Pricing for SaaS Enabled Marketplaces – When to Go Free

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tomtunguz.comSaaS Enabled Marketplaces employ elegant business models. They are verticalized SaaS companies that manage a marketplace to create winner-take-all market dynamics. SEMs can generate revenue in four ways: charge the buyer and/or supplier a software fee & charge the buyer and/or supplier a marketplace fee. In addition, a startup must determine what rake to charge.

At Redpoint, we’ve invested in more than 15 marketplaces and have evaluated dozens more, including more than 20 SEMs in the past year. Some of these are Free SEMs. So which type of pricing should SEMs pursue? These are the questions we use internally to hypothesize the best pricing models for SEMs.

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