Since its launch in 2009, Flippa has positioned itself as one of the main pillars of the e-commerce industry. The marketplace, on which online businesses, mobile applications, and domains can be bought and sold, has so far moved more than $200 million around the globe, assisting entrepreneurs to exit and enter the e-commerce market for almost a decade.
The platform has hosted some historic deals, with Mark Zuckerberg’s Facemash and StockPhoto.com changing hands on it. However, comparing Flippa’s pretty stable trading volume (300K-400K weekly) to the sheer vastness of the e-commerce industry, there appears to be a glass ceiling that seems to be hard to overcome.
Observing the activity on Flippa closely, this glass ceiling quickly reveals itself as being made of the reinforced concrete that is Corporate Law. While it’s fairly easy to sell virtual assets, such as domains, websites, and even entire Shopify stores, the corporate structure, know-how, and proprietary tools making them into what they are, is a completely different story.
Involving batteries of corporate lawyers, investment bankers, financial advisors and appraisers, selling a company entails very high costs, even before the first potential buyer is contacted. This limits the kinds of deals that can be made on Flippa or other marketplaces of its kind considerably.
One team aiming to challenge this status quo is LEXIT. Boldly proclaiming to be “the missing piece of the startup ecosystem”, LEXIT proposes an online marketplace on which entire companies, specialized departments, and their Intellectual Property (IP) can be bought, sold and licensed. This includes startups that wish to exit, but also companies that seek to sell or lease work-in-progress applications or projects they have pivoted on.
The most challenging part of what LEXIT is trying to achieve is to make Mergers and Acquisition work over the internet. Creating a marketplace on which sellers can list a project à la craigslist is relatively easily done. M&A, however, is a very complicated and sensitive process. You can not expect buyers to simply browse such a marketplace and cut deals on a virtual handshake. Especially not on an international level with many jurisdictions involved.
How do you allow people to negotiate fairly over assets that might be worth millions of dollars without disclosing patent information? How do you connect dozens of service providers, such as appraisers, patent lawyers, all residing in different countries? LEXIT’s answer to this question is DLT - Distributed Ledger Technology, or simply put: the blockchain.
If you’ve been remotely near an internet connection during the past five years, you’ve probably heard ad nauseum that blockchains can do anything but cure cancer. However, there are actually many use cases for blockchain technologies, a couple of which are immutable record keeping and programmable payments. LEXIT plans on using both to make sure that selling and buying parties can successfully complete complex business negotiations in a virtual “Deal Room” without ever having to meet in person.
Considering the 2.3 Trillion USD circulated annually by global e-commerce ventures, such an upgrade to the Flippas of this world shouldn’t be underestimated. Speeding up M&A, and allowing it to work securely online, could mean a significant increase in liquidity that would result in a cambrian explosion of new businesses that would otherwise have failed miserably.
This is somewhat akin to what AirBnB did to the hospitality industry. Guest rooms existed a long time before AirBnB or even the internet, but they were, well, not very much of a liquid asset. The fact that nowadays anyone can list their spare room on a platform, where it can be discovered and rented at ease, changed the industry for ever.
A fast, global, internet-based M&A marketplace, a ”Flippa for everything”, so to speak, would have the same effect on e-commerce and maybe the entire Tech sector. Best practices for new startups could include a shopping round at an eBay-like marketplace where CTOs could find building blocks for their ventures before hiring a single developer. Selling off unused code could create an income stream that drives further innovation, while investors would have the opportunity of shredding their failed startups to pieces, making room for new projects to come.
It is a bit early to make exact predictions, but it would be a fair bet to say that the results of this process will not be disappointing. Until now, platform marketplaces transformed every industry they touched for the better. With blockchain and network technologies improving constantly, it is about time for this trend to conquer M&A the same way it conquered the hospitality and p2p commerce industries.