The Difficulty of Initially Launching a Marketplace Startup

Richard Davis Ex Equity Research Analyst, Current CEO 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.

Hamid Asadi CoFounder of Navaar, raised 7 figures capital before, looking for CTO cofounder for my new startup

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.

Richard Davis Ex Equity Research Analyst, Current CEO 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 CEO 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

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?

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

Last updated on October 9th, 2018

Excellent feedback here, thanks to everyone who has contributed. What I find very interesting is for normal startups everyone has somewhat of a set template/designated feedback. With marketplaces, I've found founders utilizing many diverse and creative strategies to get started. The feedback presented here certainly demonstrates that.

I've thought up some creative ways to battle this liquidity adversity. Some items have been implemented and are already paying off, some are still in development but have been ran by developers I'm working with who said they will definitely help growth. I'll touch base on these after answer a few questions.

To answer the main question "Why are publishers/indie devs hesitant to add their game despite noting this solves their problem?":

1.) This answer unfortunately leads back to the classic chicken and the egg issue. While our platform is superior to the incumbent, we only have about 20 creators who signed up since launching a week and a half ago. It's more work for the publisher to use two sites when one has many compared to us who have only a few despite having significantly more functionality. Also, game keys are their babies, it's how they make money. Adding game keys to a new site is a bit nerve wrecking on their part.

Changes I've Made and Future Updates to Fight the Chicken and Egg Issue:

1.) The first thing I did was I started adding games for developers and publishers who expressed interest to our platform. They are viewable by the content creators who receive the impression our site has many games for them to request. I did not follow the approach of the incumbent competitor of adding all new games as that is one of our main value pitches, we won't saturate your games positioning on our site by adding every new game release. However, by adding games where the devs and publishers have expressed interest, they can immediately see the value we add and this gained us two games this past week.

2.) I made our game store page visible to creators who have not signed up yet. Since we now have games that you can actually request keys and store links for, and many more that you can request a key (despite the publisher not adding keys yet) the conversion rates from cold emails to content creators has gone from 5% to 15%. This also adds a lot more social proof for games looking to sign up. I will use these new games to redo our home page and make it significantly more interactive. That should further help conversion rates and interest.

3.) Honed in on marketing methods to game developers. I've really refined my pitch to the devs I speak to. Twitter has been a gold mine for getting new games on board. What I do is message new indie devs who follow our Twitter and then go to their games Discord channel. Response rates have been 75% using this method. I've made friends with 5 indie devs last week who love the concept and are actively helping me develop new features and test the platform. These devs have games in development but their feedback is enormously helpful. If I can keep making friends like that, I'm sure we can continue to just build our platform to perfectly assess developers needs. I just started this strategy so we'll see how it goes this week.

4.) I'm developing a new feature that will immediately add value to a game despite our site being illiquid. I'm currently developing a new feature where we generate a report for a games total reach on YouTube and Twitch. So now they can see their games total coverage, not just coverage from creators who request a key for their game on our platform. The report graphically displays how many creators are making content for their game on YouTube and Twitch, the total number of videos have been made for their game, and how many total impressions their game has received from all creators on those two platforms. The report also displays their top creators and top videos.

5.) In the past week a lot of ancillary gaming services businesses have actually reached out to me to talk about the platform. While they wouldn't be customers many have thousands of creators on their site. They want to partner with us. We haven't started promoting to their users yet but will do so very soon once we've finished cleaning a few remaining bugs.

This new feature isn't a business but should help smaller games who don't have these analytics capabilities. We will also be doing the same with Steam analytics for their games.

Results in the First Week and a Half After Launch:

We now have 5 games on our platform and some interactions are taking place which is amazing to watch from my perspective. We've added 30 users since we launched a week and a half ago, 20 content creators and 10 publishers, 5 of which have added games. People may see these as low numbers but keep in mind these are very valuable users. The average content creator on our platform has 75,000 subscribers on YouTube and 4,000 on Twitch. Publishers and developers are also very valuable. So to look at this on a sheer user count perspective isn't the correct lens. Conversion rates continue to slowly get better the more content we have on the site. I'm just taking it one step at a time with my goals. My goal last week was to have one game on the site. My second goal of having a creator request a key from a game has already been met. So my new goals are to have 10 games on the site, 100 users, and 75 content creators by the end of this month with one game on our store.

I believe that if I just continue to grind this out we can get to a point where things start to move on their own. I think we're heading in the right direction and am very happy with our first set of results.

If anyone has any questions or feedback, feel free to post anything that comes to mind!

This is a very good feeling:

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.


Ed Hwang

October 4th, 2018

Why are developers timid to add their games? I think you need to identify those factors and communicate solutions.

Early stage curation, and showing both communities that you are actively pursuing their best interests, I think is the gas in the carburetor.