While many venture capitalists might hope to fund the next Amazon or Shopify, Crossbeam is a new firm focused on backing the startups built on top of these platforms. And it recently closed its $25 million first fund.
We've written about well-funded startups like SellerX, Perch and Heroes that acquire and grow Amazon businesses, and Crossbeam General Partner Ali Hamed similarly pointed to Amazon to illustrate the scale of the opportunity. Noting that third-party sales on Amazon reached $200 billion in 2019, Hamed said, "There's going to be 100 winners in this space."
He added that the firm isn't just focused on Amazon — he also cited Thumbtack, Spotify and Shopify as "platform economies" where Crossbeam could invest, and he elaborated on this point in a Medium post published last fall:
Rather than own FB shares, we’d rather own Instagram accounts. Rather than owning Amazon stock, we’d rather own a bunch of third-party selling merchants. And rather than owning Google stock, we’d rather own YouTube libraries.
Why? Because all the tailwinds that make those stocks interesting to own are, in part, shared by the commercial actors on their platforms. And yet capital markets largely haven’t flowed into those spaces yet. Many traditional funds are not set up to finance these platform constituents. On top of that, many of the economic ecosystems on these platforms are newly mature, and so there are not pre-existing models to figure out how to value each asset.
Hamed and General Partner Savneet Singh are also partners at CoVenture, a firm that originally took equity in exchange for technical services, but is now more focused on providing debt to startups. He described Crossbeam as a joint venture between CoVenture, Moelis Asset Management and Fenway Summer, with CoVenture offering additional debt funding to Crossbeam's equity investments when it makes sense.
When asked about the risk to startups of trying to build businesses on a single platform, Hamed said that in some cases, it may make sense to build an audience on one platform and then expand and diversify — but it will depend on the platform. The key question, he argued, is, "Does the platform make money for you, on your behalf?"
"If you expand into other platforms, some 'help you earn money' and some don't," Hamed added via email. "YouTube does, because it seeks ad revenue on your behalf, and splits the ad revenue with you. On Instagram, they don't (Insta doesn't share ad rev with creators except in very rare cases) ... so the 'awesomeness' of each platform very much depends on that."
Even before closing its first fund, Crossbeam has made six investments, including digital media company Wave.tv, litigation financing company Litty, on-demand poof-of-service startup Proof and Acquco, which acquires third-party Amazon sellers.