Mint Condition - April 24, 2023
The state of the collection management market
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Leading Off
There haven’t been as many startups raising money in the hobby as compared to the last few years, but one caught my eye recently — Ludex, a collection management and pricing tool, raised $8 million in new funding to help accelerate growth. Use the app to scan a card and the company’s AI identifies what type it is (sport, player, product), its condition, and uploads it to your collection. As part of its next phase of growth, Ludex will be rolling out a new feature that allows users to easily list cards on various marketplaces as well as expanding into non-sports categories, like gaming cards, coins, comic books, and sneakers.
The reason Ludex caught my eye is that it is becoming clear that there are multiple companies in the sports card space offering very similar collection management apps. To name a few:
Check out each of their websites and at the surface, it seems as though these companies are trying to do the same thing — get users to maintain their collections on their platforms, then monetize in some way, like a marketplace, grading services, and premium memberships.
So why are there a lot of these businesses popping up, which are differentiated from the rest, and who will win?
Let’s get into it…
Mint Condition’s Take:
It’s important to note that none of these companies existed before 2020, the year the card market saw a sharp increase in popularity. These founders all launched their businesses because (1) in some shape or form they saw an inefficiency with how collectors organized and managed their collections, (2) they saw how large and growing the card market was, and (2) they realized that eBay continued to be the default way to buy and sell items.
The goal of these businesses is to scale fast, which they are trying to do through proving to collectors that their technology to scan, price, and grade cards is superior than all others. They are hoping that once collectors see how much time and effort they can save by using the app, users start bringing more and more of their cards onto the platform — uploading, posting for sale, creating sets, and more. From there, these companies can start trying to monetize the base of cards within their system — creating a marketplace and taking a cut of the sale price, making it easier to post cards for sale on eBay or other platforms and taking a cut of that sale, vaulting and grading services, and more.
The business model is interesting and potentially lucrative. The key for each of these companies is getting as much supply of cards on their platforms as possible. This really has to do with network effects and building a community. The benefits these businesses offer to you is only maximized by the number of other users on the platform. If I was a seller on eBay and I was the only one to use the site to buy or sell cards, I would derive no benefit because there was no community of buyers there to purchase my items. The same principle applies here. In order to bring users to its platform, these companies need to prove that it is worthwhile for collectors because, for example, there is a ton of active marketplace activity going on. Expect these businesses to use a few different strategies to acquire users:
Partner with dealers, consigners, and breakers to get both cards and users looking to buy and sell on their platform — this will show potential new customers that the company is tied into the hobby ecosystem and the marketplace will be active with fresh sets of cards and established wheelers and dealers.
Find a niche and attack it — specializing in a certain pocket of the market, obtaining customers in that subsegment, then broadening to the rest of the industry is an interesting way of approaching this. MySlabs specialized in offering a marketplace for only graded cards. It became the go-to marketplace for a seamless, low fee way to buy and sell graded cards and now the company has expanded into graded comic books and sealed wax. A few potential ideas for these companies: vintage, non-card categories (like tickets), and non-major sports (like golf, tennis or F1). Becoming the premier platform and marketplace for golf or F1 cards, then leveraging that user base to penetrate the rest of the industry is a worthwhile strategy.
So between the companies we discussed above and others out there, who will win?
It is too early to fully know. Each company is less than three years old and has recently raised money to accelerate its growth. The next twelve months will be pivotal to launch partnerships, scale their user base, and continue advancing their technology. A few things I’ve liked so far from across the industry…Center Stage is looking to build a universe or ecosystem for marketplaces, vaulting, and more that’ll help users keep track of their activity and cards on different platforms. CollX acquired Card Dealer Pro last year, which speeds up the process of scanning and uploading users’ cards.
Whoever succeeds in the market will differentiate itself in certain ways. The technology needs to be superior and allow for a seamless experience that makes collectors’ lives easier. The team, as I discussed last year, needs to be part of the hobby and not an outsider, which will help bring in users. The team also needs to execute well — entering into beneficial partnerships, finding a niche in the market, and selling the product well.
The collection management part of the market is one in which I think there will multiple winners. The large and growing card industry is able to support more than one successful company in the space. Do I think all of them will make it at the end of the day and become a household hobby name? No. But there are multiple auction houses and graders in the market today, so why can’t there be multiple collection management solutions?
As always, I would love to hear your thoughts. You can reach me at jbmintcondition@gmail.com or on Twitter @jbmintcondition
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