PaperExchange, founded in 1998 with an unsuccessful IPO attempt in 2000, was a B2B marketplace for the pulp and paper industry.
More than 1,000 such B2B marketplaces for products that ranged from commodities such as lumber to specialized components such as airplane parts-managed to receive funding. Unfortunately, most of these companies failed to realize that the lifeblood of a marketplace is liquidity and that, in B2B, a few large enterprises can generate most of the transaction volume so critical for that purpose. These behemoths typically don’t need the help of an independent marketplace, however, and they can bargain fiercely with anyone who hopes to trade with them. Independent, fee-based marketplaces have therefore mostly languished in the absence of a business model that could vindicate their early optimism.