EBay Rival Letgo Touts Sales Growth as VCs Foot the Bill
The long reign of Craigslist and EBay is under assault from several startups offering mobile apps to ease the process of buying and selling used stuff over the internet. The upstarts, with backing from venture capitalists, are moving aggressively and threatening to squeeze the leaders' profit margins.
Letgo, an e-commerce startup with offices in Barcelona and New York, said it's on track to reach $13.2 billion in gross merchandise value this year. The figure, which refers to the total value of goods sold through the service, is not a perfect proxy for the health of a business, but it shows Letgo is approaching more mature and well-known brands.
Since introducing the app in May 2015, Letgo said it's racked up 30 million downloads. The service allows users to buy and sell their personal items, with a focus on local transactions. Buyers can use their phones to browse categories from cars to stove cooktops, chat directly with sellers through the app, and locate a neighborhood pickup spot on Google Maps.
Within the last year, Letgo has raised some $200 million from South Africa's Naspers Ltd., Accel Partners and other investors, and gobbled up another company, Wallapop, in pursuit of growth. The full bank account has afforded Letgo with the luxury of not having to worry about making money yet. The service is free for both buyers and sellers, and VCs are footing the bill.
"There is a revenue model; it’s just that at the beginning stages of a marketplace, you tend to focus on liquidity rather than on revenue," said Deven Parekh, managing director at Insight Venture Partners, which backs Letgo. "Not only will these mobile-first platforms take market share, but the more important thing is that they’ll expand the market, meaning I think there’ll be more people who are willing to both buy and sell products because of how easy it is to do it now."
Some garage sale apps haven't been given such a long runway. For example, Toronto's VarageSale said it had to cut 26 employees early this year.
Letgo hopes to win by expanding quickly and offering new features, such as image recognition tools. Each month, about 17.4 million use the app on Android or iOS, according to research firm Apptopia. That compares with 35.5 million for Wish Inc. and 15 million for OfferUp, both also backed by VCs. "In only a year, we’ve done what it took others much longer to achieve, and we’re still growing rapidly," said Jonathan Lowe, a Letgo spokesman.
Letgo's gross merchandise value is similar to that of OfferUp, a secondhand marketplace app founded in 2011, according to a recent Internet Trends report by Mary Meeker, a partner at VC firm Kleiner Perkins Caufield & Byers. And it far exceeds Jet.com, which said it was on track for $1 billion this year when Wal-Mart Stores Inc. agreed to acquire the company for about $3.3 billion. Although, Jet doesn't sell cars.