B2B Marketplace History Lesson: Elemica
The Bowery Capital team is embarking on a ten week journey to cover B2B Marketplaces. We are doing deep dives on various companies, interviewing founders and investors, and learning what it takes to build success in the B2B Marketplace arena. Below is a part of our content series focused on learning from the prior generation of winners. This week we focus on chemicals marketplace Elemica. You can read all of the posts by going here.
One of the largest B2B Marketplaces of the v1.0 era is Elemica, which was launched in 2000 as a joint venture between eight major chemicals companies, including sector leaders Dow Chemical, DuPont, Rohm and Haas, and Atofina, to serve as an online marketplace for the industry. The consortium approach to marketplaces will come up frequently in our journey, and Elemica is a classic example of companies banding together to solve for the order visibility problem. Elemica was well funded at launch given its industry backing and it brought on Kent Dolby to serve as its President and CEO. Dolby was a 26-year veteran of Andersen Consulting (now known as Accenture) and had previously been the CEO of PaperExchange.com. At Andersen, Dolby was regarded as someone with deep expertise in both e-commerce and the chemicals industry making him well-suited to oversee the nascent marketplace.
Prior to Elemica, online chemicals marketplaces had struggled to drive adoption among their relatively conservative customer base. For example, CheMatch.com reported only $400k in revenue on $9.6 million of transactions in 1999, and competitor ChemConnect.com earned only $127k on $14.7 million in transactions during this same timeframe. At Elemica’s launch, marketplaces represented a very small share of the estimated $120 billion spent across the chemicals supply chain. Elemica sought to distinguish itself by focusing on contract-based transactions; recognizing that chemical companies typically ordered one to three years of supply through standing or long-term contracts, Elemica adapted its platform to align with these industry-standard terms and demand schedules. By aligning its marketplace to meet the unique demand and order timing of chemicals companies, Elemica was able to service an industry need where other solutions had fallen short.
At its outset, Elemica already had buy-in from some of the largest companies in the industry and it quickly expanded its services beyond the chemicals segment. Within a year of its founding, Elemica acquired ElastomerSolutions, an online marketplace that served the adjacent polymers business. Elemica also quickly began to expand the scope of its offerings. In 2003, Elemica acquired Optimum Logistics, a global marine logistics services provider to the chemicals industry, and in 2009, Elemica merged with RubberNetwork, a sourcing and supply chain company for the global rubber trade, further expanding the company’s reach.
In 2016, Thoma Bravo, a technology-focused private equity firm, acquired Elemica. By this time, the company had grown from a chemicals industry marketplace into a digital logistics and supply network for the wider industrial manufacturing sector. Like most transactions in this ecosystem, the specific terms of the deal were not announced. This is a great example of a marketplace exiting through a PE-led acquisition, a common pattern seen across B2B Marketplaces. Under Thoma Bravo’s ownership, Elemica further expanded its product offering and in 2019 Thoma Bravo sold the company to Eurazeo Capital. As of the Eurazeo sale, Elemica had roughly $400 billion of GMV flowing through its platform annually, and while Elemica’s take rate is relatively low (<3%), the platform’s volume is among the highest of any marketplace.
Elemica was started by chemicals market participants who set out to create an online platform tailor-made for their unique needs. However, Elemica’s management team quickly recognized the applicability of their solution to adjacent industries that were operating through similarly outdated means. Elemica was able to execute on an ambitious expansion strategy, in both its product offering and its target sectors, and ultimately grew into the robust digital supply network for industrial manufacturers that it is today.
If you liked “B2B Marketplace History Lesson: Elemica” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog. Look out for more content on B2B Marketplaces from us in the coming weeks.