The Difficulty of Initially Launching a Marketplace Startup

Richard Davis Ex Equity Research Analyst, Current Founder of Gamer Hustle

September 29th, 2018

After several months, 12-14 hour days, 7 days a week of development I was relieved to begin marketing my new marketplace startup. Boy was I in for a new uphill battle!

We just soft launched our second version of the platform we created a few days ago and gaining initial traction with a marketplace startup is no joke. One user base needs more of the other to join while those who take the risk express their distaste that there is not more activity, even when being honest about the platform being new.

I wanted to reach out to those who have created a startup requiring the interaction of two user bases and see your methods of gaining initial traction.

Did you just plow through the cold emails knowing first users would be disappointed until you reached a level of liquidity? I'm trying to be as hands on as possible adding value to both sides while we gain users but it's still very difficult. It's only been three days since we our new version has been out. Those who have signed up love the concept but this liquidity issue is such a massive wall.

I'd love any feedback from those who have gone through the ropes with gaining initial traction of their marketplace startup.

Dane Madsen Organizational and Operational Strategy Consultant

October 2nd, 2018

Marketplaces are significant opportunities because, if they succeed, they are hard to disrupt for the reason you are encountering. You have to build both sides quickly and effectively. If you are are in the B2C version with an app, you really have three groups you have to manage; sellers, buyers with the app, and buyers without the app, all that must be segmented well.

You do not identify your space so it is difficult to provide insight. If you are in a B2B, the approach will be different than B2B2C or B2C, or worse, B2G.

If you are B2B, get involved with every Linked In group pertaining to that segment. Articulate the advantages for each side well, let them know you are "in beta" so their expectations are lowered, You must have a aggressive plan of seller acquisition (call centers are good for this, with well defined scripts) and likely will be based on your rate card price but at 100% discount for the first year. They need to not be focused on ROI while you build use. You need to have a well understood CAC for this to work and enough funding to get to traction. For users, you need useful content and updates, targeting users in the easiest segment for you to fulfill. For example, if you are an industrial parts marketplace and you have etter seller adoption in bearings, focus you first user acquisition on that segment, not saw coatings and sealers. As you get unfilled demand, use that to entice new sellers showing them you have opportunities. Encourage users to communicate what they are looking for so you can use these requests to aggregate more supply.

Whatever you do, spray and pray is not a good plan, so refine your targets and support both. Do not confuse emails with prospecting. Open rates and sell through are so low, if this is your only plan, you need a new plan. This is not going to be cheap or easy; but done right, it is worth it.

Ami Asadi Product Manager @ Collaborative Visionz , Co-Founder of Maktub, BOD of

Last updated on October 7th, 2018

You have all the problems of a double-sided marketplace, you are not the first and you will not the last.It's all about breaking the chicken and egg situation and it always breaks when you push both sides as hard as possible.

I've done this for my audiobook company: I went to the best seller publisher of all time (you have to go to the best of them) and tried to persuade them that it has no costs for them and it will add a revenue stream to their revenue and I am putting marketing manpower and money instead of them, they did not listen for the first times but I hustled and hustled and I promised crazy KPIs that I myself didn't think I could hit at the time (which magically/eventually we did) and they signed a very a good contract and we could populate the content side and got their contract and put it in front of the other publishers and told them your daddy is signing this why don't you.

And on the other side you have to stick with the promising early adapters, eat with them, sleep with them :)) just make it rain in a way that they could sell your product because the publishers at the end care about the revenue and your creators are your sellers so make the product as market fit as possible for them in order to make them be able to bring you that money.

At the end, I get you, it is hard at the beginning but hustling and customer development act like an avalanche, they will be solved sooner than you expect but here will come another challenges which are much harder but then you figured out the game more and you will beat them eventually.

Wish you the best of luck.

Paul Garcia marketing exec & business advisor

January 11th, 2019

Thanks Richard Davis for providing an update. So few people do. I read the first part and cringed at "very cool features" but relaxed a little when I read "partners." Remember that customers never buy a product for it's features. They buy for its benefits. There's a big difference between the two. If you're busy developing features, STOP. Concentrate all your effort on developing VALUE. There are three elements to persuading people to use your marketplace: 1) personal benefit, 2) dramatic difference, 3) reason to believe, in that order.

If you cannot communicate the benefit of using your marketplace, it will continuously struggle to add users. Dramatic is not 20% over alternatives, it's 50%+ difference over alternatives. People do not switch for small differences like 20%, nor do they even notice small incentives like 20% (which is why Bed Bath & Beyond perpetually uses that 20% coupon to little effect). Reason to believe is the easiest for most companies, and it sounds like your partner marketing will only reinforce this area.

Go back and look at the BENEFITS before you kill yourself with marketing that doesn't matter. And congratulations on getting this far.

Richard Davis Ex Equity Research Analyst, Current Founder of Gamer Hustle

Last updated on October 2nd, 2018

Dane, thanks for the response. Maybe it is advantageous to detail what exactly our startup does as it's quite different from a traditional marketplace.

In a nutshell, we connect indie game developers and publishers with gaming content creators on Twitch and YouTube to send game keys, automatically detect game coverage on YouTube and Twitch, and give the content creators the ability to sell the game and earn 10% of the sale.

This solves many major problems indie developers and publishers have. They receive hundreds of requests to get free game keys from "influencers", most of whom are bots or fakes in an attempt to get a free game key. So publishers spend hours upon hours going through their emails, then have to go to all of the channels the "influencer" noted in the email to verify they're real, then painstakingly keep track of videos made about their game (which is not feasible at all).

Our platform verifies all of the creators, and display all of the game key requests to the developers so they can quickly send out keys. Our software automatically detects when a creator who has received a key plays the game and also makes a video. We display all of a developers game coverage from creators and a ton of analytics to show how much reach their influencers are achieving for them.

Now there are incumbents but many major issues with them. We worked hand-in-hand with several developers to solve the issues and then extended the functionality to allow developers to search for creators an a plethora of criteria, message them directly, and have influencers sell their game. The developer keeps 85% of the sale compared to 70% by selling on Steam.

We do have several developers on the platform but most haven't launched their game yet. We have two games going live this Friday which is really a breath of fresh air. I didn't want to waste time getting creators on the platform as they are a major source of demand from the publishers.

So our softlaunch marketing plan has been simple, cold email the creators, let them know we're a new startup, and ask for their feedback regarding the platform. They all love the concept and conversion rates from the emails have been 10% but then they express their distaste as there are no games.

The developers I'm speaking with, when I'm even able to get a hold of them, agree this solves their problem but considering our infancy, they are timid to add their game.

I know where these specific users spend their time, I just haven't wanted to broadcast our company in a big way like that yet. It's very easy to get on a blacklist in this sector and our goal is really to add as much value to both sides. We're ardent gamers at our startup and have been working with gaming content creators for several years.

Marketplaces are absolutely brutal. I hope this provides context.

Cy Talladen Cofounder, programmer

October 3rd, 2018

Interesting to see a few teams doing marketplace startups! Yeah two or more user bases including potential third party market players certainly makes things complex in a compounding effect. The way I see it the complexity increases at an order of magnitude for every userbase that is added. But this is why I think its so cool. Like a real life version of sim city!

I like to take a page off of AirBnb when they were struggling to get traction and that is, they helped give value to their customers by paying attention to their real needs. This was done in their case by personally meeting their clients and knowing first hand what their concerns were.

Tela Andrews Founder at Knuckly

October 8th, 2018

Go to market for two-sided marketplaces are tough. My POV is that you need one side ready at launch, and that is more likely to be supply-side. Suppliers are generally ok investing some time & effort up-front on the bet that they will be early to a new and high-performing channel. Demand side is fleeting; if you don't meet their need they're much more likely to bounce & forget you.

A solid tactic for acquiring supply-side before launch is to give-up your platform fees for a period of time after launch. I've had success pitching "You get to keep all your earnings for the first six months after we launch if you signup now and add X to the marketplace." I've also wanted to try a multi-level approach, but haven't yet: "Signup and do X. Share it with other suppliers and if they signup and do X we'll pay you their fees for the first six months after launch."

Richard Davis Ex Equity Research Analyst, Current Founder of Gamer Hustle

Last updated on November 8th, 2018

I wanted to provide a follow up to this as it's been about a month.

After a lot of trial and error, I've found a nice marketing system that is beginning to bring a lot of new users and games to our site. Conversion from emails is now 10-15% on both sides of our user base!

More importantly, these are quality targeted users that are using the site as intended. This is a point I think a lot of startups forget. I didn't learn this until much later.

Also, we are beginning to generate sales! The concept seems to be working quite well and our users are very happy with the results.

It's such a good feeling when you create a marketplace to finally start having organic interactions and people obtaining value from your platform. I never thought this day would come.

If anyone is interested on what I'm doing, shoot me a pm and I'll provide some more detail.

Dane Madsen Organizational and Operational Strategy Consultant

November 9th, 2018

Richard -

On behalf of all the people that discussed this issue with you, thanks for updating us.

A significant frustration with this group is people who ask questions (that are often totally vague or only marginally coherent), nearly expecting everyone to "invest" in their business (even if it is not a business), looking for the easy fix and the single thought or idea that will guarantee THEM success, then disappear. No feedback, updates, or follow through.

Well done. Likely, this is why you are having success; it is about you and your thoughtfulness, not about code and some get-rich-quick scheme.

Well done.


Richard Davis Ex Equity Research Analyst, Current Founder of Gamer Hustle

Last updated on January 11th, 2019

I wanted to go ahead and provide another follow up since it's been slightly over 3 months.

Not sure where to begin but holy smokes have I been through the ringer! To sum the past month and a half in a sentence, it's been non-stop 14+ hour days/7 days a week going back and forth between aggressive marketing, debugging, and new feature development.

The good news, I believe we have found our sweet spot and have developed some very cool features that are gaining traction and setting us apart in our own niche.

The bad news, the amount of volume required to make this business really get off the ground is overwhelming.

Where we're at now: We have defeated the chicken and the egg problem by now. There are a few hundred users on the site and nearly 75 games. There are dozens of interactions every day which is always nice to see and many games are receiving a lot of value from the platform as are the creators.

The main issue now is we're still not making much money. It's really a matchmaking game. I'd say the content creators end up playing 2-3% of the games they see. So I really need to increase the volume of both games and content creators on the site. Also, we have a third user (and problem now) and that is the fans who purchase the games from the content creator. This is a doozie.

We're now competing with the stores and there is a reason why you only see a handful of online game stores, IT'S VERY HARD TO CREATE ONE. So the issue that needs to be addressed is coming up with innovative ways to add value to the consumer. We're going about this by building the bridge between the content creator and their fans.

I recently spoke to several very large creators on our site who love the concept. They said the main issue they have with affiliate sites is that their fans end up purchasing the game from Steam or other shady re-seller sites (for the cheap games). So after a lot of brainstorming with all of them we came up with a very cool feature that they agree solves that problem to a degree.

We also released several features to help the devs as an immediate point of value to get more on the platform.

We're growing faster and faster every day which is a good sign and the feedback has been great. If you remember, when I first typed up my original message I was struggling to get 1 or 2 people to sign-up a day. There are now 20+ people signing up everyday and we haven't even really started heavy marketing yet.

Both the devs and the creators love what we're doing but at the end of the day we simply need more games and more creators.

Looking forward: It became very clear that I could not cold email my way into a business with this. I don't have an immediate product or service I can sell and I need a ton of users to make this work. We are now partnering with many Discord servers and groups to help really ramp up the traction. The more you become embedded in these communities, the stronger you grow and the more magic happens. These partnerships will go live next week and I'm very excited to see what happens as I've been slaving away trying to get things growing strong.

We're also sponsoring several of the larger creators on the site that love the concept. This should be very helpful as well.

At this point I'm way overworked and stressed. It's been a roller coaster ride and I believe I bit off more than I can chew. Pursuing this start-up with no funding, no team, and nothing more than a computer and great wii-fi is certainly something else. I'll spend a week doing heavy marketing and we'll gain a ton of momentum. I'll then spend another week on development and a lot of that momentum dies. The good news is the site is very polished, has a TON of features, and is finally in that sweet spot.

My plan is to spend the next two months solely devoted on marketing. We are now receiving word of mouth users, have many partnerships with 5-15,000+ discord servers, and are sponsoring creators with 500k+ subscribers. So if there was ever a time this would lift off, this is it.

3 months is a very small time to evaluate a marketplace startup as a success or failure imo. The amount of time and effort it takes to get marketplaces off of the ground is unspeakably hard, I'm sure many here could testify to that. I am running out of money however and really need to start making more sales soon. It's very clear from my discussions with our users that this is needed in the market but it's a very big goal for a solo-founder to pursue. Given the growth and demand, I'm debating if I should be open to pursuing minimal funding and hopefully hiring a small team. If I did receive funding and was able to make some hires, I have no doubts that this could really take off and become a great business.

If I was to add any type of advice/guidance to founders pursuing a marketplace startup it would be make sure you have enough capital to last at least a year, try your best to have at least a two person team as you will constantly need to develop while marketing, and be incredibly patient. Marketplaces don't just get started like single-product startups, you need to get them started before you can even get started (not sure how else to phrase that).

I know this is a bit of lukewarm update but there are a ton of moving pieces. Many things are going better than expected and others are taking a bit longer than I anticipated. I'm excited to see what happens as this will be a big month for us.

I'll provide an update soon.

Dane Madsen Organizational and Operational Strategy Consultant

October 4th, 2018

Richard - I see the crux of the issue. Broadcast too soon and, my understanding of that world, you get blackballed before you are alive.

Why would the developers be timid to add the game? Is it difficulty with an uncertain outcome, or do they think it exposes them to criticism?