success factors – On Marketplaces

10 Hard Questions That Determine The Success Of Your Marketplace

Here is an modern classic from Bill Gurley, a VC from Benchmark Capital (Uber, OpenTable), that you can use to gauge the potential of your idea if you are just starting a marketplace startup. You these 10 points as a checklist to decide if your idea is worth the investment of your time.

A true marketplace needs natural pull on both the consumer and supplier side of the market. Aggregating suppliers is a necessary, but insufficient step on its own. You must also organically aggregate demand. With each step, it should get easier to acquire the incremental consumer AS WELL AS the incremental supplier. Highly liquid marketplaces naturally “tip” towards becoming a clearinghouse where neither the consumer nor the supplier would favor an alternative. That only happens if your momentum is increasing, and both consumers and suppliers are sensing an increasing importance of your place in the world. Much easier said than done.

Here are 10 factors to consider when evaluating the potential success of a new marketplace opportunity:

How to win with marketplaces: The three success factors

Liquidity or critical mass, match-making capability and trust are the three factors that make or break a marketplace. You should measure those three things to see if you deliver value in these key areas.

Marketplaces are difficult businesses to run. Like all multi-sided platform businesses, they suffer from the classic chicken and egg problem: the technology has no value unless buyers and sellers are present and you can’t get the buyers on board unless you have sellers and you can’t bring in sellers without having buyers. Hence, building a marketplace is a lot like building two separate companies simultaneously, each dependent on the other.

There are three factors that determine success for a marketplace business:

Why peer-to-peer marketplaces fail, part 3: Your business model does not scale

So you’ve found the core problem to solve and picked the right niche. Great. Now let’s talk about how to make your marketplace sustainable.
First, you need to think about what it is that you want. Are you planning to build a large VC-funded global marketplace business, or just a smaller local business? This decision can make a big difference.

Why peer-to-peer marketplaces fail, part 2: The focus is too broad

It is surprisingly often that I talk to people who have this idea of a marketplace for “sharing everything”. And it does make sense intuitively: people who share their tools are probably also likely to share their cars. And when you have built a network of trust for sharing one asset, why shouldn’t you use that for other assets too?

3 reasons why peer-to-peer marketplaces fail (and how not to)

Peer-to-peer marketplaces can be great businesses. They combine the convenience of online stores with the scale that comes from the notion that every consumer can also be a provider. This combination is so powerful that starting a new peer-to-peer marketplace might be one of the most popular online business concepts of the day. Many people are inspired by the recent successes of Airbnb, Etsy, Lyft and the likes and want to apply these ideas to new markets.