The Money Flows in the Collaborative Economy

A series of significant monetary events have occurred.

In prior posts, I’ve covered the investment leaders by frequency and looked at funding in a category of 200 startups.  I found that 37% had been funded, with some receiving very large cash injections.  In the recent past, there have been some significant material events in the Collaborative Economy, including the following:

• VCs inject capital into startups.  Lyft raised $60m in March, and Airbnb has raised $120m.  Airbnb has made at least six acquisitions, and opened a large HQ at 888 Brannan in San Francisco  this quarter.

• Google bets big on Uber to take down Amazon.  Google funded Uber with $258 million in September 2013, which is the largest investment ever by Google Ventures.  This money will be used to link Uber to Google Shopping Express, self-driving cars, mobile apps and more, to compete directly with Amazon.

• Avis secures a place in the ecosystem by buying Zipcar.  Zipcar to Avis for $491 million, January 2013.  To expand and defend mobility-as-a-service, Avis snaps up Zipcar.

• PayPal spends $800 million on mobile payments player.  On Friday, PayPal bought Braintree for $800 million. This startup provides the mobile payments power for Uber, Airbnb, and other sharing startups.

• Enterprise software investments on the rise.  There are B2B examples too, as software solutions company Appirio (funded, and closely tied to Salesforce) acquired TopCoder, and new investment just went into Localmotion, an enterprise version of Uber, for big corporations.
• Update: April 2nd 2014, Lyft has raised $250m

A quick tally shows that funding-wise, that’s $444m (not including other startups, and additional Uber funding) and acquisition-wise, that’s $1.291b, not including the unknown Topcoder purchase. So why are big companies like Google, eBay and top investors like Andreessen and Menlo Ventures putting into this market?  Here’s a simple logic flow that helps to understand why this market matters to them.

Logic flow on why investors and tech companies are betting big on this market:

1. They have ample technology.  These well-funded sharing startups, like Airbnb and Uber, leverage cheap, but powerful, technologies like Facebook Connect and Apple and Google hardware and mobile apps platforms.
2. They’re efficient.  Using these startups, people are getting what they need from each other, often at a local level rather than getting those things from corporations.
3. They’re scalable.  Since these startups match idle inventory to buyers and renters at a local level, it means their operating costs are lower than traditional corporations, as there’s no overhead or inventory to manage.  These are scalable, two-sided marketplaces with low operating margins
4. They shift power.  This, of course, spells disruption to inefficient institutions like corporations who pay no attention to this growing trend by which individuals are getting products, services, time and space from each other.

This means, the crowd is becoming like a company.  Airbnb is a hotel, Uber is transportation, Lending Club is a bank, Cookening is a restaurant, Yerdle is a retailer, Lockitron is a warehouse, Postmates is supply chain, and social networks are marketing.  Savvy investors and big tech companies are paying close attention to this market, injecting resources and acquiring en masse.  Corporations must pay attention, as many of these startups are directly aimed at better serving market needs often unintentionally disrupting corporations.  The more successful they are at meeting market needs, the wider the disruption of corporate businesses will become.

Photo used with creative commons attribution by Epsos.