Why you should invest in the sharing economy

Join us for a panel on the future of the sharing economy at Vator Splash Oakland, May 6-7!

We are just a few weeks away from our inaugural two-day Splash Oakland event, taking place on May 6th and 7th. I will be moderating a panel discussing the future of marketplaces/the sharing economy with CEOs and investors betting on this segment.

The sharing economy refers to a group of companies, most of which have emerged over the last five years or so, that have upended traditional payment methods to, instead, rely on peer communities in which participants share access to both products or services.

The space includeds companies that, for example, allow people to share their cars (like Lyft), share their apartments (like Airbnb), share their clothes (like Rent the Runway), even their children's toys (Pley). It also includes companies that allow people to simply connect to each other through platforms to offer their services directly (like Care.com). 

The whole idea all about getting what you need when you need it, and not having to own it forever.

Market size

This is a broad category to be sure; it can involve many, many different verticals and subsections. Some even lump companies like eBay and Craiglist in, since they also eliminate the middle man and allow people to sell things to each other directly.

Overall, the market that is estimated to have been worth $110 billion in 2013. The peer-to-peer rental market alone was said to be worth $26 billion. Obviously there is a lot of money to be made.

So, not surprisingly, venture capitalists have taken notice and, as a result, numerous companies in the space having racked up huge amounts of cash. They include:

• Care.com, which raised $109 million in total funding, most recently a $50 million round from from Matrix Partners, New Enterprise Associates and Trinity Ventures in August 2012, before going public in January of this year.

• Airbnb,. which has raised $326 million altogether at a $2.5 billion valuation, including a $117 million Series B round from Andreessen Horowitz, DST Global and General Catalyst and, most recently, a $200 million Series C round from Sequoia Capital, Andreessen Horowitz, General Catalyst Partners, Crunchfund, Ashton Kutcher, and Founders Fund in 2012. It was recently reported that the company was looking to raise another $400 million to $500 million, at a $10 billion valuation.

• Lyft, which has raised $333 million, with the majority of its funding was raised in the last year. That includes $15 million from Founders Fund, Mayfield Fund, K9 Ventures, and Floodgate in January 2013, and then another $60 million from Andreessen Horowitz in May 2013. The company most recently raised $250 million earlier this month.

• TaskRabbit, a web and mobile marketplace that allows people to outsource small jobs and tasks to other people in their neighborhood, which has raised $38 million, including $17.8 million in Series B funding in December 2011, from LightSpeed Venture Partners, Allen & Co. and The Torante Company, and another $13 million from Founders Fund in July 2012. 

• Rent the Runway, which has taken on more than $54 million, including a $24.4 million from Advance Publications, Bain Capital Ventures, Highland Capital Partners and Kleiner Perkins Caufield & Byers in March of last year.

• Uber, which has raised $307 million, including $258 million from Google Ventures, along with TPG Capital, in August of last year, at a $3.5 billion valuation.

• Lending Club, a peer to peer lending company, which has raised $220 million altogether, including a $57 million investment from Yuri Milner’s DST Global and Coatue Managementlast November at a valuation of $2.3 billion. 

Last July, Jerimiah Owyang of Altimeter Group looked at 200 companies in the sharing economy and found that they had a collective $2 billion influx of funding. The average funding per company was $29 million.

Meet the panel!

On May the 6th, I will be joined by four distinguished people with a background in the sharing economy space. They are:

• Howard Hartenbaum, Partner at August Capital, who has led investments in RelayRides.

• Lynn Perkins, the founder and CEO of UrbanSitter, an online service for parents and sitters to connect through people they know.

• Cynthia Ringo, Partner at DBL Investors and member of the board of directors at UrbanSitter.

• Andre Haddad, the CEO of peer to peer car sharing service RelayRides.

Some of the topics we will discuss include:

1) Some companies in this space, including Airbnb, but especially those in the car-sharing business, have faced some very difficult legal hassles around the country. Why is that and what is the end result going to be?

2) Considering that just about anything, within reason, can be shared, how big can this space ultimately become?

3) With services like UrbanSitter and Care.com, the emphasis seems to be on cutting out the middle man and allowing people to just deal with each other directly. Why do you think this idea is appealing to people? Does it reinforce a sense of community that we maybe have started to lose?

4) Some analysts seem to lament the sharing economy, seeing it as a sign that people no longer have the money, or the stability, to buy things. Will the rise of the sharing economy start to come down if, and when, the economy starts to improve, or is it here to stay?

5) New York implimented something like the sharing economy with its CitiBike program last year. Is this something that has started to happen in other parts of the country, or other parts of the world?

We hope to see you at the event next month!

(Click here for tickets to Splash. Want to demo your services and products? Get a demo table here.)

(Image source: flutteringthroughfirstgrade.com)