In 2014, I tried to summarize the recurring patterns I had seen in working with B2B SaaS platforms by publishing the first edition of my highly-acclaimed e-book: The Nine Value Propositions of B2B SaaS Platforms. (When I say highly acclaimed, I mean by several members of my family.) In late 2019, I edited and updated the e-book. At that time, I was pleased to find the nine value propositions had held up well over the prior five years, as did many of the examples and case studies.
In reviewing that second edition, I found there has been more change in the last two years than in the previous five! (Or perhaps it is just that I am willing to do a bigger re-write this time around?!) In any case, I’ve done major re-work on the second edition and am pleased to provide you with The Nine Value Propositions of B2B SaaS Platforms (Third Edition). It is available for download here. (It’s still free and worth every penny.)
I still find the nine value props to be a useful lens for examining B2B SaaS platforms, so I only fiddled with one of the value propositions. But many of the sections needed some work due to the following trends:
- Buyouts, IPOs, and SPACs
- The Pandemic
- Marketplace Explosion (Value Proposition #2)
- Credentialing Explosion (Value Proposition #3)
- Big Data Explosion (Value Proposition #7)
- Embedded insurance (added to Value Prop #3)
- Blending and Sequencing Value Propositions
For each value proposition, the e-book provides example companies and their market caps (or acquisition prices). As I was updating these valuations, I kept seeing companies with market caps that had increased 2-3x in just two years (e.g, Descartes, Fiverr, Upwork). I thought if I had just bought all of the stocks mentioned in my e-book, I would have made a killing. Of course, if I had just bought an index fund of cloud stocks I’d have made a killing. Here’s the chart of Bessemer’s Emerging Cloud Index since inception:
It’s quaint to recall that:
- this version of the BVP index did not even exist when the first edition of the e-book came out in 2014
- nothing happened to the index for its first 1.5 years—then, of course, all heck broke loose
- even with the recent shake-out, the index is up 92% since its inception
2. Buyouts, IPOs, and SPACs
For each of the nine value propositions, the e-book provides a simple segmentation of companies specializing in that value proposition. When possible, I use independent companies or, ideally, public companies. With all of the M&A activity, I had to change many logos. In the past two years, many of these platform companies have been bought by strategics or taken private by PE companies.
On the other hand, the once active IPO/SPAC market means there are now many public B2B SaaS platforms. (Since 2014 several companies have even done the full roundtrip from public to private and back to public (e.g., Cvent and e2open). The appearance of more public platforms is useful because it makes the business models and value propositions more transparent. For instance, in this edition of the e-book, I was able to add a case study on now-public ACV Auctions.
3. The Pandemic
The second edition of the e-book had two case studies related to the travel industry. Those companies suffered disproportionately from the pandemic. Sabre, a GDS and a granddaddy of B2B platforms saw its revenue fall by 66%. Sabre has been around 50 years, but it took a pandemic to bring it to its knees. I lightened up on the travel-related content but kept the Sabre case study because it is still something you young whippersnappers need to know about. It’s useful to remember that some B2B platforms (e.g., GDS and EDI providers, CCC Information services, and more) have been around 40+ years. The cloud did not invent these companies, it just super-charged them.
The pandemic’s effect on the supply chain is also noted in the new edition. Supply chain disruption has been a reason for the explosion of interest in logistics marketplaces and credentialers who focus on supply chain risk.
4. Marketplace Explosion (Value Proposition #2)
Perhaps no value proposition has seen a greater increase in interest than matchmaking (which most people call marketplaces). Fiverr’s market cap has tripled since the last edition of the e-book and was at one point up 10x! Upwork has had a similar trajectory. Xometry and ACV Auctions both had their IPOs and have $2B market caps, even after the recent market downturn. Dozens of trucking marketplaces and investment marketplaces for accredited investors have sprung up. I updated this section extensively to reflect this activity.
5. Credentialing Explosion (Value Proposition #3)
Credentialers help buyers collect, normalize, and analyze relevant information on their vendors. ISNetworld, for instance, historically collected Environmental Health and Safety (EHS) information from contractors who did onsite work. The company recently sold a minority stake to Blackstone at a $2 billion valuation.
The last few years have seen an explosion in the types of information buyers want to collect from suppliers beyond EHS information. Examples include:
- ESG information, which was called CSR way back in 2019!!
- Supply chain risk information
- Cybersecurity information and
- Payments fraud-related information, i.e., KYC/AML
I’ve added examples and expanded the segmentation of this value proposition extensively.
6. Big Data Explosion (Value Proposition #7)
Some B2B platforms sell data to an industry’s participants to help them make better decisions, rather than participating in commerce directly. Advances in ML, AI, and growing datasets have meant this value proposition has advanced considerably over the last edition. I added examples and noted some major valuation increases in this sector (e.g., Inovalon).
7. Embedded Insurance (added to Value Prop #3)
Embedded payments and financing have been one of the nine value propositions from the start. In this edition of the e-book, I expanded the credentialing value proposition to include insurance. Many credentialers are now working with partners, or on their own, to offer insurance. With theoretically superior data on risk, they may have an advantage in underwriting and they certainly have a leg up on distribution.
8. Blending and Sequencing Value Propositions
There have always been natural clusters of the nine value propositions. Platforms providing supply chain automation often offer payments and transaction financing (and vice versa). Marketplaces (matchmakers) uniformly offer credentialing and most now offer payments. As platforms have matured and learned from each other, the number of platforms offering multiple value propositions in some common patterns (and some unique ones) has increased. I added a closing section on these common–and not-so-common–patterns.
I hope you enjoy The Nine Value Propositions of B2B SaaS Platforms (Third Edition), it’s a real labor of love—and pain in the ass.
I was referencing your original 2014 post a couple of nights ago. Just as relevant as ever!
Thanks Robert. Always excited to learn from you and your deep insights on B2B marketplaces