Platform Business (n) A multi-sided business model focussed on creating value in its network of data by facilitating interactions between two or more interdependent groups.
Why Investors Love Platform Businesses
It’s important to remember that a platform is a business model, not just a piece of technology. A lot of people make the mistake of conflating a platform with a mobile app or a website, but a platform isn’t just a piece of software. It’s a holistic business model that creates value by bringing together consumers and producers.
The most common misuse of the term “platform” is when it’s used to describe an integrated suite of software products. This is especially common among SaaS companies, which love to claim they have a complete “platform” for X. In such cases, the word “platform” really is just being used as a marketing term and these companies are still linear businesses.
A platform business model dervies value from its network not from its supply chain. Platforms have radically different cost structures and provide much higher returns on investment.
Nearly 60% of today’s billion-dollar “unicorn” startups are platform businesses. In Asia, 31 of 36 unicorns are platforms, or about 86 percent. This includes China, where 81 percent of 21 unicorns are platforms, and India, where 8 of 9 are platforms.
Examples of the Platform Business Model
Succesful platforms soon build strong moats in the form of their networks and rapidly operate at a scale that positions them to dominate.
Facilitates transactions between room owners and room seekers
Facilities transactions between people with excess goods and deal-seekers
Facilitates monetary transactions between two parties
Connects developers with consumers using a common code base
Connects image-based content seekers with photographers
Facilitates conection and interaction between people online
Facilitates transactions between drivers and passengers
Connects property owners with buyers & tenants
Since network effects fuel platforms, platforms will initially pay high costs to acquire producers.
At scale however, for each additional marginal unit of supply, the marginal cost is near zero.
Platform Businesses in the S&P 500
The number of platform businesses in the S&P 500 is growing exponentially
Pure platform businesses or businesses for which a platform is a significant part of their business have an average revenue multiple of 8.9. In contrast, linear businesses are valued between two to four times revenue on average, depending on their business model.
Igniv is the Only True Platform Solution in the Property Sales & Lettings Sector
"Igniv is a game-changer. It's a true disruptor with first-mover advantage. Totally up-ending how to monetise property transactions.
With platforms, it's a case of 'Winner Takes All' and it's hard to see how real estate agents can compete against Igniv, once it has momentum.
The Igniv business model shares all the characteristics of some of the world's most successful platform businesses, projecting 28% net margins, rapid scalability with near zero marginal cost to growth. There's no reason why Igniv won't be the next AirBnB."
David Cox, Founder, Igniv
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