Hello and happy Fourth! 🇺🇸🎆
This week I spoke with Kimberly Shenk, Air Force Captain and Co-founder of (in my opinion) one of the most exciting marketplaces operating in B2B: Novi.
See where Novi ranked in our B2B Marketplaces Top 50 Ranking 📄
Novi's success is a testament to its unique proposition and it’s no surprise that the company has been able to raise over $50M in just the past 3 years. With over 1,000 retailers, brands, and formulators on its platform, Novi is connecting the CPG supply chain to provide more transparent and trusted manufacturing. They have Sephora on the retail side and Dow on the supplier side using their tools - and, in the middle, are brands - with a heavy emphasis on cosmetic, health & beauty brands thus far.
In this exclusive interview, we delve into the origins of Novi and how they’ve been able to build, what we’re calling a two-step marketplace with vendors, retailers and brands all on board. We explore how Novi is monetizing its services and the potential avenues for expansion into the distribution industry. Additionally, we uncover Novi's funding journey, highlighting the stages of business model innovation achieved with each funding round, which have propelled the company's valuation to over $300 million.
In this interview:
A look at how Novi’s viewpoint gives them transparency and trust over the complete value chain from raw materials to the end user. 🧪
How Novi built demand with SaaS offerings to set up for an evolution into a marketplace 🛒
See page 16 of our B2B Marketplaces Top 50 report for more on SaaS to Marketplace. 📄
An evolution in marketplaces: Discussing how Novi’s two-step marketplace brings together multiple stakeholders. 🌐
What’s more enticing for Novi’s marketplace: expanding broadly across multiple verticals or going deeper into one? ⚙
How Novi staged business model innovations and funding rounds. 📈
What value added services are on Novi’s roadmap? 🏦
How Novi is monetizing. 💳
From the Raw Materials ⚗ to the End Consumer 🛒 - The Two-Step Marketplace
In May, we spoke with Mirakl Co-Founder and CEO Adrien Nussenbaum about a new marketplace evolution: the two-step marketplace. Two-step marketplace operators are facilitating transactions at two or more stages in a value chain and providing greater levels of transparency by cross-flowing data between the stages. I didn’t mention them by name during my chat with Adrien, but Novi was the inspiration behind this discussion topic.
The two-step marketplace model exemplified by Novi involves multiple stakeholders, including retailers, brands, formulators, and raw material suppliers. Retailers set standards and regulations that brands must meet to sell their products. Brands provide requirements to formulators who develop the products accordingly and can procure the ingredients through the Novi platform - providing transparency and trust all the way up the value chain. Novi has built products and services to assist at each stage of this process.
When I asked Kimberly about Novi’s apporach, she went into detail on how Novi is able to add value to all stakeholders involved. Brands benefit from accessing high-quality materials for their products while meeting retailer standards. Retailers can trust the compliance of products and avoid duplicating auditing efforts. Raw material suppliers gain visibility and access to retailers, enhancing their market opportunities.
I think Novi’s two-step marketplace model sets a precedent for other verticals in the B2B distribution and supply chain industry. The approach addresses the challenges of transparency, compliance, and sustainability, creating a more efficient and trustworthy ecosystem for product development and sourcing.
Using SaaS to Capture Demand
One of the classic platform growth strategies is to provide single-user utility. This is a strategy in where you attract one side of your multi-sided platform by offering that user group value even if the other side never shows up.
In the case of Novi, they focused on demand by bringing brands on board and building relationships with them. They offered brands (AKA the demand side of a raw materials transaction) a SaaS tool aiding in formulation, product development, and ingredients transparency. However, Novi always had the intention of transitioning to a marketplace model.
Once Novi had aggregated enough demand in the form of brands using their SaaS offerings, they were able to onboard suppliers and transition from a SaaS model to a marketplace.
Near the end of the above clip Shenk acknowledges that targeting the long tail, particularly indie brands with a focus on sustainability and specialized ingredients, requires a substantial
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