Mergermarket Interviews B-Stock CEO and Spectrum's Pete Jensen

B-Stock, a Belmont, California-based liquidation marketplace, spent roughly nine months looking for the right new investor and ultimately closing a USD 65m deal with Spectrum Equity in June, said B-stock CEO Howard Rosenberg.

Having been profitable for over nine years, B-Stock was not pursuing cash solely but was looking for a partner with experience in investing in software and marketplace businesses, according to the executive.

“We talked to a lot of different folks and received different types of interest. We decided that the path we took with Spectrum is the best fit for us,” Rosenberg said.

New funding will help B-Stock achieve scale in the US and Europe by mainly organic means, with the potential for M&A on an opportunistic basis, said the CEO and Spectrum Managing Director Pete Jensen, who along with Spectrum’s Adam Gassin have joined the B-Stock board of directors.

M&A plans and objectives have yet to be formulated, they said. Logical targets would accelerate geographical expansion or add on related services, Rosenberg said.

B-Stock provides a B2B marketplace for liquidation of merchandise for retailers and manufacturers. It helps businesses collect and analyze data to plan out the auction strategy, and builds private-labelled online marketplaces for them to conduct the sale process.

Spectrum categorizes B-Stock as a vertical market software-as-a-service company, and the white-label offering makes it attractive to Spectrum, Jensen said. “This is a big space where B-stock is a clear leader in providing a technology solution,” he added.

Spectrum has invested in other portfolio companies with a similar investment strategy such as ExamSoft in the education vertical, Tenstreet in trucking and transportation, and Verafin in fintech, according to its website.

B-Stock has built about 50 branded marketplaces for enterprise clients, with three to four of them in Europe, Rosenberg said. It also hosts marketplaces for 600-700 small businesses, he added.

B-Stock was founded in 2009 and since then has been building the network of buyers and sellers. Businesses usually liquidate their appliances, devices, or equipment through personal contacts via email, fax or phone. It was difficult to establish a network from scratch, and the magnitude of such open marketplaces was not broadly recognized until the past four to five years, he said.

Compared to the old-school methods, an open marketplace brings more transparency and efficiency in pricing, Rosenberg explained. The model of consumer-oriented marketplace has been thriving thanks to eBay, and B-Stock is one of the first who applies this service into B2B, he said.

There has not been major consolidation in the space, because it is hard for new competitors to catch up and gain buyers' attraction because of the lack of network effect, Rosenberg said.

In the future, it could consider an IPO, a sale to another PE or a strategic, Rosenberg said. Logical buyers could be marketplace businesses, or logistics companies, or ecommerce companies, he said.

In the logistics space, logistics technology company Optoro announced a USD 75m capital raise this week, led by Franklin Templeton Investments. Optoro helps retailers manage returns and resell merchandises.

B-Stock has around 120 employees, and plans to hire 50 more this year, Rosenberg said. Previous investors True Ventures and Susquehanna Growth Equity still maintain stakes in the company, according to a press release, but Rosenberg declined to provide further details.

Fenwick & West and DCS Advisory advised B-Stock on the investment.