How To Actually Kickstart And Scale Your Marketplace Startup Today

October 19, 2021

Solving the chicken-and-egg problem of creating marketplace businesses.

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How To Actually Kickstart And Scale Your Marketplace Startup Today
Uber is a car company that owns no cars.  Facebook is a content company that creates no content.  Airbnb is a real estate company that owns no real estate.  We've all seen successful marketplaces.
But how do you start a marketplace when you don't own or create anything?  This article was based on Lenny Rachitsky's "How to Kickstart and Scale a Marketplace Business".
### What is a marketplace?  A marketplace business is one that connects **demand** and **supply** and **leads to a financial transaction.**
### The problem with starting marketplaces  When your marketplace is getting started, it's hard because you have neither supply nor demand.  You must convince one side to commit before the other side.  This is the chicken-and-egg problem.
### How to start marketplaces  **1) Constrain the marketplace.**  Start small.  Two ways of constraining the market are by Geography and Category.  For example, Airbnb started with just New York.
**2) Decide which side of the marketplace to concentrate on.**  Most successful marketplaces focused on growing the supply side.  "In the early days, we were only focused on driving supply. We found that supply drove demand." -Tamara Mendelsohn (Eventbrite CMO)  Other examples of companies starting with supply are Lyft, Patreon, and Thumbtack.
**3) Drive initial supply & demand**  There are many ways to drive initial supply & demand.  Some of the most effective ways include  - Direct sales - Referrals - Word of mouth  Lenny Rachitsky lists a total of 17 different methods. Check out his article for full details
### Companies to Watch:  [Airbnb](https://www.airbnb.com/): marketplace for homes  [Uber](https://www.uber.com/): marketplace for cars  [Lyft](https://www.lyft.com/): marketplace for cars  [Alibaba](https://www.alibaba.com/): marketplace for shopping  [Etsy](https://www.etsy.com/): marketplace for craft/vintage items
[DoorDash](https://www.doordash.com/): marketplace for food delivery  [Rover](https://www.rover.com/): marketplace for dog walking/sitting  [OpenSea](https://opensea.io/): marketplace for NFTs  [TaskRabbit](https://www.taskrabbit.com/): marketplace for tasks  [Weee](https://www.sayweee.com/)!: marketplace for Asian & Hispanic food delivery
### We Predict That:  1) New marketplaces will be created based on trends. OpenSea emerged as the #1 marketplace for NFTs. Virtual event marketplaces emerged from the pandemic.  2) Niche marketplaces will be created. Weee! emerged as a niche Asian & Hispanic food delivery service to Uber Eats and DoorDash.  3) Marketplace margins may decline. In a decentralized world, people want less money going to the middleman.
### 3 Startup Opportunities:  1) Read Lenny's full article on marketplaces! He goes into way more detail.
2) Try creating your own marketplace! Start with a niche, start with the supply side, and build the initial platform with a no-code tool 👍
3) Can you create a marketplace by leveraging blockchain? Can the use of smart contracts reduce fees? Is there a way to decentralize it so that the community has more ownership?

Community Highlight:

"I got inspired to start my project after reading the Smoothie article about no-code. I made mocks from it and then I was able to get a developer on board!"
Our reader Francesca Kim (Toronto) began her startup 🎉

Uber is a car company that owns no cars.

Facebook is a content company that creates no content.

Airbnb is a real estate company that owns no real estate.

We've all seen successful marketplaces.
But how do you start a marketplace when you don't own or create anything?

This article was based on Lenny Rachitsky's "How to Kickstart and Scale a Marketplace Business".
To read his full article, click here.

What is a marketplace?

A marketplace business is one that connects demand and supply and leads to a financial transaction.

The problem with starting marketplaces

When your marketplace is getting started, it's hard because you have neither supply nor demand.
You must convince one side to commit before the other side.
This is the chicken-and-egg problem.

How to start marketplaces

1. Constrain the marketplace.

Start small.
Two ways of constraining the market are by Geography and Category.
For example, Airbnb started with just New York.

2. Decide which side of the marketplace to concentrate on.

Most successful marketplaces focused on growing the supply side.
"In the early days, we were only focused on driving supply. We found that supply drove demand." -Tamara Mendelsohn (Eventbrite CMO)
Other examples of companies starting with supply are Lyft, Patreon, and Thumbtack.

3. Drive initial supply & demand

There are many ways to drive initial supply & demand.
Some of the most effective ways include

- Direct sales
- Referrals
- Word of mouth

Lenny Rachitsky lists a total of 17 different methods. Check out his article for full details

Companies to Watch:

Airbnb: marketplace for homes

Uber: marketplace for cars

Lyft: marketplace for cars

Alibaba: marketplace for shopping

Etsy: marketplace for craft/vintage items

DoorDash: marketplace for food delivery

Rover: marketplace for dog walking/sitting

OpenSea: marketplace for NFTs

TaskRabbit: marketplace for tasks

Weee!: marketplace for Asian & Hispanic food delivery

We Predict That:

  1. New marketplaces will be created based on trends. OpenSea emerged as the #1 marketplace for NFTs. Virtual event marketplaces emerged from the pandemic.
  2. Niche marketplaces will be created. Weee! emerged as a niche Asian & Hispanic food delivery service to Uber Eats and DoorDash.
  3. Marketplace margins may decline. In a decentralized world, people want less money going to the middleman.

3 Startup Opportunities:

  1. Read Lenny's full article on marketplaces! He goes into way more detail.
  2. Try creating your own marketplace! Start with a niche, start with the supply side, and build the initial platform with a no-code tool 👍
  3. Can you create a marketplace by leveraging blockchain? Can the use of smart contracts reduce fees? Is there a way to decentralize it so that the community has more ownership?

Sources

https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-marketplace

Community Highlight

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