Think of a typical Friday night. Maybe you’re heading out to a local concert, which you RSVP’d to through Eventbrite. But before you head out, you order a pre-show meal from DoorDash. Finished with your meal, you Uber to the venue — but not before tossing on that new hat you bought off Etsy.
In the span of a few hours, you used four marketplace apps — without thinking twice.
Although these marketplaces have now become stitched into the fabric of our routines, their paths to product-market fit were far from seamless. Just ask Casey Winters, the seasoned growth expert behind massive marketplace success stories like Grubhub and Pinterest.
Across his storied growth career, Winters has cultivated a healthy appreciation for the black diamond-grade slopes these marketplaces must navigate to unlock sustainable growth. “When you’re building a marketplace, you’re tasked with generating demand and supply — so it can take longer to get the product to fully unlock,” he says.
As a growth leader and now an angel investor and advisor for marketplace startups, Winters has a multi-dimensional view into the exact moves that separate ubiquitous marketplaces from the also-rans. In this exclusive interview, he demystifies the 0-1 process into a simple punch list of do’s and don’ts that can turn promising startups into massive, multibillion-dollar marketplaces.
Picking an idea
Do: Choose a market with many suppliers
Just about any product can be bought and sold through an online marketplace. But even though a product category has hints of demand, that doesn’t necessarily mean it’s going to grow into a mammoth offering. That’s why Winters emphasizes that founders must be thoughtful about choosing a market that actually has growth potential — right from the start.
Don’t: Target customers who always want the same thing
The dream for any business is to create a product where customers come back again and again. But when building a marketplace, you actually don’t want to target markets where customers make the same exact purchase over and over.
Finding early customers
Do: Find a scalable acquisition loop
“The point that gets talked about the least in marketplaces, but is extremely important, is figuring out if you have a sustainable advantage for acquiring either supply or demand,” says Winters. “Successful marketplaces tend to have a really scalable acquisition loop.”
Don’t: Shy away from some upfront non-scalable work
Uncovering a scalable acquisition loop is key if you want to launch a successful marketplace — but it doesn’t allow you to skip out on pounding the metaphorical (or even literal) pavement.
Retaining customers
Do: Understand all three steps of customer acquisition
As the oft-repeated story goes, in the early days of Facebook, the team noticed that users who acquired at least 10 friends in the first 14 days were much more likely to stick around. Getting to that tenth friend was considered the “magic moment” in Facebook customer acquisition.
Don’t: Overdo the discounts
With the insight that a second order in the first 30 days often leads to habitual use, it’s tempting to offer a tantalizing discount to nudge customers towards that behavior. But Winters warns that discounting is a dangerous dance.
Expanding the customer base
Do: Raise supply standards over time
“Grubhub’s software itself was hacky for a long time, but the restaurants were getting more demand,” says Winters. “Meanwhile, folks ordering delivery were seeing way more options than they had in the past.”
Don’t: Be rigid with your value prop
Winters notes that these standards can evolve over time. For example, in the early days of ridesharing, proving the safety of the product was paramount — but that evolved as ridesharing became more commonplace.
Evolving from startup to scaleup
Do: Level up your data sophistication
While building intricate software is not on an early marketplace’s to-do list, robust data analysis should be. When Winters partners with marketplaces after Series A or Series B, the first step is building up data capability. “We enrich the dashboards that your team should be paying attention to and we double-check that you're looking at the appropriate slice of data,” says Winters.
Don’t: Ignore supply churn
One particular red flag marketplaces tend to mistake for yellow is supplier churn. “A lot of times, people are acquiring a lot of supply that doesn't really get any transactions and then that supply will churn,” says Winters.
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