Ah! So I see you, too, are one of those people who want to take over the world and change it for the better. Welcome, friend! You have a lot in common with the best entrepreneurs out there.
'What does it take for you to become the Queen / King of...' is a critical question I discuss with founders when I meet them. I think it is a brilliant exercise to align on targets and funding needs to get a company to the next stage. In this post, I focus on marketplaces, but you can apply the same reasoning to any startup.
Online marketplaces are one of the most fascinating and most valuable business opportunities the internet has enabled. The potential they can unlock by leveraging a connected network of buyers and sellers in a particular existing or new market is enormous (check out, for example, the new and vast market our latest marketplace investment Qoorio is creating...). What makes them even more exciting is that, very often, it is a winner takes it all play. So, once you hit a relevant market penetration, you own it - you are the Queen / King 👑.
Building a double-sided marketplace is challenging. First, a plethora of criteria have to be considered (from the specific market nature to tech innovation). Second, you need to prove that you can drive liquidity (each marketplace has its character and liquidity metrics. Here, a great read highlighting some cool ones). Liquidity essentially means that you create enough value for your supply first (enough requests and bookings at a relevant frequency and average order value) and then the buyers (variety of offerings that make them come back and book a couple of times).
This should result in organic growth, the flywheel effect, as more happy sellers should lead to more happy buyers and vice versa. To get this flywheel spinning, we need to focus on a specific market to reach a certain critical mass. This can be a geography such as a city or a particular category.
On the flip side, this characteristic leads to the opportunity to be Queen / King - owning the best supply and offering the best service in a market. You become the leading brand. It will be tough for new players to compete. Once a company reaches that point, the elasticity of demand tends to be extremely low, making the business upside enormous. However, nailing down this point is different for every business and varies along the journey.
It is, therefore, crucial that you can express and follow a 'startup GPS' early on. Classifieds founders, for example, target a 20% market penetration to reach this monopoly status. What helps then with the uncertainty and enormity of our task is to start with a process to guide us. It is the best way for founders and investors to be aligned and execute efficiently.
Building a marketplace is much easier said than done, but if you figure it out, you create a great business that can grow and sustain itself. I am very fortunate to have worked with, helped and learned from some great marketplace founders. I can't wait to back many more!
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If you think that you are onto something and got or are about to get this flywheel spinning, please do reach out... and let's figure out how you can become the next Queen / King.
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