means we acquire suppliers c. 100x cheaper than bottom up models.
So no direct mail or follow up that way? Don’t know the percentage of businesses that you are signing up (by email and phone) but I would think that sending postal direct mail and keeping in people’s face (on a regular basis) would be a great benefit. Even “swag” something that they will remember you by (if they don’t need to take advantage in the present).
We do use post (I called it snail mail above!). And it works well.As always, it’s not about one silver bullet channel. It’s about a suite of channels that work together to maximise the registration rates.We have several senior people who joined us from Groupon who run this side of C2FO, e.g. Sanjay Gupta our CMO. It’s a combination of raw data, and also finesse – when you call a supplier up the latter matters more.Solving B2B with just data & automation alone is not so easy. When I talk about suppliers they are of course businesses in their own right.Some have 3 employees, some have 30,000! It takes a pretty sophisticated approach to be able to sign up both in a scalable manner.
Are C2FO in the hunt for big ‘buyers’ in South Africa? We run a procurement consulting company with positions in some large companies. Let me know if you’re interested in talking.
Sure – ping me on linkedin and we can connect
FYI http://www.calibagroup.com/…
It’s bottom up guys not bottoms up. Reading this post and comments I now am distracted by this strong craving to go find a brunch that serves mimosas!
Bottoms up!
Talk about being witty ! You, sir, are incredibly talented.
Nah, she served a soft ball.
Soft Ball to you, maybe :-). I burst out laughing. Like Shakespeare said – “Brevity is the soul of Wit”.Edit: Besides the obvious context of bottoms up to mimosas (which was a soft ball and implied in Donna’s initial comment), you seemed to be giving a “thumbs up” to the plan to go find a brunch serving mimosas. Except that instead of saying “Thumbs up”, you said….something else !
“Brevity and levity”, I always say.
Brevity, levity, clarity, and charity!
Thanks for expanding
We are all here to help each other concoct good champagne toasts, amiright?
Indeed. Skol!
Well yeah but the compliment still stands.
Don’t you mean a high ball?
Oooooooh!! Steppin’ up to the bar with a good one.
I’ll cheer you with a Kir Royale. True, Fred’s Sunday posts tend to be on the substantial side 😉
keeper
This is really helpful on a number of levels.On a more personal note, I’ve toyed with the idea for an app for a crowdsourced approach to recruiting and one problem in my mind has been the building of the network effect. I realize that I’ve been thinking from the perspective of a consumer app.
This was the approach used by Ariba (and others) to build their networks. I worked at Ariba for many years and now work almost exclusively with such industry platforms–of which there are hundreds. See the downloadable landscape chart on the resources section of my website for a graphic of a few hundred examples. It’s a great business model when done properly. http://www.softwareplatform.net/re….
Do you see USV’s investments in education/edtech in the same way?
1. Would Fred Wilson, given enough comfort around due diligence, have invested in Alibaba at the ground floor?2. Would it make sense for Amazon to become more of a network of marketplaces than just a market place, turning the social dial up a bit?
Help me understand C2FO: a big company doesn’t pay its invoices until WAAAYYY past the due date (in violation of the contract terms with the supplier), then bids to discount the amount for fulfilling its legal obligations? And the smaller supplier takes the bait to manage their cash flow? Perhaps it should be called C2 FU? The fact that the enterprise company knows it won’t pay on time makes it guilty of contract fraud, and at the scale with which this takes place, quite probably guilty of racketeering. Sounds like an opportunity for another business: RICO2 C.
Absolutely agree with you that late payments are totally unacceptable – I wrote an article on this just 3 weeks ago:http://gtnews.afponline.org…(you do need to register which is not the easiest thing to do!)In the UK, where the data for this are best, 60% of SMEs say they struggle with late payments of their Accounts Receivable (A/R). This is a shocking number.The founding thesis of C2FO was not necessarily late payments per se, yes these are a problem as you correctly point out, however it was to liberate the c. $40T of working capital (i.e. cash) that is trapped in A/P and A/R at any moment in time in the world. This is a far larger amount than the total amount of late payment owed at any time.Whether a supplier (like I said in other comments, could be a business of 3 people, or a business of 30,000 people) decides to use C2FO is entirely their choice.If they decide not to then they are paid on the terms they negotiated with their buyers.If they decide to use C2FO, they participate in a fair marketplace where they bid a discount that they are happy with. In a recent survey we conducted, over 99% of suppliers got access to cheaper capital with C2FO than with any other source.This means we are lowering their cost of doing business, as they need to get hold of working capital somehow (or they would not use us), and this therefore strengthens their business. At first that seems counterintuitive a they have given a small discount, however what matters is that this discount, when annualised into an APR, is lower than all their other sources of capital.Our marketplace averages c. 6% APR, which corresponds to an actual average discount of less than 0.5% in absolute terms.We believe this is fair to both the supplier and the buyer, and like all marketplaces, we have to balance both the supply (buyer) and demand (supplier) in order to have a liquid and efficient marketplace.Finally, our supplier Net Promoter Score of 70% is absolutely world class (on a par with Apple, Amazon etc), so we have a product that resonates.
Hi Chris –Thx for your thoughtful reply. [Sorry I did’t reply to you sooner, but took time off for the arrival of my 2nd grandson yesterday.] I will acknowledge that my POV is heavily influenced by my experience at AIG, where I spent the single unhappiest year of my career. AIG would purposefully not pay suppliers for 120 days, when the supplier often called to beg for payment. The procurement people would apologize, feign embarrassment, then suggest that they could cut a check that very day… in consideration of a 20% discount to the invoice. It was systematic, pervasive, and unforgivable. Loved the karma when a supplier that was twisting in the wind was the sole source for a key infrastructure component that was needed to restore network service to the firm… with the procurement people being the most effected. I get your premise for your company… great concept. Be aware that you could be enabling bad actors in their abuse of power. I know you want their business, but I hope you can shine a light on their deplorable practices.
Fred / Chris, Very curious to hear if there are pricing trends you see across this model. Do enterprises provide a freemium or trial period for suppliers to come on board? Seems like there is a strong incentive for enterprises (and for the company) to generate trial here. Also, how do these businesses use pricing to create positive motivations over time, so that suppliers have incentives to funnel more business through the platform?tx
all over the mapi am seeing more and more freemium modelsbut i also see transactional pricing a lot toosaas usually comes after there is a network in place
thanks Fred. one follow-up, if you’ve got a sec… do you see successful freemium models with relatively small addressable markets in this space? freemium has been associated with large, horizontal markets (thinking of IVP analysis http://www.ivp.com/assets/pdf/ivp_... which cites dropbox and evernote).in context of enterprise networks, you’ve got an enterprise providing a really strong push which solves the sales/marketing challenge of freemium. and i’d think that a push from the enterprise creates a much higher conversion to paid rate than the typical freemium product. but focusing on one enterprise or segment limits the addressable market in comparison to the horizontal businesses like dropbox/evernote.would love to know if there are folks successfully using freemium as par of an enterprise network in a vertical market.
freemium works at any scale if the pricing of and conversion to freemium is high enough
I have an email doppelganger, Ryan, who has a very similar e-mail to mine, w/o the digit “5” I have in my personal e-mail. He gets my e-mail frequently. Fortunately he’s a good dude and is quick to forward my e-mail back to me. We’ve gotten to know each other a bit of the years from these interactions.
Sourceeasy is a network of small / medium brands, corporates, QSR / licensed brands, designers, startups, and small / medium overseas clothing manufacturers. Sourceeasy’s salesforce calls on these brands and explains how they can manage their custom clothing production directly and more efficiently on the free Sourceeasy platform. These brands / entities come onto the Sourceeasy platform and then, using Sourceeasy, place their orders and create bids for their suppliers / other suppliers aggregated by Sourceeasy onto the platform. They then issue all of their production work orders on the Sourceeasy system, manage the produciton, and pay for the goods, all on Sourceeasy. Sourceeasy finances the goods, checks quality, enables logistics, and delivery and takes a profit cut for facilitating this and many of Work Market’s customers convert to a locked in long term contract to produce goods purely through Sourceeasy once they have all of their designs and templates on the platform.
Sorry couldnt resist pitching that. 🙂 resonated a lot with what we do.
Sounds like three great companies. I am interested by the network effect in the enterprise. Will networks eventually replace giant corporations as the dominant form for global business?
Good description. I’ve seen a company trying to do this in healthcare with HIPAA business associates. You described exactly what they’re doing. I hadn’t thought about the network effect benefit of it, but you’re totally right.The key question when creating these networks is does the company asking the outside vendor to “come onto the platform” have enough pull to get them to actually do it.
I may be totally wrong in understanding, but would you consider a recruiting platform as an enterprise network serving businesses looking to hire talents on one side and job seekers on the other?
It was great to hear you speak at LaunchFest (and to meet the lovely Gotham Gal). This particular post has been sitting, marked as unread in my email inbox to come back and comment on. I appreciate how you articulate the strength of an enterprise network as it is the core of my business model.
What is cool about C2FO is that we have already shown several network effects that are real. For example, we know that the more buyers that each supplier can see in our network, they more they play in our market (they simply see more of their A/R). Also, the more suppliers we have in the network, the more overlap there is for each new buyer – which makes using our network much more attractive.A bit like Airbnb, where the #1 way hosts sign up is when they have used the platform as a customer (i.e. renter) first.Finally, we have several companies who have been suppliers to major corporates, and now use the market as buyers, with their own suppliers. This waterfall effect goes down the supply chain, and means zero cost of acquisition in-effect.
I see it as a network effect in that as more companies use C2F0 it becomes more valuable to all participants.For example, in my fictional example that I gave elsewhere:”Wilsonart is willing to take a 3% haircut on the invoice amount due (“the vig”) if they can get that money (once the invoice is approved) in 5 days.”…if there are other vendors that Wilsonart uses that are already on C2FO then they are already educated and pre-sold on using that and in fact the security of knowing they can get their money quickly (because many of their vendors are on C2FO) will no doubt change the way they make business decisions.Likewise if the company that Wilson owes the money to meets a new vendor that is already on C2FO then they might take that into account knowing they can actually get a price that is 3% (fictional) cheaper.So if you go and sell Lancaster Bread to a supermarket that uses c2fo then if that market knows that you are on the platform then they might take that into account just like they might 2% 10, Net 30 in deciding to buy bread from you (a stretch, for illustration purposes).
The key is that if you login to our platform as a supplier you see all your buyers on one screen. We see suppliers accelerating A/R from 10+ buyers in one click. That is pretty cool.When we sign up a new supplier, it benefits multiple buyers too.I agree it’s not identical to Airbnb, all network effects manifest themselves in different ways.Ultimately each time we add a ‘node’ (whether a buyer or supplier) we see an increase in engagement on both sides of the marketplace.