When engineer Heico Koch wants to solve a problem, he sits down and sketches his thoughts on a large sheet of paper. It was these drawings, scribbled down in Berlin, that he used to compile a video for potential investors.
Ten signed contracts later, he launched his Internet startup, TradeMachines, in October 2013 and later brought Wieland Knodel on board as managing director.
The company offers a search engine for used machinery, covering everything from band saws to diggers. It’s something like a Google for used forklifts. But unlike eBay, it sells nothing on its platform.
TradeMachines lists offers and directs interested visitors to the sellers who pay TradeMachines for bringing in additional customers.
If Mr. Koch had his way, dealers and auction houses would save themselves the trouble of advertising online and concentrate on what they do best.
The value of used machinery being bought and sold worldwide is $380 billion, or €346 billion. The market is growing annually by 30 percent, largely because business planning cycles are becoming increasingly shorter. Companies buying new equipment today often plan to sell it within a couple of years.
Worldwide, around 60,000 dealers are active in the second-hand machinery market, mostly small dealers who work largely in local markets.
If Mr. Koch had his way, dealers and auction houses would save themselves the trouble and expense of advertising online and concentrate instead on what they do best — setting prices, closing sales, disassembling machines, shipping them and putting them back together again. The potential customer who goes to the TradeMachines website is searching for a specific piece of machinery and wants to compare as many offers as possible, from Aachen to Arkansas.
The success of such a business model has been demonstrated in other sectors such as the flight and hotel search site Swodoo, now owned by U.S. company Priceline, which also owns Booking.com. Swodoo founder and venture capitalist Wolfgang Heigl has also invested in TradeMachines.
Another investor, Investitionsbank Berlin, a business development and promotion bank, has provided €750,000. Mr. Koch has also raised €690,000 via the crowdfunding platform Companisto. Total funding is €3.5 million with a large chunk of it coming Mr. Koch himself.
TradeMachines is not his first startup. After earning his doctorate in mechanical engineering, he went to the Frankfurt chemical company Hoechst as it was known as the time, until the “new economy” boom cast its spell over him.
Mr. Koch worked for the price-comparison website Doyoo and later the property and rental website Immobilienscout 24. Then he founded a consulting agency named Leanovate where he worked on a machinery market project, which gave him the brainchild for TradeMachines. He founded the company after selling shares in the agency.
The platform business is capital-intensive. TradeMachines needs one thing above all else: Internet traffic. Luring a customer to the website through online advertising currently costs on average 22 euro cents and generates in 40 cents in revenue, Mr. Koch says.
These comparatively low acquisition costs are earning respect in industry circles. That wasn’t always the case. A year ago, Mr. Koch was able to woo another angel investor, online marketing expert Philipp Klöckner. He was previously responsible for search engine optimization at the price-comparison website Idealo.
In 2015, TradeMachines company generated €750,000 in revenue compared with the previous year’s €200,000. About €1.6 million is planned for 2016. But the company, with a staff of 28, is a long way from making a profit. To become profitable, the company needs to lower the cost per customer and increases its prices.
Mr. Koch is counting on growth and the related economies of scale. The more customers the platform serves, the more customer data the startup collects. He plans to use this knowledge to make cheaper, more targeted advertising.
Germany-based Jungheinrich, the world’s third-largest producer of specialty trucks and warehouse technology and also a dealer in used machinery, is skeptical about the TradeMachines platform, according to a company source. Jungheinrich would rather support its own marketplace for used forklifts, Supralift.
Since its founding, TradeMachines has mediated transactions worth over €6 billion and established 47 local marketplaces in a total of six languages. Currently 830,000 offers are on the website, putting it clearly ahead of its biggest rival, Maschinensucher. Although that company has existed for 15 years, it lists only about 100,000 offers.
Thanks to search engine optimization, Mr. Koch says the company now has 4.5 million regular visitors, including Canada’s Ritchie Brothers, the world’s largest auction house for second-hand machinery.
Miriam Schröder is based in Berlin and covers the city’s startup scene. To contact the author: email@example.com