Learn more about Accel’s upcoming event ‘Decoding Marketplace’ here - https://www.seedtoscale.com/marketpla...

In this video, we talk about how marketplace model has seen a massive adoption among Indian Startups and how Accel, a venture capital firm that invests in early and growth stage startups, has helped in it’s growth in India.

The marketplace business model is when an online store allows multiple sellers to sell their goods and services through its platform, connecting them to possible buyers.

Marketplaces come in many shapes or forms, but are often separated between two categories: horizontal or vertical.

Horizontal Marketplaces offer products across different categories on a single platform with a similar level of services, so for example customers can buy products on Flipkart ranging from groceries to mobiles to fashion to electronics, Flipkart has everything.

Vertical Marketplaces, on the other hand, focus on just one product category but they offer a lot of variety within that category, and Cars24 is a great example of this. They buy and sell used cars and also provide other services like for example car financing.

So those are the basics of the marketplace model, but now let’s actually take a look at how these businesses make money.

The first method of generating revenue from a marketplace is called the Commission Model.

This is arguably the most widespread way for a marketplace to make money. They take a commission for each successful transaction, and the reason they’re able to justify this is that they handle the payment and logistics for each sale. Examples of companies that use this model include Flipkart, Amazon, and Myntra.

Now another revenue generator is called the Subscription Model, where either buyers or sellers or both are charged a recurring fee to access the marketplace, making it more exclusive. Buyers will pay this subscription because through it, they gain access to a high-quality customer experience, and sometimes it actually allows them to save money if they’re a power user. The cost of the subscription ends up paying for itself - Netflix uses this model where its users are charged a recurring fee to gain access to its entire library of movies and web series.

And then finally we have: the Freemium Model. Here, the marketplace can be used free of charge for both buyers and sellers, and the idea is that once buyers and sellers get hooked, once they realise how valuable the platform is for them, they don’t mind paying a fee or subscription to gain access to additional power user features.

About Accel:

Accel is one of the leading venture capital firm in India, investing mainly in early and growth stage startups. They've launched an exciting community initiative called SeedToScale, where they sit down with successful Indian startup founders to find out how they went from Seed to Scale, how they went from an idea, a tiny little startup, to a massive change making business. A part of this initiative is they're upcoming event called Decoding Marketplaces which is happening on December 1st, where they'll be bringing together aspiring startup founders to learn more about the marketplace ecosystem in the country and how to navigate it.

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