Marketplaces · Bootstrapping

Chicken or the egg with two-sided marketplaces?

Philip Welber

February 18th, 2015

My company brings together specific people and employers who are desperately looking for said people. Do I try and sign up the people or the employers (clients) first? Or do I try and get both at the same time pedaling just a promise and an idea? There are many more people than employers in this situation.
As a founder, you’re always in fundraising mode (whether active or passive). In this course, we’ll teach you how to successfully raise follow-on capital, establish a valuation for your company, build an investor pipeline for your next round, and more.

Benjamin Olding Co-founder, Board Member at Jana

February 19th, 2015

Two sided market places are appealing because - at scale - they are hard to disrupt.  Rarely are they easy to build (i.e. there's no secret or piece of advice that's going to help too much, other than embrace the mindset this will be hard work for a while: you can't just launch a web product and wait for magic to occur - you need to work hard at business development).

Google, Facebook & LinkedIn are audience models that grew so large that parts of them are effectively two-sided market places (well, I'm being generous towards Facebook, but Google's ads and LinkedIn's jobs are sometimes what I'm looking for).  This can be an easier approach to scale, though it requires content that appeals to your audience and investment to pay for the content prior to the revenue strategy.

eBay, Uber and AirBnB are true 2-sided marketplace examples. eBay focused on power sellers - people who could list a lot of items quickly.  I'm not familiar enough with Uber, but they've clearly focused geographically.  Same, I believe, with AirBnB.

I agree with everyone who tells you to start by focusing on a niche to build both sides at small scale yet high saturation, but I'll add this dimension for you to think about: pick the focus such that it becomes possible to get to 50% of that tiny niche in a purely manual fashion.  In other words, restrict your business down until a couple people with phones, email addresses, spreadsheets and a willingness to hustle can get you real traction.  If you restricted yourself to just NYC, for example, could you meet all the players in person in a year?  Or should you restrict it to a specific type of job - could you find everyone online who has that specific job title?

Choose the focus to try to make your life easier - the task is hard enough to begin with.  If you can get things rolling, you can look to add another niche to expand to.  However, if you are thinking you'll focus on one side of the market and then deal with the other later, you have an audience business model like Facebook, not a 2-sided market like Uber.  Make sure you have real, sticky content like Facebook in that case.  For Uber, the other side of the marketplace *is* the content...  without it, "focusing" on just one side isn't going to help much.

Ben Sweat Director, Product at Idealab

February 18th, 2015

Ideally both. But one approach you could consider is making it more of a signup on a waiting list or something equivalent. That way there isn't an expectation of having a good experience yet and they aren't aware of your real numbers. But other than that you probably want to build in a balanced way, which I think is the most sustainable path. Sent from my iPhone

Anonymous

February 18th, 2015

I just went thru this with http://HighTech.Careers and what I did was connect with 10,000 developers in a very passive way, I kept connected with them as I built the product.

I then started connecting with HR Managers and Recruiters, this was the long leg of the pole for me.

It was pretty simple getting the talent side lined up, the employer side is still becoming tricky.

I made the decision to go this way because I have passive talent and the idea was to present to employers that I had a list of people ready to view jobs, not a system that allows talent to be searched (There are patents on this side to be aware of).

Once I rolled it out I had Jobs listed and people could view the jobs, if I had people and no jobs to view I was concerned that the people would leave, its like a dating app without the opposite sex, makes a boring app - kinda like I worked on last year :)

Now I have thousands on the talent side but only a few hundred on the provider side.

Michael Barnathan

February 18th, 2015

Trying to fill both sides of a two sided market simultaneously is a recipe for failure. Try seeding one side and bringing the other on with that seeded content, or find a compelling one sided offering to retain the initial population you need.

Steve Simitzis Founder and CEO at Treat

February 18th, 2015

You have to "make chickens". If you have a two-sided marketplace, figure out which side represents supply and which represents demand. Create just enough of the supply side (either fake it or pay people) so the demand side feels satisfied by your offering. If your offering is good, buyers will spread the word, which will lead suppliers to flock to where the buyers are going. Then the ball is rolling.

Andrew Lockley

March 20th, 2015

An alternative strategy is to approach a smaller market initially, eg antique military toys not antiques

Sanjay Choudhary

February 18th, 2015

I would suggest you get the candidates database built up first . If it's a niche industry and you have the right "said" people employer will pay good for your services . If you just sell the idea of getting good candidates and try to get the client on board you may not get very far. All the best . Regards Sanjay

Ben Sweat Director, Product at Idealab

February 18th, 2015

Here's another perspective from Andrew Chen that I think is relevant: http://andrewchen.co/how-to-solve-the-cold-start-problem-for-social-products/

Anonymous

February 18th, 2015

Your business model should dictate the answer.  Basically you start with what is more in demand. Bigger shortage of somethings (or skills or employment)  leads to bigger demand ...

Rob G

February 18th, 2015

both.  it is worth the effort to try to come up with a model to add both simultaneously. Whether that is focusing on a niche (i.e. Facebook focusing on college students one school at a time) or offering mutual incentives for both or a method to add one side of the equation in large batches (colleges in a limited geography or real estate agents in a certain geography, etc.) that can then attract complimentary groups or individuals.