What turns a good marketplace into a really great marketplace? - Andrew Blachman (Marketplace Capital)

Please note: The transcript is automated, meaning that there will be mistakes.

Andrew Blachman: Biggest difference between like incredibly great marketplaces and good marketplaces are okay marketplaces is if you're actually creating an entirely new experience that couldn't have existed before. Either you're unlocking new supply that never could have existed before that marketplace or you're somehow, like, enabling the connection that never could have happened on the demand side.

Sjoerd Handgraaf: Welcome to 2Sided, the marketplace podcast brought to you by Sharetribe. Hello, and welcome. I am Stewart, CMO at Sharetribe, and I am your host. Welcome to episode number 3 of season 3 of 2 sided. Again, as a reminder, so as opposed to previous seasons, this season, we're talking to investors, not founders.

However, like many PCs, my guest in this episode has been a founder and marketplace operator for many, many years himself as well. I'm talking today to Andrew Blackman, cofounder of Marketplace Capital. Andrew has a wealth of experience in building and operating marketplaces, and since a short while, has also been investing in online marketplaces. I feel that throughout the conversation, there are some really, really valuable insights for aspiring marketplace founders, such as, for example, the importance of creating new market opportunities. So Andrew explains how really truly successful marketplaces, they unlock completely new supplier demand that did not exist before, the way Airbnb did this for short term rentals, for example.

Another thing we touch on is why building traction before raising capital is key. And we share some advice on how to validate your marketplace idea and gain traction without relying on funding too early. And maybe finally, of course, unavoidably, at this moment in time, we talk about AI, the impact of AI on the future of marketplaces. So Andrew shares how he feels AI can enhance marketplace experiences, making connection more efficient, and just overall improving the customer satisfaction. As always, I had a great time while also learning a ton, just talking and listening to Andrew.

I hope you will as well. So here is my chat with Andrew Blackman. Hi, Andrew. Welcome to the podcast.

Andrew Blachman: Hi. Thanks for having me.

Sjoerd Handgraaf: Yeah. No. It's really nice that you took the time to be here. I know it's early on your end, so let's get straight into it. But before we go down the marketplace rabbit hole, could you briefly tell us a little bit about yourself?

What did you do before you became an investor in, marketplaces? Sure.

Andrew Blachman: So yeah. So I've been a marketplace operator most of my career, actually. It's it's only very recently that I moved to the investing side in the last kinda year or 2. I've always been an an angel investor, but as a as a professional investor only in the last couple of years. But as an operator for most of my career over, you know, 20 plus years, I built a few different marketplaces.

Most notably, I built a company in the UK and Europe called Get Me In, which was if you guys are familiar with StubHub in the US, we were

Sjoerd Handgraaf: an

Andrew Blachman: equivalent company in the UK. We built that business, 2 sided marketplace, grew it, and then sold it to Ticketmaster, the biggest player in that space. And then I ended up, after that sale, running Ticketmaster's resale marketplace internationally. So that's where my first sort of day marketplace success and experience came from. And after that sale, I also saw the power of marketplaces and how great they are when they work.

And so, you know, with the proceeds from some of that sale, I started angel investing in other marketplaces. So as an angel, I invested in about 20 marketplaces over about a 10 year period. Then I moved back to the US and launched another marketplace with a couple of colleagues that I had met that had founded a business called TopAdder, which is a live auction marketplace. And we actually grew that to be pretty big. We got to, you know, over 400,000,000 of of GMV at our at our peak, and we were profitable and thought we had made it.

But that marketplace, unfortunately, we didn't have the network effects that you like to see in in in marketplaces, at least not the really strong ones. And so, ultimately, it became a performance marketing driven business, and we we hit some headwinds. So Yeah. I've experienced both sides of it, both good and bad of marketplace dynamics that I've involved in a lot of, you know, operating roles. And couple of years ago, I moved to spend more time on my angel portfolio, then I became a scout at Craft Ventures, who who do a budget marketplace investing, and decided I really enjoyed the sort of advising and and investing side of things.

And met my partner, Mike, at the same time, and we we shared a similar thesis around marketplaces and decided to to launch this fund. I'm relatively new to the professional investment side and and much longer on the on the building and operating side.

Sjoerd Handgraaf: Yeah. Yeah. It's fine because I was going to ask you, like, in your introduction that I think that my experience with marketplace founders is that they never found just one marketplace. Like, I've had the feeling of many people or at least many people, once you see the marketplace model, you suddenly see it everywhere or you see at least opportunity for it everywhere. So that's really funny because I feel that that that's exactly that's exactly what happened to you.

Andrew Blachman: Yeah. I mean, it takes a few times to get anything anything right.

Sjoerd Handgraaf: Yeah. That's true. Yeah. That's actually because I was I had that written down as a question also. That's kind of an interesting story, like, from how Marketplace Capital came to be, I feel.

Like, could you could you tell us a little bit about that?

Andrew Blachman: Sure. So I was, you know, as I mentioned, a scout at Craft Ventures looking at marketplace deals. I myself had, you know, built a few marketplaces and seen the the power. And if you look historically at just simple metrics like venture returns and some of the largest and most successful IPOs in history. A lot of them, a very large disproportionate number of them are marketplaces.

And so we had this thesis that marketplaces, when they work, they really, really work, and they create this great outcome. But they're also no doubt harder than other businesses, you know, more traditional sort of b to b SaaS or or even direct to consumer business because you gotta get both sides right at once.

Sjoerd Handgraaf: I was gonna if you don't mind yeah. If you don't mind interrupting, but why do you think why do you think it is? I mean, I I I can have some theories, but what exactly makes it harder? Because I think a lot of people underestimate that part of the equation.

Andrew Blachman: I mean, there's a really practical reason that they're harder is because you have more than one customer Mhmm. At any given time. Right? And sometimes you have you have 2 or 3, and and competing those interests and and making everyone happy becomes not just linearly harder, but exponentially harder the more Yeah. Sort of players you put into the mix.

That's, like, one sort of practical reason. But the other more sort of esoteric reason or or the reason I think about is that when marketplaces work, they're really like catching lightning in a bottle. Mhmm. And you end up seeing a natural lift to the business where, you know, more supply begets more demand begets more supply begets more demand. And those are very it's just very, very rare to have that happen in in any business, just to have that natural lift.

Yeah. And that's what makes a good marketplace. That's what turns a good marketplace into a great marketplace. And so from a venture perspective, if you don't have that, you end up having an outcome that doesn't really always support a venture investment. Yeah.

Sjoerd Handgraaf: Sorry. I interrupted your story about, actually, how you came with. Mike. So you you're saying that, like, you both saw that that marketplaces create these incredible outcomes if they work. And then yeah.

Andrew Blachman: Yeah. No. I saw that as an investor and an operator, and then I decided we both kinda decided independently, actually, that we wanted to raise a fund. So, Mike, I don't know if your listeners are familiar, but Mike, my partner, Mike created a community called everything marketplaces.com. So he's a community builder at heart.

He was also an operator before that, but he created this community. Now it has a couple thousand active members that are all marketplace founders of various stages from, you know, just getting started or have an idea to large and thriving marketplaces. And so within this community, he always thought about adding a fund or an investment vehicle to it. I had been inside Craft and and on my own thinking about how should I raise a fund to pursue this strategy. We looked around, and there are a few different funds that kind of focus on marketplaces, that like marketplaces, but there was no fund that was dedicated to marketplaces.

And so we thought there was a big opening in the market, and we thought that the the combination of that focus and the community support could make us really outperform so that the community can help us spot breakout marketplaces early and can also help us support the the companies that we invest in. And so he and I decided to, to team up and launch this, and we we launched it last year the beginning of last year with our first funnel. Yeah. So Yeah. That's kinda how it came to be.

Yeah.

Sjoerd Handgraaf: I know Mike, of course, because the the company that sort of provides this podcast, Sharetribe, he he he built his 1st marketplace. I don't know if this is his first, but I think he built his most successful marketplace on Sharetribe, Studio Time. So so I know him well. And then, of course, I'm also a member of the Everything Marketplace community. So you you mentioned earlier that you share a little bit of a similar thesis or you've you've sort of developed a thesis.

Like, could you maybe explain a little bit more about that, sort of maybe by the hand of, like, what what are you looking for in marketplace or what are the type of marketplaces that usually draw your attention or your your checkbook?

Andrew Blachman: Yeah. It's actually super interesting. We we've looked at our portfolio recently. So just to to give you some perspective on what we do, we invest relatively small amounts in a lot of businesses. So some some venture funds are very concentrated.

We are not concentrated. We've made 21 investments so far in the first kinda year and a half. We expect to make about 40 investments out of this fund. Okay. And so we have a lot of data to look at, like, you know, and we see we see thousands of of companies Yeah.

As you can imagine. So, we do have a very high bar, but we also have a lot of data in terms of the kind of marketplaces that we ended up liking and backing. And it's pretty interesting in that it's not focused on any one sector or even, business model. You know, we've we've got business to business marketplaces. We've got business to consumer marketplaces.

We've got some companies that are sort of in the marketplace stack, we like to call it, so they sell to other marketplaces. Yeah. And so it's been pretty varied. So our thesis is actually much, much simpler, which is that just what I said earlier, that marketplaces, we think, create the winning business model in almost every sector. I mean, for kind of the original promise of the Internet, you're gonna connect people that couldn't have otherwise connected before we brought the world online.

And so that's what marketplaces are. You're gonna connect more than one side in a transaction or some kind of activity, and that exists in business to business, that exists in business to consumer, that exists in health care, that exists in labor, that exists in pretty much every sector. And so that's kind of how our investments have unfolded, actually. We we just believe the model is the one that is right. And, you know, not obviously, not everyone is gonna win, but we we see we think the model is the one that's gonna write.

So that's we look at

Sjoerd Handgraaf: for that model in different

Andrew Blachman: businesses, and we've backed, at this point, 3 different health care related businesses. Okay. A couple of different, like, labor marketplaces, you know, 5 or 6 that are direct to consumer or not direct to consumer, but business to consumer kind of related. Mhmm. We've done a couple in childcare and and sort of education.

Sjoerd Handgraaf: Okay.

Andrew Blachman: We've done a couple of business to business, like, pretty much all across

Sjoerd Handgraaf: the board.

Andrew Blachman: So it's been pretty interesting and part of our thesis too because one of the things that we wanted to do is not just, you know, focus on one thing because you never know as an investor what's gonna come across your desk. So even just the marketplace focus was enough of a filter. Yeah. Inside that focus, we invest in in everything. And, in fact, even geographically, we just made our first investment in Europe this month.

And so we expect to do more globally. Actually, that that company is more in the marketplace stack, I would say. So we've done 2 companies that are in the marketplace. That mean that their customers and partners are all marketplaces. And we have an obvious kind of vantage on that.

And we've talked to a lot of marketplaces, so we can vet we can vet that. But, also Yeah. That's a scenario where we can help those companies more than anything. Yeah. Yeah.

True. Company based in France. They're called Raleigh, and they do they're basically an alternative data source for for credit and other information. So, for example, they work with gig marketplaces like Uber and and DoorDash and others, and they have more data about those Uber drivers than anyone else. And then that that they can also leverage data from other alternative sources like government portals and other pieces to help underwrite financial products for those customers.

So

Sjoerd Handgraaf: That's a really interesting model. Yeah.

Andrew Blachman: Yeah. And they're they're growing really quickly, and we've known them for a bit. And and it was a super, yeah, exciting investment for us. That that one was just closed.

Sjoerd Handgraaf: Yeah. Congratulations. Our

Andrew Blachman: first non our first non US

Sjoerd Handgraaf: Ah, that's good news. But we expect to do more. Yeah. Our company is Europe folk. Well, not actually.

The the majority is scheduled customer. The vast majority is US, but but there's I can see, for example, the marketplace conference where we met also. I think there's lots of lots of lots of interesting opportunities in Europe as well. So really nice to hear. So basically, you said, just to recap, like, you you just sort of believe in the model and then it can be applied to any industry or or particular field.

Yeah.

Andrew Blachman: We do have, like, various patterns and things that we've seen. So we do Yeah.

Sjoerd Handgraaf: Yeah. That was gonna be

Andrew Blachman: my question. We have different theses, but it but they're they're different in different sectors. So, for example, one pattern that we've seen, and it it probably doesn't come as a surprise to a lot of folks, but there's just been a big change in the way people work over the last, you know, 5 years since the pandemic. But even before that has been this big change in the way people work, More people working independently and wanting sort of control of their own lifestyles and who they work for. They don't wanna work for, you know, one company or even, you know, a couple companies.

They want total flexibility. So that's given rise to a bunch of different marketplaces that we've seen and and invested in. We are an investor in a company called Berry Street that's a marketplace for dietitians, and that's they're growing incredibly quickly and because they're they're creating this ability for dietitians to launch a business and actually run their own business on the platform. We're an investor in a company called Teach Me, which is a marketplace for, sort of amateur lessons in various categories of of sports, you know, pickleball and golf and tennis. And so they're creating a new sort of revenue stream for these coaches or, I guess, you call them instructors, but they but they weren't previously instructors.

They're they're basically creating this new supply. And we're seeing that in a bunch of different sectors. So that general concept of, like, labor changing has been a big theme that we've seen kind of repeatedly.

Sjoerd Handgraaf: Yeah. Yeah. That makes that that makes sense. If you can do, like, this whole, like, indeed, like, change of labor and then people no longer following, like, a linear career and and and, like, that is that creates massive opportunities. So I I can totally see that.

When you say, like, of course, like It does. You know, you you you look to to health care and and, and things you mentioned now. Like, is there still some sort of, like, let's call them, like, green lights that you look for in a marketplace that, like like, oh, this is like, for example, I really like that you said about the instructor marketplace that basically that is, you know, it's kinda like a market creator kind of thing where, like, that market doesn't really exist. Is is that, for example, one that you're like, oh, that is, you know, like, the the most famous example is, like, Airbnb where, basically, you know, like, the supply side didn't exist before. Like, people didn't rent out their room or something.

So is that one?

Andrew Blachman: Exactly right. I mean, it's funny that you mentioned that one because that is probably, like, the most important Okay. That I look for personally. We have sort of, like, a, you know, a checklist. Like, there's a I wouldn't say we go through the checklist with each investment, but there are checklists out there.

And for

Sjoerd Handgraaf: those

Andrew Blachman: of you listening, you know, to the podcast, you can see some of the content that's been put together there around you wanna see, you know, fragmentation on both sides of the marketplace. You wanna see liquidity. There's all these things you wanna see. But for us, I think you hit the nail on the head. Like, the biggest difference between, like, incredibly great marketplaces and good marketplaces or okay marketplaces is if you're actually creating an entirely new experience that couldn't have existed before.

Either you're unlocking new supply that never could have existed before that marketplace, or you're somehow, like, enabling a connection that never could have happened on the demand side. So, you know, one example, you mentioned Airbnb. I'm actually working with and advising a company. This is actually not in our portfolio because they're a little bit ahead. Yeah.

They're further along than our portfolio. They're a series c

Sjoerd Handgraaf: sort of

Andrew Blachman: stage company. But I'm working with a company that I'm incredibly excited about, called Padsplit. And they're a marketplace where they do exact kinda what the name says, Padsplit. You can imagine what they do. They're basically a co living marketplace.

So they take single family homes, and they allow that owner of that single family home to rent out that home by their rooms instead of the home at once. And so they have a whole platform where they help that owner, you know, reconfigure their house to be, you know, suitable for pad split, and they have, you know, shared kitchens and and bathrooms, and some of them are are private. They have the whole thing set up so that they can turn a single family home into 6 or 7 or 8 units. So before they existed, that inventory wasn't there. It was only single family home where you could get together with people that you didn't really know and and pull in and and find a way to access it.

But because they've unlocked it, they've become the cheapest and most affordable housing option in every market that they're in. And so, you know, they're still relatively early, they but they already have, you know, over 10,000 units that are live in the US. And to me, I'm excited about it too because it's it has the potential to it's not the the silver bullet solution, but it's part of the solution to a lot of the housing, affordable

Sjoerd Handgraaf: Totally. Yeah.

Andrew Blachman: Problems we have. And, you know, it's a it's a very interesting marketplace that if it works and it's starting to work, has that elements of a flywheel where because they'll as they get more supply in a given market, it's a better proposition for that potential renter because they can actually move from house to house if they need to, and they have more selection. And then as it's more selection, more investors want to come in and and actually invest in and build these units out. And so Yeah. It's super interesting.

But it's, again, it's not in our portfolio. It's just one that I happen to have met and I'm working.

Sjoerd Handgraaf: Yeah. No. This is a really interesting one. I was actually thinking that, like, I'm the this is one of these things also that I'm sure you come across this as well that you're like, how didn't I think of this before? Because basically, what you're describing, like, I I I'm from Amsterdam originally, and that is how most people get their first, like, like because in Amsterdam, the housing problem has been alarming and permanent somehow.

And that is how people get their first, you know, student room out of the house. It's always some sort of or not always, but it's often like some split, like some some person who owns their house and then splits it out. But it's never been possible to I know there's or there have been early marketplace models around it, but it's never really, yeah, never really took office for what I can remember. That's really cool. That's really cool.

You mentioned earlier, like, you're looking for the difference between, like, a good and a and a great marketplace. Like, how do you and actually maybe good to mention that you if I'm not mistaken, please correct me if I'm wrong, but your marketplace capital is really about early stage marketplace. Right? Like like seed.

Andrew Blachman: Yeah. We invest at the seed, sometimes the pre seed stage. But the thing that's nice about investing today versus, like, investing, you know, 10 years ago Mhmm. Or even 5 years ago, is even at the seed stage, expectations are a lot higher. So even the seed stage companies that we look at typically have real GMV, real revenue, real customers, even cohorts that you can look at and understand their behavior just because of tools like things like you've built to make it easier than ever to launch and to get traction without a lot of capital.

And so even at the stage that we're investing, we tend to see signals that something is going to be something is working. We've done a couple of of investment purely, like, we love the idea. We love the founder. Mhmm. And we think there's a a chance here, but it's not even live yet or there's something like, it's just super early.

Yeah. We've done that a couple of times, but we but we try not to because it's just so hard to predict.

Sjoerd Handgraaf: Yeah. Because exactly. Because yeah.

Andrew Blachman: We we prefer to see some real some real

Sjoerd Handgraaf: traction. Yeah. Because that was going to be my question indeed. Like, how do you see that this flywheel is taking off if it's so early in the journey? But but, of course, like you said, like, there's

Andrew Blachman: When we have a a a larger fund and a larger, you know, pool of capital, we probably will go later stage as well because I think that this stuff does play out over time. Yeah. It is sometimes hard to see early, early on. And, again, we believe that the winners in marketplace the other reason why marketplaces create these enormous outcomes is because the winners tend to take most. Yeah.

Doesn't necessarily mean that there's one winner in a marketplace. We don't believe that you can't be, like, the number 2 or number 3, but it's way better to be the number 1.

Sjoerd Handgraaf: Yeah. Yeah. Yeah.

Andrew Blachman: Yeah. And we've seen that over and over again. Sometimes even at the seed or series, it's just hard to predict which who's gonna win. And we have a bit of an advantage with the community so we can spot things. I think, ultimately, we we expect to go later as well.

Sjoerd Handgraaf: Yeah. No. It makes sense. So you mentioned you you were thinking about going, jumping into later stage. I assume that's not gonna happen with the same fund.

Andrew Blachman: That's right. This first fund is is a we've been public about this. And, actually, if you go to our website, obsessed with marketplaces.com, which is I love that.

Sjoerd Handgraaf: Same. Yeah. That's our website in Europe.

Andrew Blachman: It's also mark marketplace dot capital. You also will find the same site. But we have a founder's manual that sort of describes what we do and or how we do it. But we invest exclusively in sort of early stage marketplaces today because it's a it's a $10,000,000 fund. We write checks average between $100,250,000, so relatively small checks.

We don't lead rounds. We invest alongside other institutional leads. Mhmm. But we are also we're about halfway through this fund, and we're planning sometime in 2025 to start fundraising for fund 2, which would be sometime in 2026. And for us, fund 2 is just based on the success that we're seeing with fund 1 and the the ability to do this at a little bit of a bigger scale.

We still think that we want to not be a lead investor typically because, again, we're we're spread pretty thin across our portfolio. So we will do, you know, we will do continue to do c and pre c, but we might also do, you know, a's and b's with that fund since we'll have more capital, more more firepower at our disposal. And so the first fund is looking really good. I mean, it's it's early. These funds are 10 year funds.

And so we're in year 2. We've had, you know, 4 or 5 of our portfolio marked up in in in really great rounds. And so we're excited about that, but it's very, very early to Yeah. Yeah. Yeah.

To to see But

Sjoerd Handgraaf: anyway, that's a better way to get into the next fundraising with a couple marked up at least. Yeah. Congratulations. When you think about, like, the market and, like or when you think about, like, marketplaces that are sort of in innovative, do you see any sort of interesting monetization models? Or do you see, like, still sort of commission takes most or, like, most still work on commission?

Or do you see because you mentioned earlier for because of for example, I I forgot the name of the company, you invested in, but it has this, yeah, Raleigh, which is, like, I've seen a lot recently also, like, with different financing players coming in and, like, making new. So what is your view on that?

Andrew Blachman: We've seen a lot of different monetization models, and they can really run the gamut. I mean, we we do like to when it's if it's a pure marketplace, we like to invest. I mean, this is probably the most the clearest thing. We wanna make sure that marketplace is involved in the flow of funds, and they're not just like a a lead generation type business just because it's much harder to build lasting value in in the lead generation businesses. So we do wanna see that you're in in that flow of funds and the customers interacting directly with you and you're paying out, you know, suppliers.

And we think that makes, you know, a ton of sense. But we've also seen a lot of these marketplaces that have been able to sell a product that's really valuable on one side of the marketplace as a, you know, sort of a wedge or a stickiness or a way to build out supply, for example. So those are, like, what we'd call sort of SaaS enabled marketplaces where they have some sort of software product that one side of the marketplace is paying them for. Sometimes they're giving it away for free as a way to, you know, enable transaction. But typically, you know, one side is paying for it.

We've seen that. I think that makes a lot of sense. And we have seen, you know, you mentioned financial products or other services that are layered on top of the marketplace. I think that also makes sense, but tends to be most effective when you're at sort of scale and you have, you know, an audience that that it it's meaningful for because those things rely on usually, like, you're in a better position to have data and you can support it. But this idea of, like, SaaS enabled marketplace is one that we really do believe makes a lot of sense.

And we have invested a few times in that where basically the SaaS was like what the business started as. But because they're have this great compelling SaaS product, there's an opportunity to launch a marketplace on top of it. It's not always like fully thought through that we're going to be a marketplace, but sometimes it's, well, we have this side. How do we like, what's the next step to, to make ourselves, you know, really indispensable? And if you build a marketplace on top of that, that it's phenomenal.

Sjoerd Handgraaf: Yeah. Yeah. Like, I was gonna say, like, classic, like, comfort the tools, stay with the network type of approach. But indeed, like, it's surprisingly often and then after a fall. When you imagine, for example, maybe in the light of the pitch for for the next fall, like, what what do you see?

What gets you excited, like, in the marketplace area still?

Andrew Blachman: I guess there's 2 main things that get me excited. 1 is and this is sort of a reaction to some of the feedback we get, which is, like, oh, aren't aren't all the good marketplace ideas taken? Mhmm. Like, you know, like, isn't it too late to invest in the market? We hear that all the time, and I think it's kind of funny because all you have to do is just, like, think about your own personal life every day, but also the businesses that you're involved in every day and how much inefficiency there is in in the world of of commerce Yeah.

And just finding the, you know, the right partner or customer or supplier or whatever it might be. And so we just think it's still early days in in terms of taking that inefficiency out, creating marketplaces that actually help you find that unique person on this planet of 8,000,000,000 people that can solve your problem. And the Internet promises that. And so so we basically, like, that's the the biggest reason we're excited is we think it's still very, very early days in in marketplaces. We think they will take over every single industry and category, at some some point.

So that's, like, the very broad

Sjoerd Handgraaf: Oh, that's cool.

Andrew Blachman: Pie in the sky thing. But I think in terms of, like, actual practical things, a lot of people point to AI and the impact of artificial intelligence on all of these different, you know, use cases and business models. For us, I think it's gonna be a phenomenal thing for marketplaces because AI can transform the experience on marketplaces and can make things possible that never could have been possible before, whether it's, you know, digesting a bunch of information, enabling lots of communication back and forth, but sort of all these labor intensive processes that you couldn't have imagined before, but AI cannot importantly, AI cannot replace the customer relationships. And that's what makes a marketplace really, really powerful and and building that place for liquidity, that place that distributes to customers and distributes to suppliers. That's the real value of the marketplace is the network.

Mhmm. So both from a positive and a defensible point, I'm super excited about AI because I see opportunities all the time where this marketplace that existed in, you know, 5 years ago has a really bad experience, but not today with AI could have a phenomenal experience. Yet if they, if it works, it's not like the another one can come along day 2 and just build a better mousetrap because it's the network that makes it possible. So we've seen a few of those those examples. I'm not sure who's gonna win in some of these things.

No. It's like one of those scenarios you active you asked about earlier. Well, how do you know who to invest in? We don't really always know. But one area as an example of this, just to make it more concrete is I've looked at a bunch of companies in the home services space.

You know, we've had, in the past 10 years, you know, explosion of marketplaces like, you know, Yelp, Thumbtack, Manage List, and HomeAdvisor, all these marketplaces because home services is a huge category. But if you look at every one of those marketplaces, and they all do a good job, you know, they connect people and they're a good marketing platform, but they all have very poor customer experiences, or you can see it in the Net Promoter Scores. Like, people don't like it on either side, on the supply side and on the demand side, because it's such a hard problem to solve.

Sjoerd Handgraaf: It is. It is. Yeah.

Andrew Blachman: But if you think about and we've seen this pitch, so I'm not advocating to go someone to go and build this because we've seen this pitch a bunch of times where AI can solve a lot of this because AI can help you diagnose. Let's just use a a Yeah. Example of something in your house. AI can help you, you know, diagnose what the problem is, find the best potential vendor, communicate with that vendor back and forth, figure out what it's gonna take to fix the problem, and then just basically provide you with a solution. Yeah.

And then on the vendor side, AI can make it so that you're not dealing with, like, a 100 different window shoppers that wanna talk to you and waste your time about about potential jobs, but actually just hire someone. Yep. We've seen that pitch. It makes sense, but the the problem with this business or the hard part about this business is gonna be distribution to both sides. And so we think if someone cracks it and someone gets, like, you know, that flywheel going and and or wins this market, that's a potential to be an enormous market place.

Yeah. And I don't know who's gonna do it yet. We've seen, like, 5 or 6 of these pitches. Yeah. Yeah.

Yeah. I'm waiting for someone to do really well at this, and and we've got to back them when they do.

Sjoerd Handgraaf: Yeah. That's a really interesting one actually because I've just been recently thinking about this. I'm going a bit off track now, but what we've earlier said, I think I got this from, Matthias Oakenfels from from Speedinvest some years ago. He said, like, marketplaces, they bring, transparency, efficiency, and trust, like, to a thing. And and I've been thinking about for something I don't remember where I got this idea, but they're all, like, they're three forms of basically information asymmetry.

Like, one side, like, there's information asymmetry between the sides of the market. And I think that is something that, like, AI is so well set to do. Right? To take that information from both sides and somehow equalize that the symmetry, like, whether that is the amount of vendors that is available or whether the price is is reasonable. And on the other side, like, what you always said, because that's why I don't often think about supplies about that, like, for a plumber service, provide the actual information that is needed so that when that person comes on the job knows that that's the job they signed up for and not a totally different job.

Yeah.

Andrew Blachman: It happens in so many different categories where you don't even think about it today because it's just the way it is. It's just it's just the status quo. But you spend as even as as a consumer, certainly as a in business as well, but as a consumer, you spend so much time and effort doing research Yeah. That you don't have to do theoretically if you trusted a platform that was doing that research for you. And there are cases where you want full transparency and you wanna make, like, decisions.

You know, you wanna read a ton of reviews and figure things out. But a lot of times, you don't, actually. You just want product that works. And so, you know, Uber is a great example. You don't really wanna, like, choose your driver.

You just wanna know that the driver is great and gonna show up on time and then gonna take you where you need to go. And so we think that that's true in a lot of different bases as well. But even as you get to the things that you want more sort of control over, more choice, hey, I can do that for you. If you're like, I really wanna go on, like, the, you know, vacation. This is, like, the kind of stuff I'm interested in.

This is my family. Like, it's hard to do that with a marketplace, but it's much easier to do that with some kind of AI agent that's actually acting on your behalf and helping you figure out and digest information that's out there so you don't you don't have to have to do it all yourself. No. And I I've seen that happening in in different sectors. I mean, it's you know, this is all, like, easier said than found,

Sjoerd Handgraaf: but I

Andrew Blachman: I I believe it's gonna happen. I believe the marketplace winners of tomorrow are not necessarily the ones of today. A lot of it comes down to the fact that, you know, they've built their business model, how they've built it. So I Mhmm. Take the home service as an example.

I think it's unlikely that the Yelps or Thumbtacks or Angie's List of the world are gonna be, like, the winners in AI. I could be wrong about this. There's there's people that feel the opposite, that AI is gonna just, like, force all the gains to the current winners. I actually don't agree, but we'll see. It certainly creates an opening to have a compelling problem.

Yeah.

Sjoerd Handgraaf: I can see both ways. Like, what also referring to what you said earlier. That's sort of the important part is still the network, and, of course, the incumbents often have the network. Right? Like, they have that asset already.

So I can see both ways. Yeah.

Andrew Blachman: That's the counterargument to what I've seen. Totally. Totally.

Sjoerd Handgraaf: But I but I But you have to choose. Yeah. Yeah.

Andrew Blachman: Yeah. I've been in enough big companies. In fact, most relevantly, like, you know, at Ticketmaster, we were we had all the distribution. Yeah. For business model reasons, we couldn't compete with, you know, the likes of StubHub.

Yeah. And now I'm also an investor in a company called SeatGe. Yeah.

Sjoerd Handgraaf: Yeah. I know SeatGe.

Andrew Blachman: We couldn't compete with those those businesses, not because we didn't have the distribution scale, but because we just Too big. We were beholden to our customers and to our business model. And so I think the same thing is true in a lot of other categories. And it takes, you know, a very long time to shift those behaviors, and it creates big opportunities for upstarts to come in and and do all that.

Sjoerd Handgraaf: I believe that. Last question, speaking about the marketplace of tomorrow, what advice would you have for a new marketplace founder, you know, very early stage pre product product? Like, what what is the number one thing that you think, like, this is what they should be thinking about or what they should be doing or even should not be doing?

Andrew Blachman: What I hear the most about because I'm an avid investor. I'm sitting in, like, the venture capitalist seat. I get and most people come to me trying to, you know, obviously raise capital. I would say that as speaking directly to, like, a a founder before they've raised money, trying to figure out what to do, I think, like, the venture capital route is absolutely not for every business. And so I would, if I, as a founder, try to sort of preserve as much optionality as as possible and try to prove out whatever marketplace value proposition you you're trying to build before you go and raise money.

And so that might be faking the supply side of it or or or doing something to validate just that there's a con the demand side of it without actually having to build the supplies I have or vice versa because I've seen companies that their goal is basically to raise money. And if you if your goal is to raise money, you you might be successful. Yeah. It'll raise money for something that you probably shouldn't or didn't need to raise money for. And so that's just like a very high level advice I get to not just to marketplace founders, but to any founder.

And my own personal lived experience, like, I've my my biggest success came from a company that we never raised venture money for. And I've also been companies where we've raised, you know, not 100 of 1,000,000, but, like, dozens of I guess, we in my last company, we raised 65,000,000 and ultimately had no good outcome for anyone. And so I feel like that's one piece of advice. In terms of marketplace specific, I think, again, trying to boil down that problem to one that you can accomplish without capital is part of the exercise. Like, how do you get the supply side without spending money?

How do you focus on enough of a narrow wedge? Maybe it's, like, if you're building, like, a local marketplace, how do you, like, tackle one neighborhood or one Yeah. One postcode or one geography? Those are, you know, some of the practical things we we tell people. Yeah.

But, generally, it's try to build a great business without capital. Yeah. That's that's the ultimate success.

Sjoerd Handgraaf: I think that's fantastic advice. Thanks. I think that is often overlooked. I think a lot of the startup advice that we hear is always somehow drenched in venture capital because those are just the biggest outcomes often, but I agree that that that probably does not apply to most businesses even, like, most marketplace business even. There might be just a few.

And

Andrew Blachman: Yeah. And it's also a reality that it's been easier historically, you know. Over the period that we're in, there was a crazy period where it was easier to raise capital than it is today. So capital raising, I think, for which is very good for everybody, for both investors and for the companies. It's very good, and it's much a much higher barter with capital today.

It's it's a it's a great thing because, again, the the worst scenario is for both an investor and for, an entrepreneur is to raise money for a company that doesn't need or Yeah.

Sjoerd Handgraaf: I can make it.

Andrew Blachman: Return that capital. And so that's one piece of advice. But the funniest thing is that's the hardest advice for people to hear. Again, it's really strange to me because it's it's it's not self serving at all. I as a venture capitalist, I want people to wanna raise money, but that tends to be what we say is that I don't know if you really need to raise capital for this.

The flip side is that when something is working, again, as I mentioned, marketplaces, I think AI makes a lot of things cheaper and more efficient, and there's been a bunch of advent advances, make it easier to build. Distribution is still the hardest part of any business. So if you can raise capital to pour fuel on on a fire that's already starting to burn, that's fantastic, and that's where we wanna spend our time.

Sjoerd Handgraaf: And then they should go to obsessed with marketplaces.com.

Andrew Blachman: Yeah. And the and the other beauty of our funded business is that, you know, we support companies even if we don't invest. And that's every every fund might say that, but for us, it's actually true because of the community. So you're in the community. We encourage everyone to join the community.

There's a ton of activity there, and, you know, we we're there to help in ways that we can. It's probably not gonna be Mike or I directly, but we know someone in the community that can help with any problem that any marketplace is is dealing with.

Sjoerd Handgraaf: Yeah. Absolutely. Check it out at, everything marketplace.com. And was it obsessed with marketplace.com? Obsessed with marketplaces.com or

Andrew Blachman: simpler marketplace.capital.

Sjoerd Handgraaf: Alright. Henry, thank you very much for your time. This was a pleasure from my side, and see you next time. Thank you for listening to 2 sided, the marketplace podcast. If you enjoyed this episode, don't forget to subscribe.

And if you really liked it, please give us a rating or a review on Spotify, Apple Podcasts or wherever fine podcasts are downloaded. If you got inspired to build your own marketplace, go visit www.sharetribe.com. It's the fastest way to to build a successful online marketplace business.