I have been fascinated by the new-age marketplace models, especially seeing the potential of scale with the impact that they can create if done rightly, and consciously the effect can be positive; otherwise, it might negatively disrupt the ecosystem. That’s why a marketplace is an ecosystem business.
We are living in the era of marketplaces, or should I say – we have always been living with markets forever. The persona and delivery of marketplaces might have changed, but they exist since the early days of human civilization.
Three pieces that I want to touch base in this blog are around the marketplace as a community venture; marketplace platforms are nothing but new avatars of middle-men and building marketplaces for social good.
The marketplace as a Community venture
It is a platform that connects those looking to provide a product or service (sellers) with those looking to buy that product or service (buyers). So, at its crux, it’s just a middle layer connecting the community of sellers to buyers.
I am intentionally using the word community here because producers and sellers don’t exist in isolation. If, as a platform, you leverage them collectively than individually, you can reduce the CAC (cost of customer acquisition) and improve the producers and buyers engagement on your platform, and hence reduce attrition.
For any 2-sided marketplace platform, the seller community is the key to success. They are not just the users of your rig, but they are also the most critical partner and stakeholders in your business. So, the seller community is the most significant contributor to your marketplace. Hence, I call them the soul.
Hence, a marketplace should have the laser-sharp focus to engage its seller community, which means tracking engagement is equally as important as promoting community engagement.
“If we wanted people to invest in Udemy, we had to invest in them,” Eliza Davidson, Udemy.
There are few resources on building marketplaces keeping the community at the center of the platform design.
Lyft’s community Helped the Business Scale and so can yours by David Rust
Udemy’s Instructor Community: Engagement with a Purpose by Eliza Davidson
New Avatar of Middle-men?
In its previous avatar, the platform used to be the man – or as we know “middleman” or, in many cases, “middle-men.” We see middle-men as a very controversial term and whenever you visualize the middle-men (no matter where you come from) – you imagine an older man who is probably very corrupt and mean
Now, we call this middle-men as marketplaces – we have been able to make the middle-men age SEXY. So, what problems these middle-men or these modern marketplaces solve.
Six Problems that middleman solve (what middleman do to be a valued partner):
1. Solve the problem of distance – physical, temporal and social reach – a need to bridge the gap
2. Solving the problem of quality – middleman act as a certifier
3. The issue of accountability – related to services
4. The question of risk – managing the unpredictable fluctuation in demand (see a lot in on-demand services) – risk pooling – reputation systems
5. The problem of information overload – curating the content/personalization
6. The issue of self-advocacy – role as an insulator
Marketplaces for social good
Though the most crucial puzzle that I have been looking to solve is can we build markets for education, employability, agri, healthcare supply chain that we have built-in for last-mile delivery, lifestyle and e-commerce like Amazon, Tokopedia (in Indonesia), Lyft, Airbnb, Udemy, Go-Jek and Grab. I am continually looking for solutions, and I am incredibly optimistic about the application of marketplaces pieces in agriculture – farm to plate or farm to SMEs/MSMEs, education (like Udemy), healthcare – knocking off the middleman and make the whole supply chain more efficient.
I highly recommend and challenge you, if you are an entrepreneur or an investor, look at more prominent and more impactful problems to solve using the marketplace approach and build and foster communities at both ends of your marketplace.
With Love,
Sagar
About
"first followers" is founded by Sagar Tandon, a founding member at Moonshot Ventures. You can reach him at sagar@moonshotventures.org.
Occasionally, he blogs about the responsible investing, tech for good, venture capital, investment thesis, conscious capitalism, collaborative consumption, community, and humane lifestyle.