Season 2 recap: six essential insights from interviewing 11 marketplace founders

Transcript automated - so there will be many mistakes.

[00:00:00] Welcome to Two-Sided the Marketplace Podcast, brought to you by Share Tribe.

[00:00:13] Hello and welcome. I'm Sjoerd CMO at Sharetribe, and I am your host. Welcome to the final episode of season two of two. This is not an interview episode, but instead I will attempt to do a summary, a sort of cliff notes of the entire second season by going through what I thought were some interesting takeaways from this season.

[00:00:33] You can also use this episode as a guide to the season to find the episodes you hadn't listened to before that are worth checking out. Although of course, I recommend checking them all out. I have several topics for this recap. I'll shortly introduce each of them and tell you why I think it's worth remembering or revisiting.

[00:00:49] And for each topic will also play some outtakes from the guests that will hopefully drive the point home. But before we go into all of this, since this is the final episode, I just wanna say a couple of things. First of all, this has been a fantastic season. It took a lot longer to get to this than expected, so to those who have waited since the first season, thank you for your patience and continuing support and to all of those who joined us this season for the first time.

[00:01:15] Thank you too. I'm really happy you're here, and I hope to see you next season as. And of course a big, big thanks to all the guests. I realized there is not much upside to doing this and spend an hour of your time with me, but I do know that many people are truly helped by this Also, dear listeners, if you have feedback ideas or if you feel you know, an awesome marketplace entrepreneur I should talk to, if you have any questions about the discussion we've had.

[00:01:42] Please reach out to me. You can reach me@shortsharetribe.com. That is sj oe rd sharetribe.com, or just tweet to at sharetribe and I'll read it. I'd love to hear from you after the end of last season. I got some really inspiring and motivating messages. I love getting them and I'd love to get some more.

[00:02:04] Finally, if you're an inspiring marketplace entrepreneur and you don't yet have a marketplace, but you have a marketplace idea, have a look at share. We build marketplace software, which allows you to get your marketplace platform up and running into the market in a fast, easy, and affordable way. Even if you have no technical chops, you can find us@ww.sharetribe.com.

[00:02:25] Now with all of this out of the way, let's get to it.

[00:02:45] The first. For those who have listened to last season's recap, I'm going to sound a little bit like a broken record, but I swear there are some new insights later on. Since I know a lot of starting founders are listening to this, I cannot stress this first point enough. Start small or constrain your marketplace since last season.

[00:03:04] Andrew Chen from Andreas Horowich, who unfortunately I haven't yet been able to get on a podcast, has provided us with a really good way of talking about this, starting small. He wrote a fantastic book called The Cold Start Problem, where he describes that platform should be looking for their atomic network, which is the smallest network needed that can stand on.

[00:03:25] Its. And as Andrew says in the book, your product First Atomic network is probably smaller and more specific than you think. Not a massive segment of users or a particular customer segments or a city, but instead something tiny, maybe on the order of hundreds of people at a specific moment in time. It was similar for Uber whose networks we tend to talk about as San Francisco or New York, but in the earliest days, the focus was on narrow ephemeral moments more.

[00:03:53] 5:00 PM at the Cal train station at Fifth and King Street. So that's a great example of how small a marketplace can start. Casey Winters, who has been instrumental at GrubHub, Pinterest, and Event Bride, and who has a genuine marketplace and Grove Wizard shared something similar with us in the first episode of the season.

[00:04:12] He talks about the need to know the shape of the network effect that you're looking.

[00:04:17] Yeah, so I think the main goal, and there's not a lot online about this, but we were trying to understand is the shape of the network effect. That you're trying to build. So, uh, ritual is one of these companies I advise and their network effect is how long you're willing to walk for a coffee or lunch.

[00:04:35] That is a very small distance. Whereas compare that to like Etsy, right? Yeah. Etsy's network effect is wherever it can ship. So like that's pretty global, you know, rituals is hyper local. And then a lot of the companies we've talked about, you know, are, are more in between like, You know, mainly it's about cars in the area that you are, but you could also use it when you travel.

[00:04:53] So there are some more global elements. You know, Airbnb, I mainly care about does it have places where I'm traveling today, but if it's adding supply in places I may travel in the future, I'll, I'll at some point, you know, get, get a benefit from that. But your only goal is to get an initial network effect to work, and that's what we call liquidity or product market fit.

[00:05:12] So you don't wanna expand into incremental markets until you have liquidity. in, you know, the network effect that you've decided is the appropriate shape. It could be one market, it could be one category, whatever. Yeah. And then if you manage to unlock that, which is usually the hardest part, you're trying to understand what created that so that you can replicate it in these other markets.

[00:05:33] Yeah. And

[00:05:33] to have another illustration of that atomic network, David Oats from Cury, which nowadays is a marketplace for reselling apparel and is doing more than 25 million annual GMV actually started out as a dress rental marketplace. Not just in one state or in one city, not even in one university, but in one sorority.

[00:05:53] Listen to David sharing their origin story. It

[00:05:56] actually started as a more of like rent the runway, but on college campuses. Specifically like within the sorority system? So my friend from high school, William had a girlfriend at the time and she was in a sorority and he was in a fraternity and he was a computer science major.

[00:06:11] And she was saying that, you know, especially the culture of in the south at these big s e c schools, uh, which is like, you know, the schools that have football and Greek life. Okay, yeah, yeah. It's, it's very centered around dresses. Pretty much every, every single social thing. Football weekend, baseball games, all of the formal events connected to the fraternity and sorority parties, like you need a different dress for all of those.

[00:06:37] And so she calculated that you need something like 20 unique dresses per semester. And some of those are gonna come from, you know, gifted from your parents. Some of those are gonna come from a local boutique, some of those are gonna come from your roommate's closet. But her idea was to create an app where you could list your dresses on it.

[00:06:54] Other people could rent them from you and you would go, yeah, you would go meet in the sorority house. They could try it on and if it fit they could take it for the weekend and then bring it back on Monday. And so that was the, that was the idea. It was just at Ole Miss when we launched, all the rentals were paid for via Venmo and we just kind of manually Yeah.

[00:07:13] Ran that process. We tried to have it be very simple and like take care of a lot of the stuff, you know? Yeah. Manually in the beginning. . Yeah. I think in our first, our first month there we did like 300 of, or something like that. Rentals. Really? Yeah. So it was like a really big, really big spike and people really seemed to love it, even though it was very.

[00:07:35] Janky. And as far as user experience goes, the spoiler on that idea is that it was a great beachhead, exactly what you're talking about, like launching in the college market, we were really able to zoom in on one school, even one sorority to bootstrap the supply side and the demand side. But as we grew out over the next couple of years, we would launch at other schools that were similar to Mississippi, like Alabama and Georgia.

[00:08:01] and it would do extremely well just like Alabama,

[00:08:04] I hope. By now you're convinced that the validity of this argument, just from the perspective of achieving liquidity, but starting small, also allows you to do some other important things that many of the founders of this season mentioned. Do things that don't scale is one of them.

[00:08:20] Many of you might already know this Legendary advice by Paul Graham, co-founder of Y Combinator, which is often considered the world's best startup accelerator. In our daily interactions at Chatri, we still see too many people who are not familiar with this and who are instead looking to fully develop and automate everything from the start and discard some ideas just because they're not scalable.

[00:08:44] Sure, scalability is important, but in the beginning, you can make magic happen with manual work faking it. I'll divide these in two areas, marketing and product. In marketing in this digital day and age, and especially for founders coming from a tech background, we tend to forget about the old school way of marketing and advertising Last season, episode 11, we already heard from Brian Clayton, who runs a marketplace for lawn care, about how they passed out a hundred thousand door hangers, door to door to advertise their market.

[00:09:13] This season as well. We've heard about some truly old school tactics, like in episode nine, where Goov Singal, CEO of Drive Law appeared to appear car rental marketplace, shared how he and his co-founder generated their first supply in Singapore by simply taking along flyers wherever they would go.

[00:09:30] We were always carrying set of flies with us wherever we were going.

[00:09:34] If you're gonna a shopping mall, there are hundreds of cars standing in the basement, just go and put it in the basement. If you're passing a big building, uh, big housing, big apartment, you just go down and sometimes security guard come polite and you know, , and then you were the next one until the time the security guard comes chasing you.

[00:09:54] Or there are also digital ways of doing things that are non scalable direct sales through Instagram dms. For example, even though founder Jason Bergman did this tactic even before, really going public with market price, a marketplace for matching professional athletes with marketing deals, it is still worth mentioning as it laid the foundation for market prices later approach.

[00:10:14] So I probably DM like 3000 professional athletes. A couple years ago, I got blocked by Instagram every single day.

[00:10:21] You can only send like a couple hundred a day. So I got

[00:10:23] blocked every single day for a couple months and I said basically

[00:10:26] like, Hey, I'd love to be your marketing agent. I'd love to bring you marketing deals.

[00:10:30] And I got 12 out of a couple thousand to

[00:10:32] say

[00:10:32] yes, which I'm a salesperson. That success rate is pretty terrible, but it was more than one. But it's not just marketing where using non-scalable tactics can pay. Also on a product level, it is easy for founders to get trapped into building for a long time just because you have this perfect platform in your head and that's what you want to put into the market.

[00:10:51] But there is a very real risk of, first of all, running out of time and money. Before you have finished building what you need. And secondly, and probably most importantly, you might be mistaken about how much customers want a certain feature or how it should work, or about the value that it provides to customers.

[00:11:09] It's easy to forget that the core product of a marketplace isn't the tech, it's the liquidity. It's the matching of supply and demand. It's about customers finding what they need and how that happens is often of secondary importa. One of my favorite examples comes from episode five of this season where I spoke with Derek Fay of Paul Camper, a marketplace for RV rentals, which by the way since then has been acquired for 47 million Australian dollars, which is a bit more than 30 million SD at the moment.

[00:11:40] Congratulations, Derek. But as Derek shared, he didn't start a marketplace with a fully finished product out of the box. Actually, quite the. Which

[00:11:49] was just a

[00:11:50] really website, no, no booking platform or anything, but I could

[00:11:54] present more than on eBay.

[00:11:56] I could put a calendar on, uh, more pictures Yeah. And so forth.

[00:12:00] Behind that, I had an Excel file where I had an calendar of, of, for Paul, so if there was a request, and then finally booking, I just changed the color of the.

[00:12:12] Made a screenshot and we're uploading

[00:12:15] it again. And then the website was,

[00:12:17] was updated. So that's how it

[00:12:18] started. So that was your booking calendar, like a screenshot of an Excel file with the color code?

[00:12:23] Yeah, that is like one month per line and then the days of course. And then different colors. And that's actually also like when I, when I decided to really make a business outta the 1st of January in two 13. Oh wow. I was still using

[00:12:39] this website.

[00:12:41] And the Excel file behind for another half a year, and I already listed other vans, so my ex Excel file just hit more calendars and that's the way how it started.

[00:12:53] So really, really lean. So it was just a website with the screenshot of an Excel file. Basically, as they say, fake it till you. And you don't need to just fake product. You can also fake supply in the beginning. My favorite example of this season comes from James McCauley of Encore, a marketplace for booking musicians and bands.

[00:13:14] So we didn't show any of our suppliers to customers. Like you couldn't go to a search page and say, I wanna see all the mariachi bands in Manchester, because if you did that, you would've seen that we had none. You instead went through an inquiry form that said, you know, I want a mariachi band in Manchester.

[00:13:30] And then we said, cool, you'll receive some quotes within the next few hours. And then we'd hurry off to Facebook and say, yeah, someone, someone needs a mariachi band. The mariachi band would sign up and then we'd sort of make the match and, and make the booking. So, We were able to sort of tell customers we can give you whatever you want, because we were running away to these Facebook groups and sort of recruiting musicians on demand.

[00:13:52] I love that story. And again, wasting time and money is a real risk, especially if you're not from a software development or tech background. You can get really lost by trying to build something complete from scratch. You can lose serious money and perhaps more importantly, serious time. This is what happened to James Younger from Temp Stars, a platform for temporary dental.

[00:14:14] I did what I think is very common and also a very common mistake where I took my sketches and I found a, essentially a full stack development house based out of Utah. And I said to, I took my, I showed them my drawings and said, could you build this? And they said, sure, we can build this. Mm-hmm. . Without going too deeply into it.

[00:14:37] Looking back, that was a recipe for disaster because I didn't even know what I wanted. I didn't know what it should look like or how it should work or anything like that. So I will just tell you that this is not the right path to go, but this is the path I went where I paid someone to develop it. It took a year and a half.

[00:14:51] The whole thing was a complete disastrous mess. I didn't even launch it. Didn't even tell anyone I was building it. Okay. And then, but I knew that it was going to be a mess about two thirds of the way through. So I threw out all the. I built my own prototype. I took it to a one full stack developer, and in instead of a year and a half, the first person, that next person built it in six weeks.

[00:15:11] Oh, wow. And, and at least I had an MVP at that point. And so when you're asking about validating the idea, it was sort of like I had to go through all of those things just to get an MVP of a first working version that I wanted to show to somebody. Luckily, things turned out well for James and temp stars.

[00:15:25] In the end, as you can hear, in the rest of the. Another manual, non-scalable things you might want to consider doing early on is handholding your first users. It will teach you invaluable lessons about your customers, what they want, how to behave, et cetera. And also early on, it helps to alleviate any trust issues Customers may have.

[00:15:46] Listen to Garra from Drive Love, for example. I think

[00:15:49] one of the elements that really work for us is that we met our customers very. Especially the supply site because the trust issue did not get alleviated because we were just appeared impressed. Yes, of course it helps the trust factor. It just definitely having the, having the right insurance, having the backing off the transport authority.

[00:16:11] Yes. It just does. Definitely trust, but people still want see and meet people who are doing this, who are behind. So we met a lot of our hosts, as we call them, people who share their car, or we call them hosts. We met a lot of them personally and we, we had coffees with them. We had beer with them,

[00:16:29] and we've heard this from hunters as well.

[00:16:30] This season in episode 10, we heard from Trisha Banque from Queenly, a marketplace for formal dresses who shares how they're getting the first people to download their. It's not very glamorous. It's me manually messaging a lot of people. And I was lucky enough that throughout my eight years of competing in pageants, I have built a good amount of, you know, network, different groups.

[00:16:55] I was just trying to spread it word of mouth, and I was like, Very, very open to feedback. I would always engage with them saying like, Hey, you know, we're here to make this better for you every single day. So anything that is broken, any feature you want, please communicate to me and we'll make it happen. I would always check in every single time a seller has successfully sold something or a buyer has purchased something that they're happy with, and ask them about their experience and thank them for using queenly.

[00:17:21] So we always focus on this very like, White glove customer service experience, right? We want it to be better than existing platforms. And you know, you're supposed to do things that don't scale in the beginning anyways. And of course, this is easy for me to say safely from behind this microphone, but it is hard work and it can be exhausting.

[00:17:39] And so it helps if you are working on something that you really, really like. Truly care about or is really about a problem that you've experienced yourself? I personally love what Andrew Sudeki said in episode six. Having fun is a competitive advantage. Andrew runs micro acquire a marketplace for buying and selling online businesses, and here's what he had to say.

[00:18:03] So I thought it would be a really fun business to run, and that was probably my number one thing. I'm a big believer that if you wanna be in the top percent, top 1% of anything you do, Art, music, business, sports, you, you have to love it. Like you have to enjoy like the daily building. You have to enjoy doing the stuff that isn't fun.

[00:18:25] Moves the business forward every single day and find a way to make it fun. And if you get the things right, like your customer, your business model in a market that you truly enjoy, that increases your odds of success, in my opinion, because it's, it's, it's really hard to compete with the founder where, It's work to you, but it's fun to them.

[00:18:46] So they're gonna be putting in, you know, 130% cuz I like it. They're just playing like their, it's like a game. Yeah. It's like they're playing their favorite video game. Yeah. Their favorite video game. And you're, you're a work, an additional benefit if you're basically building something for yourself, is that you kind of know what the user wants.

[00:19:03] The best example of this season comes from episode 11 where Gene Miguel was our guest, who is the CEO of Short Boxed a Marketplace for buying and selling comic. Yeah, so you know, like many startups and solutions out there, short box was born out of frustration. We do obviously spend a lot of time talking to our users, figuring out what do they need to build or what do they want us to build, what are the features that they need.

[00:19:29] But at the end of the day, we know our users so well because we are the user. We're collectors. We built this for ourself, right? We instinctively know what we want because we are our user. But of course there are exceptions. In episode four, I talked with Immanuel Nata, who together with three friends founded Rezi, a marketplace for services around self-publishing books.

[00:19:55] And so you were in business school and the other three, do any of them had already history with the publishing industry? None of us. I think we were all quite interested in

[00:20:06] cultural,

[00:20:07] creative industries, uh, in general and in, you know, startups and. But none of us had experience with publishing. And actually my co-founder, Ricardo, is the first one of us that's published a book.

[00:20:18] He published a book like a few months ago about how to market a book, basically. Okay. So they had zero experience and still were able to build a successful marketplace in that industry. Now, If you haven't started building a marketplace, but you're thinking about it, then there are also some interesting gems in this season.

[00:20:35] First of all, what was surprising to me was that there is still a lot of unbundling that can happen also in B to C or consumer marketplaces. So unbundling is the idea that you take a vertical out of a big horizontal marketplace and turn that into its own marketplace. The most famous example of that that's always being used is Craigslist.

[00:20:55] It's one of the oldest and most successful online classified websites started already in 1995 where people could famously and infamously advertise, buy and sell practically everything. It had a whole slew of categories, which you could say, although there is a lot of discussion about this, those categories have been slowly verticalized by marketplaces.

[00:21:17] For example, the vacation rentals category has been overtaken by Airbnb. Housing has been overtaken by Zillow. Jobs by Upwork, zip recruiter, et cetera. You get the picture. But even within these separated verticals, there is still a sort of inception thing going on there where there are verticals within verticals and they're not always obvious.

[00:21:39] The best example of this season is reselling and renting apparel. It's one of the more mature vertical categories of online marketplace. With several bigger players such as postmark, rent a Runway, theup Thread up, and many others. And there have been all kinds of mergers and acquisitions. For example, in Europe, the Lithuanian company, Vinte has been buying a whole bunch of domestic leaders from several European countries, such as the Dutch Company, United Wardrobe Rope, and more recently the German company Rebel for 30 million euros.

[00:22:09] And so it feels like a very mature, contained vertical. But this season alone, we had two guests who were both. Successful marketplace within a niche of that space. Cury, for example, in episode eight, as we heard, started as a dress rental for Southern University sororities, but has grown into successful thrifting apparel marketplace for the casual seller.

[00:22:31] And then Queenly, episode 10 is able to run a fast growing and well funded business, focusing only on formal wear. So the point is don't be deterred if there seems to. Dominating marketplace in your vertical. There might be niches in there that can stand on its own and even broaden. A last insight, which I really loved and which can be crucial if you're looking for new marketplace ideas, is the idea of looking for places where supply is artificially kept.

[00:22:58] We heard this in the very first episode, and I'll let Casey explain it himself.

[00:23:02] I think specifically in those cases with Airbnb and, and Uber, they pointed out opportunities where supply was artificially constrained due to regulation and they leveraged consumer sentiment to effectively change regulations and that allowed them to unlock these, these fairly large markets.

[00:23:19] So I think to try to find these major global marketplace opportunities you are looking for. Something in the market could be regulation, could be, could be elsewhere, that's artificially constraining the supply and therefore could be, you know, raising the price and, you know, where else could you do this?

[00:23:34] Well, I think the first place I look is anywhere where there is regulation that cap supply. This could be like licenses and areas like, you know, doctors. Yeah. You know, countries that have like very high minimum wage laws that might be, you know, taking people out of the market that would be willing to work for cheap.

[00:23:49] And then really cool is that we heard proof of that in episode seven from Jason when he discussed how market prices market grew a hundred x over. So what happened was on July 1st in 2021, so in last year or July 1st, it's about to

[00:24:04] be a year since this

[00:24:05] happened, the ncaa. So college athletes were never able to do

[00:24:10] marketing deals for a multitude of

[00:24:12] reasons that would probably bore the audience.

[00:24:14] But on July 1st, last year, They passed a legislation where every single college athlete, so 500,000 college athletes overnight starting July 1st, they passed the legislation on June 30th. I'm not kidding. Yeah. Were able to start doing marketing deals.

[00:24:29] There are 500,000 college athletes. There's about

[00:24:31] 5,000 professional athletes.

[00:24:33] That's where I get the hundred x. But you don't need to wait for regulation to change. You can also take the initiative and start to drive the change in regulation. We heard a great story from Drive Law who started in Singapore where it was just simply forbidden by both the law and by insurance to rent out your car to other people.

[00:24:50] Coming

[00:24:50] back to regulatory, uh, regulatory have a very interesting story. So, as I said, the regulation did permit us to do this model, right? We went to this one of these events for National University of Singapore, us. We were, uh, listening to one of the ministers. From the Singapore government who was stalking, who was the, and was presenting how Singapore government is supporting startups.

[00:25:13] And he was just encouraging people to do think outta of the box and, you know, Singapore government is with and, and that very, and he, he said, Hey, that's, that's need. So we got his name and of course we could speak to him that time, but we wrote an email to his office explaining the. And the minister was so kind enough to respond to our email and he asked one of his ministerial members to look into our.

[00:25:41] And then we presented the idea to 'em. And of course as I'm speaking, it just sound that one thing happened after the other. But certainly it did not. I mean, it took some time, it took a lot of effort and, but they were open to the idea, built a sandbox for, in which you got the approval to run the sandbox in Singapore with number of cards.

[00:26:00] And it has been a wonderful association and a lot of, lot of support because it ultimately, and the reason it works is because the objective is aligned.

[00:26:11] I love that story as well. Of course, there are lots of other great insight and examples in the entire season. For example, we've heard, again, prove that marketplace can take a long time to build.

[00:26:22] Short Box started their blog 10 years ago. Cur has been added since 2015. Paul Camper started in 2013, et cetera. It's something you don't hear about a. We've also heard great things about the importance of community. Short Box has their comic book collector community has to backbone. The writers of Rezi are a tight knit community that supports the business.

[00:26:45] Encore gets a lot of benefit from their community of the musicians, for example. But I found it hard to grasp the importance in a single quote. So I didn't wanna dive deeper into this here, but I do recommend if community is your thing, to check out those episodes. I could go on for much longer. There has been so much wisdom and experience in this season, but I'll end it here.

[00:27:05] I hope this is giving you something to think about or otherwise inspired you for your marketplace idea. And if you already have a marketplace, of course, perhaps you can apply some of these ideas immediately. Finally, I just wanna say I had a fantastic time this season. I hope you did too. Thanks for letting me into your head, into your car or wherever, and however you listen to this.

[00:27:25] Thank you for all the reviews, the nice messages, the five stars. If you do wanna give us a holiday present, of course, hit that subscriber review button or reach out to me and let me know your thoughts for the last time this season. Thank you for listen. And until the next one. Thank you for listening to Two-Sided the Marketplace Podcast.

[00:27:47] If you enjoyed today's show, don't forget to subscribe. If you listen on iTunes, we'd also love for you to rate and give us a review. If you got inspired to build your own marketplace, go visit www.sharesharetribe.com. It's the fastest way to build a successful online marketplace business. Until next time.