Founded in April 2012, MarkITx is building the world’s largest online B2B exchange for the trading of used IT equipment including switches, routers, servers, storage networks, iPads, etc. Their platform provides a real-time, transparent view of the secondary IT market and makes it easy for buyers, sellers, and intermediaries to find one another and exchange used IT equipment for fair value with a minimum of effort. MarkITx has the potential to disrupt a $350 billion dollar industry which has no market leader, standardization, governance, nor trusted neutral parties.
PRODUCT/SERVICE: Buyers and sellers place listings for used IT equipment on the MarkITx site and intermediaries bid to refurbish, certify, and ship the merchandise. The company’s proprietary algorithm automatically prices the inventory and matches buyers and sellers based on preferences for pricing and condition of the equipment. Once buyers and sellers negotiate a deal, goods are shipped through intermediaries and not directly from seller to buyer. An OEM-certified technician ensures that the equipment is in proper working order and MarkITx guarantees warranties that can last from 1 year to life. The money sits in escrow until the buyer signs off on the merchandise. They just re-launched their 2.0 version and a mobile app will be released soon. Their mobile app with geo-location software will allow users to take a picture of the asset tag or model number, locate the IT equipment, price in real-time, and, if necessary, enter the merchandise into the company’s inventory tracking system.
VALUE PROPOSITION: MarkITx offers the following value propositions: brings together buyers, sellers, and intermediaries to create a centralized, liquid, online marketplace; provides price discovery, transparency, and inventory valuation; verifies that products are in good working order along with a guaranteed warranty; handles transportation of goods; offers predictive market intelligence and analytics; ensures customer satisfaction. Typically the seller trades in old equipment when he buys new equipment from the original OEM and receives pennies on the dollar. With MarkITx, the seller gets 80 cents on the dollar and the buyer gets hardware at a fraction of the retail price that’s been refurbished, OEM-certified, and warrantied. The intermediary or wholesaler doesn’t get his markup but has access to another distribution channel, reduced sales force costs, and limited inventory risk. His markup is reduced but the volume of business increases. The useful life of hardware is growing as Moore’s law begins to slow down.
MARKET SIZE: Gartner, a prominent IT research and advisory company, estimates the size of the secondary IT market at approximately 350 billion per year worldwide and it’s growing. There are approximately 30,000 intermediaries in the U.S. In the short-term, MarkITx is focusing on iPads which will be refurbished and sold to schools. The market for desktops and laptops is dying. Smartphones are a C2C market. There is less competition and bigger margins in the B2B space and more opportunities for disruption. In the long-term, the company will be focusing on servers and network equipment. MarkITx is placing a special emphasis on large data centers and the core infrastructure of Cisco, EMC, IBM, and Oracle. The useful life of hardware is growing as Moore’s law begins to slow down.
REVENUE MODEL: Sellers of equipment pay a 20% commission to MarkITx and thus receive 80 cents on the dollar. Buyers pay the cost of refurbishing which is included in the sales price and varies depending on the product. Intermediaries pay between $1K and $5K per month for the right to trade on the site which varies depending on the volume of business. Of the 20% sales commission, MarkITx receives 15% and the intermediary gets the 5% portion. Eventually, MarkITx will add three additional sources of revenue: commissions on warranties and service agreements, financing to buyers and intermediaries, and predictive market intelligence and analytics.
MANAGEMENT TEAM: Frank Muscarello, founder/CEO, is a serial entrepreneur in technology and e-commerce and grew his last company to $20MM in sales and 100 employees. President Marc Brooks is a serial entrepreneur and CEO at MKMB Holdings. CTO Ben Blair is a former partner at BBR Trading, lead developer at Peak 6, and has extensive experience in trading platforms and software development. The company has 9 employees: 5 software developers, 1 data scientist, 2 executives in business development, and 1 social media expert.
COMPETITIVE ADVANTAGE: MarkITx has 3 distinct advantages: 1. In a very short period of time, they have created a liquid, centralized, online marketplace which provides real-time pricing and shipment of merchandise and allows for used IT equipment to move seamlessly from seller to intermediary to buyer. 2. They offer predictive market intelligence and analytics and reveal the optimal time to sell used equipment based on market trends and cycles. 3. They focus on the B2B enterprise IT space whereas most of their competition targets B2C.
PROOF OF CONCEPT: MarkITx launched their site and went live in May 2012. In the last nine months, they have validated their software and revenue model by attracting several hundred customers to their site and generating a significant amount of revenue.
CUSTOMERS/USERS: Since their launch in May 2012, the company has generated approximately $1MM in revenue. They have more than 300 customers including the largest banks, financial exchanges, and telecom companies. Currently, there are $7.8m in demand and $4.7m in supply listings on their platform with the majority of supply coming from Apple, Cisco, and other Fortune 1000 companies. The company is projecting revenue between $2.5MM and $4MM in 2013. They expect to become both cash-flow positive and profitable in 2014.
STRATEGIC PARTNERS: MarkITx has distribution agreements with 10 strategic partners including major distributors and IT exchanges which sell B2C and don’t compete directly with them.
FUNDING: MarkITx raised $1.06MM in November 2012 from a group of Chicago angel investors including Michael Balkin, Francis Wisnewski, Jack Keenan, and John Ward. They’re seeking to raise between $3MM and $5MM in the 2nd round to continue and gain traction and built out their business model. The capital will be allocated in the following manner: 35% to marketing, 30% to hire new talent, 20% to pay the current management team and 15% for data acquisition. In the third round, they will need to raise $10MM to scale. Institutional investors from the West Coast, East Coast, and Midwest are calling on a daily basis.
SUMMARY: MarkITx has been impressive and moved quickly to build its platform, launch sales, and attract a critical mass of buyers, sellers, and intermediaries. The company generated $1MM in sales in just nine months and the size of the market is substantial at well over $300 billion. The main question is how MarkITx will respond when the inevitable competition comes knocking at their door.