Consumer marketplaces are undeniably hot right now. Since December, around $150 billion in equity value has hit the public markets through the IPOs of online marketplace companies including Airbnb*, DoorDash, Poshmark and Wish, per CapIQ data.

While the value created by these companies is no surprise — I have been a firm believer in consumer marketplaces for years — I was intrigued by a handful of similarities shared by this group, which I think helps explain the current fervor shared by public investors.

Here are six key takeaways from the current cohort of consumer marketplace IPOs and how they differ from other IPOs in the sector in the recent past.

1. Organic traffic is a powerful driver of efficient growth.

Companies like Airbnb and Poshmark benefit from tremendous word-of-mouth and organic traffic to their sites. For example, more than 90% of Airbnb’s traffic arrives organically via direct or unpaid channels. This is due to viral loops embedded in the product itself, as guests and hosts recommend it to friends, and guests become hosts and hosts become guests. Similarly, on style marketplace Poshmark, there’s a deep cross-pollination between buyers and sellers, with buyers often becoming sellers and vice versa; of all new buyers on the site between 2012 and 2018, 34% had been “activated” as sellers by the end of 2019, according to a Poshmark regulatory filing. This minimizes the need for both companies to spend marketing dollars to drum up new customers.

2. Strong repeat rates and cohort retention equal stickiness.

Many traditional consumer marketplaces are fairly transactional. But some of the recent crop of consumer marketplaces generate an enormous amount of repeat business.

Both DoorDash and Poshmark have more than 100% buyer retention as measured by gross order value and gross merchandise value (GMV), respectively. That means that a cohort of customers who made their first purchase in 2018 and spent $100 returned in 2019 and spent more than $100. That positive-GMV pattern is repeating for fresh cohorts. This is indicative of a highly sticky service with strong recurring behavior.

You’d typically only expect to see those numbers in B2B SaaS businesses, where existing customers are locked into a minimum spend for as long as they stick with the company. Seeing these metrics in consumer marketplaces is potentially a paradigm shift in how these business models should be evaluated.

3. Repeat revenue can drive profitability.

Highly durable customer cohorts and strong repeat-purchase patterns mean that, over time, more of the revenue from these companies is generated from existing customers. If customers who joined years ago are still around and spending as much or more as they did in their first year, you can see how those cohorts stack up and produce an enormous impact on profitability.

To put into perspective, at DoorDash, 86% of revenue in Q3 2020 came from existing customers. At Airbnb, 69% of 2019 revenue was generated by stays from repeat guests. Simply put, the more your revenue stems from existing customers who spend increasing amounts with you, the less you’ll spend on sales and marketing, and the more profitable you can become.

4. Many of these companies are benefiting from long-term tailwinds accelerated by the pandemic.

Obviously, consumer behavior has changed drastically during Covid-19. Companies in food delivery and e-commerce have benefited enormously, and I expect these tailwinds will continue even after the pandemic winds down.

5. This new cohort of consumer marketplaces has demonstrated a clear path to profitability.

In 2019, when Uber and Lyft went public, both companies lost a lot of money. Uber had negative $2.7 billion EBITDA (earnings before interest, taxes, depreciation and amortization), for a margin of negative 19%, according to public filings. Lyft’s EBITDA was negative $679 million. The question of long-term profitability still dogs both stocks.

Three of the four companies in the more recent cohort of marketplace IPOs were profitable, or close to it, when they went public. DoorDash went out expecting to be EBITDA profitable in 2020. Poshmark saw a 35% EBITDA margin in Q2 of last year and a 22% margin in Q3. And Airbnb, despite Covid-19, realized a 37% EBITDA margin in Q3 of 2020. In 2017 and 2018, the company was narrowly profitable at 2% and 5% EBITDA margins respectively, though it did see negative EBITDA in 2019 due to several factors, such as increased marketing spending and investment in new product lines.

6. The Rule of 40 rules in terms of explaining valuation.

As I’ve discussed before, there’s a clear link between the Rule of 40 and marketplace companies’ multiples today. Investors are looking not just for growth but efficient growth, and the Rule of 40 is a simple test to check for this. To do the test, add a company’s revenue growth (as a percentage) plus its EBITDA margin. If the number is over 40, the business is efficient. Proprietary analysis by my firm has found that companies that pass this test have stocks trading at an average forward revenue multiple of 10.9X, while companies that fail trade at 4.1X. Uber’s Rule of 40 number is 6, for example, while the average of the figures for Wish, Poshmark, Doordash and Airbnb is 64, according to estimates drawn from CapIQ.

Investors are rightly wary of companies that pursue growth at any cost and may never become profitable. But the most recent cohort of consumer marketplace IPOs has demonstrated efficient growth and potential staying power. Startups looking to follow in these companies’ footsteps would do well to learn from their example and prioritize organic growth, consumer retention and efficiency.

This article first appeared in Forbes