Should I build my idea as a marketplace?
Want the short version? Probably not... But let's go into it in a little more detail.
I’m getting a few messages here and there about people starting to build a marketplace. We’ve talked a ton before about the chicken-and-egg problem, and how to overcome it. But if you can prevent yourself from running into this issue in the first place, maybe you should?
I’m not the best example of all of this. When I started to build MentorCruise, I did so with the marketplace model in mind from the start. I knew that I needed to get mentors, and then I needed to get mentees, and I needed to pair them, and also pay the mentors, and have systems to settle disputes… and which side would I need to market to first? How can I attract mentors?
I was in the classical two-sided clinch, and I was lucky enough that I got out of it. Time to look back, and see how I could have done better.
If I’d be in the same situation again, I’d look at the problem first and see how I can generate a one-sided solution. The initial problem has been that people need someone to help them with their studies. They’d be in their online courses or learning to code on their own, and then got stuck. Time to look for a mentor.
What I could’ve done to kickstart my mentorship program was to hand-select 3-4 mentors with expertise in different technologies, and matched all mentees with one of them. The mentees would still get the personal mentorship, but it would all be much more straightforward. As I am building a base of mentees, I can scale up the mentorship team until it forms a marketplace.
If you are looking to build a marketplace, think about whether you can start with one side at first. Recently, I was talking with an amazing mentee from Brazil (shoutout if you are subscribed) about their local sharing platform. They were building a high-fidelity marketplace of people renting out electronics, games and gaming equipment locally. Instead of going for a full marketplace, we decided to seed it with about 60 items that this mentee and a few of their friends were able to scramble together. They figured out funnels that worked for the renters and got their first booking about two weeks down the line from running local Facebook ads. Time to scale up!
When should you build a marketplace?
If you look at my past, you might ask yourself why MentorCruise worked out nevertheless. I think there is one specific situation where building a marketplace is the way to go: If you can leverage network effects from day one.
Truth is, for most marketplaces that won’t be possible. Airbnb started with renting out airbeds, no need to productize the side of landlords/renters. Uber was an SMS-powered cab service, no need to productize the driver signup. MentorCruise, on the other hand, is a platform where you can book experts on a longterm basis – if those experts share that they are available on the platform, that will create network effects.
That’s why a marketplace has worked well for me, but wouldn’t work for a local sharing service, for example. If people share with their friends that they are renting out their FIFA game, it’s not very powerful. If an influencer with 5,000,000 followers shares that they are available to be booked for a Cameo, that’s incredibly powerful.
Always keep in mind: Marketplaces are a vehicle to build network effects and scale. If you have neither of those, a marketplace is not a good pick yet. If you have one (e.g. only network effects), you’re fighting an uphill battle, but one that you can win. If you have both of them, you’re off to the moon :)
I have opened up a limited amount of spots every week to discuss marketplaces and your issues with it over on my mentorship platform. If you’d like to chat with me, grab a spot.