How Momentum Scales a Physical Business With Tech Company Margins

How Momentum Scales a Physical Business With Tech Company Margins

The venture capital orthodoxy is clear: own assets and margins compress. Stay asset-light and margins expand. Preston Bryant built a $150 million business that violates both rules simultaneously.

In a recent episode of Category Visionaries, Preston Bryant, Founder and CEO of Momentum, explained how his recycling marketplace operates processing facilities in 30 states, absorbs all shipping costs, extends net 120 payment terms—and still maintains economics that work. The insight: infrastructure ownership doesn’t kill margins when you capture value across the entire chain instead of just facilitating transactions.

The Asset-Light Gospel Nobody Questions

The playbook for venture-backed marketplaces has been consistent for two decades: connect buyers and sellers, take a percentage, avoid owning anything physical. Capital-light models scale efficiently, deliver high gross margins, and generate valuations that make investors happy.

Physical assets are the enemy of this model. Warehouses require capital. Equipment depreciates. Operations demand headcount. Fixed costs scale linearly while software scales exponentially. Every unit economics discussion reinforces the same conclusion: own software, not stuff.

Preston looked at the recycling industry and recognized this orthodoxy would fail. Pure marketplace models couldn’t solve the fundamental quality and reliability problems that prevented digital transformation. The only way to build a successful recycling marketplace was to own the hard parts—processing facilities, logistics infrastructure, quality control operations.

“We built out all the logistics infrastructure, all the processing infrastructure. We have locations in like 30 different states across the country,” Preston explains.

This decision seems to violate everything investors want in a marketplace business. But the economics work because Preston structured the business to capture value that pure marketplaces must leave on the table.

Capturing Multi-Layer Margin

The genius of Momentum’s economic model becomes clear when you map where margin accumulates across the recycling value chain.

Pure marketplace platforms capture transaction fees—typically 3-15% of gross merchandise value. This single margin layer must cover all costs: customer acquisition, platform development, support, operations. The math constrains how much you can invest in customer experience while maintaining profitability.

Momentum captures margin at multiple points: sourcing materials from suppliers, processing and sorting, quality assurance and grading, logistics and transportation, and final sales to end buyers. Each step adds value and captures margin.

By owning processing facilities, Momentum doesn’t just facilitate transactions—it participates in them. The company buys raw recyclables, processes them into higher-value graded materials, and sells finished products. The margin on this value-add processing often exceeds what pure transaction fees could generate.

This multi-layer margin structure changes the unit economics equation entirely. Momentum can afford to absorb costs that pure marketplaces cannot—like shipping and extended payment terms—because the total margin captured per transaction is substantially higher.

The Free Shipping Economics

When Preston says “We don’t charge for shipping. We just eat all the shipping costs,” it sounds financially reckless. Shipping physical materials across the country costs real money. How does absorbing these costs make economic sense?

The answer lies in infrastructure distribution and margin structure. With facilities in 30 states, the actual cost of “free shipping” is dramatically lower than it appears. Materials rarely travel cross-country—they move to the nearest processing facility, reducing per-unit shipping costs.

More importantly, free shipping isn’t pure cost—it’s customer acquisition cost with better unit economics than traditional marketing. The cost of absorbing shipping on a customer’s first order is often lower than the cost of acquiring that customer through advertising, sales outreach, or other marketing channels.

And because Momentum captures processing margin on top of transaction fees, they can afford customer acquisition costs that pure marketplace platforms cannot. A pure marketplace earning 10% transaction fees can’t profitably absorb shipping costs. A vertically integrated operator earning 30%+ blended margin can.

The Working Capital Strategy

Extended payment terms—net 120 in some cases—create working capital pressure that seems unsustainable for a high-growth business. How does Momentum finance four months of float while scaling?

The key is that infrastructure ownership enables asset-based financing. Physical facilities, processing equipment, and inventory can be financed through debt at much lower costs than equity. Pure software platforms lack these collateral assets and must finance growth entirely through equity or expensive working capital lines.

“They’re collecting and sorting and baling material. They’re putting it into an intermodal container or into the back of a truck, shipping it to us. That’s like a 60 day process. And then once we get it, we have to process it, we have to sort it, we have to sell it. That’s another 30 to 60 days,” Preston explains.

Because Momentum owns the processing operations, they have better visibility into when cash will materialize. This visibility allows more efficient working capital management than pure marketplaces dependent on independent supplier payment timelines.

Additionally, the higher total margin captured across the value chain means Momentum generates more cash per transaction cycle. This improved cash generation partially offsets the working capital cost of extended terms.

The Technology Leverage

While Momentum owns physical infrastructure, technology still provides crucial operating leverage. The difference from pure marketplace models is that technology optimizes owned operations rather than just facilitating third-party transactions.

Software drives efficiency in facility operations—optimizing sorting processes, managing inventory, routing logistics, and forecasting demand. These efficiency gains directly improve margin by reducing per-unit processing costs.

Technology also enables the self-service customer experience that makes the unified sales-success model viable. “We really try to make our product easy to use, easy to onboard,” Preston notes. This reduces the human support cost per customer, improving unit economics even with account managers handling both sales and service.

The platform generates proprietary data from owned operations—processing yields, material quality patterns, pricing dynamics, demand forecasts. This data improves decision-making across the business in ways that pure marketplace platforms cannot replicate.

The Customer Economics Advantage

Infrastructure ownership creates customer economics advantages that compound over time. By controlling quality through owned processing, Momentum reduces customer churn from quality inconsistency—a major problem with pure marketplace models in physical goods.

Lower churn means higher customer lifetime value. Higher LTV means Momentum can afford higher customer acquisition costs—like free shipping and extended payment terms—while maintaining healthy LTV:CAC ratios.

The quality consistency also drives organic expansion. Customers who experience reliable quality naturally increase volumes rather than splitting business across multiple vendors to hedge quality risk. This expansion happens with minimal sales cost because the account manager relationship already exists.

“Our account managers are also our salespeople,” Preston explains. “They’re really incentivized on net new revenue.” This unified model means expansion revenue doesn’t require separate sales infrastructure—improving the economics of customer expansion.

When Infrastructure Ownership Makes Economic Sense

Momentum’s model isn’t universally applicable. The conditions that make infrastructure ownership economically viable are specific.

First, processing or value-add operations must generate margin that exceeds pure transaction fees. If the only margin is matching buyers and sellers, infrastructure ownership destroys economics.

Second, quality control must be a critical customer requirement. If customers don’t care about consistency, owned operations are unnecessary cost rather than competitive advantage.

Third, the industry must have sufficient transaction volume to support facility utilization. Fixed costs only work when volume amortizes them across many transactions.

Fourth, technology must be able to drive operational efficiency gains. If owned operations can’t be optimized through software, you’re just building a traditional physical business with worse economics.

Fifth, infrastructure must create barriers to competition. If competitors can easily replicate your facilities, ownership doesn’t build a moat—it just increases capital requirements.

The Compounding Economic Advantages

The long-term economic power of Momentum’s model comes from compounding advantages. As facilities process more volume, operational efficiency improves through learning and scale. Better efficiency improves margin, which enables more aggressive customer acquisition terms, which drives more volume.

The infrastructure also creates data advantages that pure marketplaces cannot match. Processing millions of pounds of materials generates insights into quality patterns, yield optimization, demand forecasting, and pricing dynamics. These insights improve operations, which improves economics, which generates more data.

Customer switching costs compound as well. Once a customer integrates Momentum into their operations—relying on free shipping, net 120 terms, and quality consistency—switching to competitors means disrupting multiple operational processes. This retention improves customer lifetime economics.

What B2B Founders Can Learn

Preston’s approach reveals several principles for founders evaluating infrastructure-heavy business models.

First, don’t assume asset ownership kills margins. If you capture value at multiple layers of the value chain, owned assets can generate better total margin than pure transaction fees.

Second, use infrastructure to enable customer experience advantages that competitors cannot match. Free shipping and extended terms only work economically because Momentum owns the underlying operations.

Third, treat customer acquisition costs holistically. Absorbing shipping costs is customer acquisition, not pure operational expense. Evaluate the ROI against traditional marketing spend.

Fourth, use physical assets to enable better financing terms. Infrastructure ownership provides collateral for debt that pure software platforms lack.

Fifth, ensure technology drives operational leverage. Infrastructure only works if software improves efficiency and generates proprietary data advantages.

The Counterintuitive Truth

Preston built a marketplace that violates conventional wisdom about asset-light models—and achieved better economics as a result. Processing facilities in 30 states don’t destroy margins when you capture value across the entire chain. Free shipping doesn’t kill profitability when it replaces more expensive customer acquisition. Net 120 terms don’t break working capital when infrastructure enables efficient financing.

The lesson for B2B founders: sometimes the best marketplace isn’t the lightest one. When infrastructure ownership enables superior customer experience and captures multi-layer margin, physical assets become competitive advantage rather than economic liability.

The companies that win aren’t always the ones that follow venture capital orthodoxy. Sometimes they’re the ones that own the hard parts competitors won’t touch—and use that ownership to build economics that pure platform plays cannot match.