Investing in Collaborative Consumption: Venture Funding in 2012

By Stephanie Brincat

Dubbed the “Megatrend that swallowed Silicon Valley,” collaborative consumption ventures will continue to be a hot area for investors in 2013. Investments in startups topped $431M in 2012, up from $400M in 2011. While not a significant increase in overall funding, the collaborative consumption space has received consistent venture capital over the last 12 months from leading investors such as Sequoia, Union Square Ventures and Floodgate.

Here’s our roundup of where the big investments were made across sectors:

Money

The biggest winner in the payment space was Social Finance (SoFi) - a peer-to-peer student loan network - raising an outstanding $77.2M. With student debt in the U.S. reaching $1 trillion in 2012, SoFi offers students a lending fund with a better fixed loan rate than unsubsidized government loans.

Marketplace payment platform Stripe picked up $38M in funding over two rounds, with an estimated valuation of $500M. Stripe makes it much easier for businesses to start accepting online payments, a big friction point for collaborative consumption marketplaces. Y-Combinator backed Balanced Payments is another player in the space, securing $1.4M in funding. The platform focuses on making sure sellers get paid quickly and is already being used by TheFancy, Kitchit, CrowdTilt, Copious and Zaarly.

Travel and accommodation

Airbnb’s success after its $117M Series B round in mid-2011 has paved the way for other startups seeking funding in the travel and accommodation space. HouseTrip, a platform that allows people to rent out their homes online, picked up an impressive $40M in Series C funding. Couchsurfing received $15M in Series B funding to help extend its 5-million-strong social travel network. Overall, the travel and accommodation space received over $78M in funding in 2012, making it an ongoing trend to watch for 2013.

Fashion

Online fashion marketplaces were one of the standout trends for 2012, with fashion startups receiving more than $56M in funding. Recently, there has been a move away from swapping or "swishing" marketplaces towards the buy/sell or consignment model. Poshmark, a peer-to-peer clothing marketplace for new and used clothes, raised $12M in Series B funding. Users can download the app and start taking photos of their closet immediately, giving potential buyers the chance to purchase unwanted items. ThredUP, the children’s clothing exchange platform, moved away from swapping to a consignment model, meaning parents can now send a bag of children’s clothing, which then gets individually sorted and listed online via the thredUP marketplace. ThredUP raised $14.3M in Series C funding to help expand the business.

Ridesharing

Ridesharing experienced explosive growth in 2012, attracting investors to make some big bets. Startups in the space received more than $48M in funding worldwide. European companies BlaBlarCar, Hailo and Carpooling.com (recently expanded into the U.S) secured $37M of this funding pool, demonstrating the immense success of ridesharing in Europe.

It’s all in the niche

Collaborative consumption startups that focus on a niche market opportunity continue to attract interest as people experiment with sharing services in other parts of their lives. Pet-sitting services received just over $10M in funding, with DogVacay securing $7M over two rounds and Rover.com getting $3.4M in Series A. Cherry, an on-demand carwash service launched in San Francisco that enables you to wash your car on the spot, landed $4.5M in Series A.

Our top 3 trends for 2013

While 2012 has been about increased activity and competition in a number of key verticals across the collaborative consumption space, 2013 will see a focus on the market leaders, as well as enthusiasm for a number of emerging sectors. Here are our top three picks for what will make the headlines this year:

• Errand networks go international: After proven success in local markets, errand networks like TaskRabbit will focus investment dollars on scaling up and global expansion.


• Building trust in p2p transactions: If 2012 was the year of p2p payment systems, the rise of identity and reputation tools focused on further reducing friction in p2p marketplaces will be a hot investment area in 2013.


• Shareable office space: The next frontier in space rental, we are seeing progression from bespoke coworking spaces, to tapping into the assets of corporate work environments through the likes of LiquidSpace, which closed a $6M round in January this year.

Where would you place your bets on the hot investment areas for the collaborative consumption space in 2013?

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Stephanie Brincat is Community Manager for CollaborativeConsumption.com, the premier online portal for curated news, information and examples related to collaborative consumption worldwide.