Since 2015, global online B2B (business-to-business) marketplaces have grown 8.6x — and VC investment into them has grown by 4.5x since 2017.
But recently there's also been a pandemic, a downturn, geopolitical instability and other market shifts. So where do European B2B marketplaces stand today — and are they on track to match their B2C (business-to-consumer) counterparts? We asked the experts.
Strong growth despite downturn
The B2B market has shown resilience in the slowdown. It had a combined enterprise value of $214bn in 2022 despite turbulent market conditions, according to Dealroom.
Dealroom data shows that over 40% of B2B marketplace unicorns were created since 2021. And currently, there are over 250 B2B marketplaces active in Europe, with many more being created.
Luke Trayfoot, chief revenue officer at payments platform Mangopay, says that while B2B marketplaces were previously quite nascent, they're maturing at a fast pace due to digitalisation.
“There's still demand [during the downturn] because some of the traditional ways of transacting or doing business are being overtaken by the digital forefront — with which you can get better outcomes and more optimisation for a lower cost,” he says.
“You've got your incumbents that are now vying to become digitally capable, so there’s a great opportunity for startups and digitally native platforms to take significant market share.”
The advantages of B2B marketplaces are indisputable: they offer businesses access to a wider range of suppliers, products and services, as well as increased visibility, efficiency and cost savings
For Heath Lansbury, a B2B investor, the market’s growth in the downturn and pandemic owes to the inherent nature of B2B products and services which make them necessary for the functioning of other businesses and industries.
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“The advantages of B2B marketplaces are indisputable: they offer businesses access to a wider range of suppliers, products and services, as well as increased visibility, efficiency and cost savings,” he says. “As more businesses embrace digital transformation, B2B marketplaces will become increasingly important for conducting transactions and building relationships between companies.”
VC funding lags behind
The B2B ecommerce market is expected to grow to $26tn by 2028. While VC funding has also grown in the last five years, funding levels are still only 19% of that of their B2C counterparts, according to Dealroom.
“Compared to B2C, B2B models tend to have longer sales cycles and require a deeper understanding of the target market, making valuation more challenging. This complexity could discourage some venture capitalists from investing in such businesses,” says Lansbury.
Compared to B2C, B2B models tend to have longer sales cycles and require a deeper understanding of the target market, making valuation more challenging
But it’s not all gloomy. VCs invested $16bn in B2B marketplaces in 2021, equating to 20% of global marketplace funding — $7.7bn of which went to key EU markets including France, Denmark, the UK and Spain.
Lansbury adds that to further bridge the funding gap, creating more awareness about the opportunities in B2B, encouraging VCs to have a deeper understanding of the business models — which would help them appreciate the long-term potential of these ventures — and more training and networking opportunities for B2B founders so that they can develop fundraising skills, are all key.
Shifting regulatory landscape
In 2023, startups have been warned to expect a large number of changes in Europe’s rules and regulations. The EU’s Digital Markets Act (DMA) and Digital Services Act (DSA) are two such regulations aiming to bring about content moderation rules and challenge the power enjoyed by Big Tech, thereby levelling the playing field for the growth of European startups.
Lansbury says that these regulations will result in stronger growth of the B2B sector. For him, regulations like the DMA and DSA are likely to create a level-playing field for “businesses of all sizes, prevent monopolies and foster innovation in the digital economy”, which in turn can open up new opportunities and gateways for B2B startups.
Trayfoot says that the regulatory environment is only going to get more rigid with increasing digital adoption — and for payments technology providers, like Mangopay, this offers an opportunity to add compliance as a service to their value proposition.
For the B2B market, this means that there will be smaller players entering the market, on their own terms and offering products that are already strong in compliance — bigger companies might need more due diligence and be slower to implement the necessary changes. The DMA will lay down guidelines to stop Big Tech platforms from imposing unfair conditions on businesses and consumers.
“There was already GDPR, the second payment services directive (PSD2), 5th Anti-Money Laundering Directive (5MLD) and so on, and now with DMA, there'll also be a lot more scrutiny on payment transactions and transfers. But that's part of what we provide as a service — the specialist guarantee that we understand our space,” says Trayfoot.
Verticalisation and impact on B2C
The expansion of B2B marketplaces can be linked to advances in three main areas of the industry: supply and demand aggregating platforms for businesses, procurement tools and financing solutions. But in the future, vertical specialists — focusing on specific goods and services that meet the needs of a specific customer group — and managed marketplaces, which are marketplaces that attempt to improve customer experience by being more involved in the execution of the product or service, are expected to generate and capture more value.
“The increasing importance of digitalisation, verticalisation and the 'B2B-sation' of B2C are expected to drive the growth of the B2B market. So it’s possible that the B2B market will continue to grow and reach similar levels as the B2C market in the coming years,” says Lansbury.
The B2C market in Europe is expected to grow from $878.6bn in 2021 to $1,564.9bn by 2026.
The increasing importance of digitalisation, verticalisation and the 'B2B-sation' of B2C are expected to drive the growth of the B2B market
Trayfoot says that as franchise, procurement and wholesale try to go digital and entrepreneurship and startup culture grow, digitally native businesses are booming and gaining more market share.
He adds that the convergence of different verticals will be an interesting space to watch too.
“Unlike B2C where you’ve got a shopping mall mentality of wider categories of items that can be bought or sold, in B2B, typically platforms will set out to solve problems for an industry. So an interesting trend to watch is when you start to see those hyper-verticalised industries converging and becoming more like a B2C type marketplace as offerings increase,” he says.
Find out more about Mangopay here.