Building Enduring Value

Jackson Square Ventures hosted our annual CEO summit on Thursday, Jan 28th.  We had many of our portfolio CEOs in attendance at our office in downtown SF.  We invited a guest speaker, Pat Connolly, EVP at Williams-Sonoma; we had a panel discussion with Mark Gainey, CEO at Strava, and Tom Gonser, founder of Docusign; small group discussions; and we had a happy hour with enduring brands Anchor Brewing Company and Boudin Bakery.   The theme of the day was “Building Enduring Value” and it resonated throughout our portfolio as every company in attendance deals with similar challenges, despite the wide array of company stages, industries, and sectors.  Pat Connolly spoke of his 37 year journey with Williams-Sonoma, growing the brand from a single store and a few million in revenue to the brand it is today, doing north of $4B in annual revenue with over $500M
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The Almost On-Demand Economy

Or… why you should stop trying to copy Uber and come up with a model that makes sense.   Obviously there are a ton of Uber for X startups out there.  It’s become fashionable to call everything part of the on-demand economy.   While the on-demand economy feels like all sunshine and roses for consumers, there lurks a danger of unsustainability in on-demand startups.  If we want some of these wonderful VC-funded miracles to last in our lives, we need to change the demands a bit as consumers.  And “on-demand” startups need to wise up and provide “almost on-demand” solutions that meet the needs of the consumer while enabling a profitable business model.  The joke around San Francisco nowadays is that there is a transfer of wealth going on from VCs to consumers because VCs are funding these negative gross margin businesses like free food, delivery, parking, rides, etc. 
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OfferUp Series A


The world just recently learned about the phenomenal growth of OfferUp, as reported last week at New York Times, Forbes, and Geekwire.  We at Jackson Square Ventures first met the founders Nick Huzar and Arean van Veelen over 3 years ago and later led their Series A round in August 2013.  We’ve been thrilled to be part of the incredible journey so far, and we’re confident that OfferUp is building one of the next great marketplace brands.  OfferUp’s vision is to revolutionize local buying and selling – making it simpler and more trusted than ever before.   I want to tell the story of their Series A financing.  Let’s rewind to 2013 and talk about why we invested and how we saw the early network effects of the business. In late 2012, OfferUp did not have significant traction. I met with Nick and talked about the business. Continue reading "OfferUp Series A"

Don’t Buy the Hype


“People calculate too much and think too little”  – Charlie Munger

One of the core principles of Jackson Square Ventures is that we don’t buy hype.  Don’t get me wrong – we love it when a company in our portfolio does exceptionally well and receives a lot of attention.  We try to avoid buying hype when there is no substance - we look out for it before we ever invest.  We try to avoid buying the sizzle when there is no steak.  Let’s talk about how to do that. First – let’s understand the source of hype in the first place.  Why does hype occur? How does it spread?   Incubators and accelerators are breeding grounds of hype - they put lists of companies out there and have a demo day to display their wares.  Angellist is a breeding ground for hype – so are Mattermark and CBInsights and Product
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Meet Jackson Square Ventures

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Today we announce Jackson Square Ventures.  We are an all-partner VC firm focused on Series A financings for SaaS and marketplace startups from our offices in the heart of the startup ecosystem in San Francisco at Jackson Square.
You may know a few of the companies in our portfolio, such as Docusign, Strava, and oDesk (now Upwork). You may know my fellow partners Greg Gretsch, Pete Solvik, and Bob Spinner. You may know the name Sigma West.   We spun out of Sigma Partners in 2011 and named ourselves Sigma West to hold the history of the firm, but it turns out that being tied to the legacy name created confusion.  We probably should have done this before, but now we are choosing a name that fits us.  We are Jackson Square Ventures.   There are three things you should know about Jackson Square Ventures. 1) We were all operators. Continue reading "Meet Jackson Square Ventures"

Hourglass of Focus

I’ve now been dispensing advice to startups for several years - whether they want it or not.  I’m sure at least some of it is good advice, and I’m equally certain that some of it has been bad.  I try to reflect on my feedback to see if it was helpful.   One thing I noticed is that I’ve given conflicting advice about focus. At times, I tell founders that they really need to focus more - you need a laser-like focus on your key goals.  Then, other times I encourage founders to do lots of new initiatives which is clearly defocusing.  At first I thought this was all contradictory advice, but in truth, it is not at all.  It is stage-dependent. And it looks like an hourglass.
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At the earliest stages of a startup, the founders are in an exploration phase.  The founder may have a fairly clear vision about Continue reading "Hourglass of Focus"

Vertical or Horizontal

People in the startup ecosystem have been heralding the “unbundling of Craigslist” graphic for years now.  This is the original from Andrew Parker.  The conventional wisdom is to say that horizontal marketplaces will be replaced by vertical marketplaces.  And why not – if you are designing a vertical marketplace you can have the user experience custom tailored to that vertical and provide a better experience.  In theory, that should win in the long run.  However, the reality is that many verticals will be better served by horizontal marketplaces for a long time to come.  

There are two factors that matter most when looking at whether a horizontal or vertical marketplace makes the most sense.  The size of the transaction and the frequency of the purchase.  

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These two factors combine to make a standard matrix.  The upper left is the high price vertical and the lower right is the Continue reading "Vertical or Horizontal"

Option Value and False Hopes


Ever had this response to a pitch meeting? “Really exciting stuff, would love to work with you, please come back and see me when you’re formally fundraising.”

As many of you probably know by now, a VC gives that response to founders all the time.  It’s extremely common.  It’s really the only answer that makes sense for a VC to give to a founder.  The reason is VCs give that answer is to preserve option value. We at least recognize that we are wrong a lot, and there is always a chance of breakout success, and therefore when we see something that has potential but hasn’t broken out yet, we’ll try to preserve option value and make sure we get a chance to invest at a later date.  

Delaying decisions as long as possible is a clear strategy in gambling.  People want to gain as much information as possible before making a bet.   That’s why the dealer declares “no more bets” at the roulette wheel once the ball starts slowing down.  

This behavior can be misinterpreted by the recipient of the feedback.  When a founder has a bunch of meetings and receives a universal “this is really interesting, would love to see you again in a few months,” answer — it can be misleading.  It can lead founders to thinking that the next fundraising process is going to be easy.  It can lead to false hopes

This dynamic also plays out in many other areas besides the VC / Founder relationship.  It happens in enterprise sales when big companies have lots of different pilot projects going on to see if anything pans out.  It happens in personal dating sites where a user might like 1,000 profiles.  And guess what — it happens to VCs all the time when we have to go out and pitch big LPs (limited partners).  Obtaining and leveraging option value is a common theme across many different areas.

For the individual, be aware why people are responding to you the way they are.  Don’t read too much into positive replies from meetings that have no real commitment from the other person.  My advice would be to get people to put skin in the game early.   Don’t let people coast along preserving option value and wasting your precious time.  

Underspending on Paid Advertising

"We’ve achieved great month-over-month growth, and that’s all with zero spent on marketing!” 

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I’ve heard founders make this proud statement hundreds of times.  It appears to be a badge of honor to have grown your startup without handing a bunch of money over to Facebook and Google for their ads.  It is also the advice that most investors give to founders.  It goes something like this: ” If you can grow your startup with organic growth only, then you really have something special.”    

Sure - I won’t argue with that statement.  Organic growth is fantastic.  But, many founders are foolishly under-spending on paid advertising.  Here’s why: 

* Facebook and Google ads scale very well.  If you can spend effectively on Facebook or Google and achieve a good CAC to LTV ratio, then you can scale your business that way.  There’s no shame in spending on advertising if it works. 

* Advertising is a great learning environment.  The Lean Startup movement has long embraced paid ads and landing pages with nothing behind them to test business concepts quickly.  For some reason, founders seem to only use that tactic when they are first thinking of business ideas.  People should continue using paid ads on an ongoing basis to refine positioning and messaging, launch new products, test new customer segments, etc.  The rapid learnings from paid ad campaigns are fantastic.  A few hundred dollars and I promise you’ll learn something.  Just pay close attention and fund the campaigns with enough spend to make sure you’re getting significant learnings in short periods of time. 

* Leaving money on the table.  Marketing teams should explore all possible channels for growth.  Paid advertising is a channel that has proven time and time again that it can be very effective.  If it really didn’t work, Google and Facebook would not be worth a combined $582B.  Of course all startups should strive to provide great customer experiences that lead to organic growth, but they should also explore paid advertising channels.  If they do not, they are just moving slower than they could.  Why would anyone do that? 

* Answer questions about CAC.   I frequently ask if people have tested paid advertising and frequently get no’s in reply.  It leaves me wondering if the unit economics of the business will work.  The fact is it’s really hard to tell until you have a known CAC (customer acquisition cost) number that should stay consistent going forward. 

* Organic Growth Acceleration.   If you have a good NPS (net promoter score) and you know that each new customer will generate 1 more customer, then you should absolutely be spending more on Continue reading "Underspending on Paid Advertising"

An Idea for Amazon to Spread More Joy

I now have a 3 month old baby boy.  His arrival has been highly correlated with a rapid increase in Amazon purchases… diapers, wipes, toys, books, diaper bags, play mats, etc. 

I love pretty much everything about Amazon these days.  They are wonderful — they supply our life.   

The only downside to this supply is the massive quantity of cardboard boxes that accumulate each week in my house.  It also occurs to me that cardboard boxes are one of the most fun toys for young kids.  I distinctly remember building spaceships and forts as a young boy myself.  

So, Amazon, my idea for you is to print some fun designs on the boxes themselves.  Make the massive quantity of cardboard you ship around the world fun and interesting all by itself.  Print simple cutout designs and spaceship ideas or blueprints for cardboard castles.  You also certainly know when you’re shipping stuff for young kids — so you could do it selectively.  

Top 9 Misaligned Marketplace Incentives

"Never, ever, think about something else when you should be thinking about the power of incentives."  -Charlie Munger

Most marketplaces I know end up seeing some unexpected behavior from their users.  It’s always critical to be examining the incentives of all users of the platform.  As soon as you have a clear understanding of the incentives, all of the behavior will make more sense.  And believe me, as soon as you have any kind of scale, plenty of people will try to game your system.  

Here’s are 9 common misalignments that I’ve seen in marketplaces.  I’m sure there are many more.  

1) The Perfect Feedback Disincentive - Let’s say I’m working on a marketplace and I have a perfect 5-star rating with a high number of reviews.  I may be at the top of search results.  At this point, I have negative incentive to get more feedback.  I only risk harming my reputation on the platform so I’ll stop seeking any more feedback on the system. 

The fix: Introduce some recency criteria (recent feedback is more valuable) and be careful of simple sorting on descending average feedback scores.  

2) The Premium Placement Incentive - Premium placement (sponsored posting) has no place in marketplaces.  Marketplaces should show the best available results to optimize for liquidity, not for paid placement.  Paying for paid placement implies that you need a higher number of impressions to get a conversion.  Good marketplaces are better off focusing on liquidity.  And I know everyone will bring up Google and paid ads as an analogy.  However, Google’s Adwords system is highly advanced and shows excellent results because they reward relevancy, most premium placement initiatives are simplistic fixed rates of billing.  

The fix: Don’t offer premium placement. 

3) The Bait and Switch Incentive - Many times sellers in a marketplace will list something for very low prices to ensure they show up in search results and attract customer interest.  This leads to the inevitable bait and switch tactic. 

The fix: Depends, but pay attention to search filters and choose wise defaults. 

4) The Waiting Incentive - Take a look at a typical auction on eBay.  It’s well-known that the price shoots up just before the bidding ends.  So even with a 7-day auction, all of the action is in the last few minutes.  If you see the item anytime prior to the last couple minutes, you have no incentive to bid.  It’s wasted.  You should just watch and wait.  

The fix: Don’t allow behavior that obviously makes users want to wait to purchase. 

5) The Membership Incentive - If a marketplace monetizes by getting paid memberships, then they Continue reading "Top 9 Misaligned Marketplace Incentives"

The Contest Model Doesn’t Work

One of the common models for some marketplaces consists of the contest. 

The most well-known contest marketplace is http://www.nospec.com/faq

Since the contest model doesn’t work well for the freelancers, it creates a vicious cycle of quality.  Quality declines over time despite the best efforts from the marketplace to rate and filter.  This is the exact opposite of what a marketplace needs to be successful in the long term.  I can’t stress enough how important it is to design a virtuous cycle of quality into your marketplace.  Quality will naturally trend up or down, so make sure that you’ve designed your marketplace to make it go up.

Let’s compare two different models.  The contest model and a supplier-picks model (where the freelancers choose jobs on a first-come, first-served basis).

Contest model: Contests come in —> Good freelancers participate —> Some win —> Move long-term clients off the platform.   Or —> Some lose —> Get frustrated —> Go elsewhere.  You are left with only bad freelancers.   Quality declines. 

Supplier-picks model: Work comes in —> Good freelancers claim jobs —> Get good reviews —> Get more work.  Or —> Bad freelancers claim jobs —> Get bad reviews —> Get kicked out.  You are left with only good freelancers. Quality improves. 

I have a lot of respect for 99Designs.  They are one of the pioneers, but I believe they have the model wrong.  I only write this piece because I still receive pitches for marketplaces using the contest model.   I want to share with all marketplace entrepreneurs out there that the contest is a flawed model.  It inevitably creates a vicious cycle of quality that cripples the business.  Please stop pursuing contest models and create a better work environment for freelancers everywhere.  That’s the only way that we can all realize the dream of a global meritocracy where anyone with the appropriate skills can work how and when they want.

Marketplaces are Eating Firms (Unedited)

The following post is the complete, unedited version of a guest column that was recently featured on Techcrunch.  

If software is eating the world, then marketplaces are one of the agents of destruction.  Marketplaces are eating every type of firm on the planet.

Let’s look at where the feasting is happening. 

oDesk is killing the outsourcing firm (or web design agency or BPO consultancy).  The majority of the work goes to individual freelancers rather than small agencies around the world.  

UpCounsel is trying to consume the law firm. And doing it quite well, especially for small businesses that find the cost of lawyers to be offensive. 

RecruitLoop is trying to displace the recruiting firm. They’re innovating on the delivery model and providing hourly-based recruiters.

Bench is tackling the traditional bookkeeping / accounting firm.  They’ve standardized their offering to make high-quality bookkeeping affordable for small businesses. 

Crew is attacking the traditional web design firm.  They have some of the highest quality designers and developers in the industry. 

Rev is eating translation and transcription firms.  They provide a fast, affordable, and high quality service that is beating traditional firms. 

Skillbridge is trying to eat up consulting firms like McKinsey.  And they’re using lots of former McKinsey consultants. 

Contently is killing off some marketing firms.  

Wonolo is gearing up to take on staffing firms. They provide on-demand temp labor via mobile devices.  

And yes, AngelList syndicates are trying to kill VC firms.  More thoughts on that here

There is a huge number of startups trying to disrupt the traditional “firm” structure.  The fundamental reason is a drive towards greater economic efficiency in the world.  If these new marketplaces did not offer a better overall service, then they wouldn’t be gaining any traction.   The biggest driver of adoption is the massive cost savings that these marketplaces provide.  Consider the following service attributes: 

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Service Attributes

Cost - a marketplace with low fees is a very efficient delivery mechanism.  Typical markups in law firms or consulting firms might be 4X, eg a worker making $50 per hour would get billed out at $200.   The same person on a marketplace might raise their rate to $75 to compensate for utilization, but the end price to the customer might end up at $85 - $95 per hour.   The simple reason for this cost savings is the reduction in overhead.  Freelance labor marketplaces don’t have middle layers of managers and other support staff, they have independent contractors rather than employees, and they don’t have the cost of office space and supplies.  The cost savings are dramatic. 

Turnaround Time - Uber once again is

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There’s No Hard Number

All VCs pass on the vast majority of deals that we look at, and it’s frequently because the company doesn’t have enough traction yet.  In this case, inevitably, the founder of the company is interested to learn “how much traction would I need to raise money?”  I rarely answer with a hard number. 

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I’ve seen pre-revenue companies with enough traction to invest and I’ve seen companies with 5 million in revenue that didn’t have enough traction.  The are different types of “traction” - some are scalable and some are not. 

What I want to see is something that looks like it will continue to grow and scale consistently for many years to come.  

The key here is that I don’t view traction as a hard number.  I can’t tell you get 50 customers or get 1M in annual recurring revenue or something like that.  But, I’ll know enough traction when I see it.  

For me, it’s a combination of a few things: 

* How are you getting customers? Is it through a channel that will scale well?  Friends and family and existing network don’t scale.  Hacking a social graph doesn’t scale.  Google and Facebook ads scale reasonably well.  Organic scales the best.  Sales teams can scale well. 

* How are your customers buying?  Are they likely to be repeat buyers?  Are they just testing you out because it’s the hot new thing?  Are they also testing 3 other competitors? 

* How much handholding is required?  Are you doing things that don’t scale to support customers?  That may be fine, as long as it is straightforward how you’ll make them scale in the future. 

* How fast are you growing? Has the growth hit an inflection point? Month over month growth is essential, that’s the momentum that I want to see.  And I need to believe that the momentum will continue. 

* Will the product become better with scale? This is a nice bonus.  Some services get better with scale — many marketplace businesses can do a better job of matching supply and demand as they gain more users on both sides.  When you see this sort of business, you gain some confidence that the traction will continue. 

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Brendan Baker has the best post about communicating traction.   The only thing I would add to his post is to make sure you demonstrate that your traction is repeatable and scalable. 

Other People’s Money

This is the most memorable 2x2 I’ve ever come across.  It’s fundamental to understanding government behavior, consumer behavior, and business behavior. 

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Awesome quotes from The Effective Executive

I recently finished reading The Effective Executive by Peter Drucker.  It’s a business classic that’s chock full of exceptional advice and insights.  It was originally published in 1966 and all of the lessons still apply.  Here are my highlights.  Enjoy. 



The Effective Executive (Harperbusiness Essentials) by Peter F. Drucker



"The fewer people, the smaller, the less activity inside, the more nearly perfect is the organization in terms of its only reason for existence: the service to the environment."


"An organization, a social artifact, is very different from a biological organism. Yet it stands under the law that governs the structure and size of animals and plants: The surface goes up with the square of the radius, but the mass grows with the cube. The larger the animal becomes, the more resources have to be devoted to the mass and to the internal tasks, to circulation and information, to the nervous system, and so on."



"The danger is that executives will become contemptuous of information and stimulus that cannot be reduced to computer logic and computer language. Executives may become blind to everything that is perception (i.e., event) rather than fact (i.e., after the event). The tremendous amount of computer information may thus shut out access to reality." 



"Whether this theorem is valid or not, there is little doubt that the more people have to work together, the more time will be spent on “interacting” rather than on work and accomplishment."



"Few executives make personnel decisions of such impact. But all effective executives I have had occasion to observe have learned that they have to give several hours of continuous and uninterrupted thought to decisions on people if they hope to come up with the right answer."



"I have yet to see an executive, regardless of rank or station, who could not consign something like a quarter of the demands on his time to the wastepaper basket without anybody’s noticing their disappearance."



“What do I do that wastes your time without contributing to your effectiveness?” To ask this question, and to ask it without being afraid of the truth, is a mark of the effective executive.”


"The man who focuses on efforts and who stresses his downward authority is a subordinate no matter how exalted his title and rank. But the man who focuses on contribution and who takes responsibility for results, no matter how junior, is in the most literal sense of the phrase, “top management.” He holds himself accountable for the performance of the whole."



“If I had a son or daughter, would I be willing to have him or her work under this Continue reading "Awesome quotes from The Effective Executive"

SaaS + Marketplace

One of the hardest things about marketplaces is that you typically only get a very small rake.  10% of services is common.  After transaction fees, you may be left with just 7% of gross services.  So, even if you’re doing 100M in gross services, you’re really still doing less than 10M in net revenue.  Some marketplace businesses have started monetizing at least in part through higher-margin software fees. 

There is a new trend emerging which combines two of the most beloved business models in tech.  

SaaS + Marketplace

SaaS (software as a service) models are very well understood and straightforward.  A customer pays a monthly fee to be able to use a hosted software solution.  

Marketplaces are also very common business models.  You simply take a percentage of all the transactions that you facilitate through your platform. 

What happens if you combine these things together? 

The SaaS gets better. 

One of the issues with selling SaaS is that the tools often enable a new use case in the company that the company is not prepared to staff.  Take Optimizely as a hypothetical example.  They provide a great tool for A/B testing, but maybe the internal resources are not in place to actually design a whole bunch of new landing pages.   This creates a hurdle for a company to adopt the software solution that may create longer sales cycles or lower sales conversion. 

Now imagine Optimizely + a Designer Marketplace.  This becomes more of a complete solution and a company can adopt both the software and the designers to start testing pages immediately.   Additionally, it ensures that they will get the full value from the great SaaS tools. This fits with Chris Dixon’s theme of owning the “full stack.”  

Not only that, all of the designers on Optimizely’s platform will be very experienced using Optimizely so they can take full advantage of all the features and functionality.  They will also likely be product evangelists and can help the classic land and expand type SaaS strategy.  Maybe even comp them for upsells of the product within organizations they’re working for. 

Summary: 

  1. Sales cycle decreases 
  2. Sales conversion increases
  3. Value from SaaS increases

The Marketplace gets better. 

The opposite happens sometimes when you start with a marketplace only.  Frequently, the marketplace may be a great source of talent, but then software is needed to manage the process and people. 

Now imagine a designer marketplace without any software solution.  There may be great designers on there, but if you hired them to do A/B testing work, you’d have to figure out an additional software package to use, train them on Continue reading "SaaS + Marketplace"

What type of marketplace are you?

A founder proudly told me yesterday that “Liquidity is not a problem.  71 people applied to a job within 24 hours!”

I replied, “That sucks… 70 out of 71 of your users had a bad experience.” 

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This led me to think about the different types of possible workflows for marketplaces.  I wanted to share my thoughts on a framework for thinking about the different types of marketplace matching mechanisms.  It’s absolutely critical to think through the correct workflow for matching in a marketplace.  There is no single right answer - it all depends on the service that you provide. My experience has also been that almost everyone starts with an overly complex workflow.  The simpler and faster you can make the matching process, the faster you’ll be able to grow.  

Double Commit Marketplace

Examples: Care.com, oDesk, Thumbtack. 

A typical workflow:  Buyer posts job.  Buyer invites candidates AND Candidates apply to job.  Interviews happen.  Buyer makes a hire. 

These marketplaces are the easiest in some sense because all of the curation, filtering, and matching is really done by the users.  They also allow for completely custom needs to be fulfilled since people can chat and interview and be flexible.  On the other hand, these marketplaces tend to have the lowest overall fill ratio (hires made / jobs posted) since there is substantial time and effort required by both sides.  They are also the least efficient overall since much time and energy is “wasted” on applications and interviews that do not turn into real work.   As a result, one of the big risks is that you end up with a vicious cycle of quality.  If high quality suppliers get frustrated with the process, they will leave.  

The key focus for the company in this case is often on improving the fill ratio.  Lots of emphasis is often placed on streamlining the candidate -> interview -> hire process since there is significant dropoff through this funnel.  

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The next evolution of marketplaces is to single-commit models, where one side can make a transaction without the active approval of the other side.  There are two types of single-commit models — you could have the buyer pick or the supplier pick.  As soon as a marketplace moves to a “single commit” model, they must be responsible for the quality of at least one side of the marketplace.

Buyer-Picks Marketplace

Examples: YourMechanic, Unwind.me, Airbnb. 

A typical workflow:  Suppliers enter availability.  Buyer can see available suppliers.  Hires a supplier without discussion.

These marketplaces are a bit more complicated since additional availability criteria must be captured from the suppliers.  It does not fit well with low

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Liquidity Hacking – How to Build a Two-Sided Marketplace

This post was originally made as a guest post on PandoDaily and VentureBeat.

Marketplace businesses… They always seem great on paper, but it’s so insanely hard to solve the chicken or the egg problem. Every founder I meet who’s building a marketplace business basically says the same thing: “It’s so much harder than I thought to build a two-sided marketplace.

But of course it can be done. There are plenty of examples of success. EBay did it. We did it at oDesk. OpenTable is famous for doing it, and AirBnB is killing it. What I’ve noticed in the success stories is the basic theme that I call “liquidity hacking.”

What is liquidity hacking? 

In short, liquidity hacking is the strategy that successful marketplace businesses employ to reduce the challenges associated with low transaction volumes. It often requires narrowing the scope drastically of the offering until sufficient scale allows you to expand to achieve a broader marketplace.

This type of hacking is completely necessary in my opinion. The thing with marketplace businesses is that they work great at scale. Once you have hundreds of thousands of users on the supply side and the demand side, then everything works great. The challenge is almost always — how do you get there?

Provide value to one side

Offer portfolios — Many different people like to showcase their work online. In the olden days this would be done with a custom and personalized website. Now there are free portfolio tools for almost every type of individual. Once a site is successful in gaining users for their free portfolio tool, you end up having solved your initial supply challenge. See: BehanceDribbbleCarbonmade

Build community — If you can establish a healthy and vibrant community on either side of the equation, you’ll end up with the potential for a great marketplace. See: StackOverflow
Offer Tools — If you can get a lot of people to use your free tools, then you’ll have a highly engaged user-base on one side of the equation. See: GithubOpenTable.

Find aggregators

Find physical aggregators — There are various aggregators in the real world that provide really novel ways to hack liquidity. These are physical locations that contain a concentration of supply or demand. College campuses work great for this. Word spreads lightning fast and student labor is crazy cheap. I’ve seen some marketplace businesses that start focused on campuses and figure out the formula for getting significant penetration. Then just go to the next campus and repeat. Basically same deal with large office buildings and even high-rise apartment buildings. The great thing about large office buildings is you can sometimes convince the HR manager that Continue reading "Liquidity Hacking – How to Build a Two-Sided Marketplace"

What On-Demand Teaches All of Us

Liz Gannes published a well-done series on the on-demand economy on Recode.  She talks about the rise of food delivery startups, on-demand rides, on-demand laundry services, etc.  There is certainly a huge wave of these startups that are all harnessing the power of having every worker walking around with a GPS-enabled smartphone (as I’ve said before, the smartphone is a great logistics device).  

Many of them are taking off and making super-happy customers in the process.  There’s something magical about the first time you order from Sprig and your dinner gets to your door in 10 minutes flat compared to the typical 45-90 minutes that traditional restaurants take. 

The on-demand economy has taught us all that turnaround time is always important.  Even if your service normally takes 1 month to deliver, if you can do it in 2 weeks, you will amaze customers.  It doesn’t have to be “on-demand,” but you should always strive to improve the speed of your service.  Nobody will ever want it to be slower. 

Sometimes it’s very difficult to deliver massive cost savings or massive quality improvements, but turnaround time improvements are frequently achievable.  Analyze everything about your process and find ways to cut wasted time. 

Speed should be a key performance metric of every business service, from taxis to analytics software. 

Speed applies to everything.  We always want things to be faster.  It applies to business software solutions just as much as it does to consumer services.  

A few examples: 

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Omniata delivers analytics and engagement software.  The performance is incredible - processing billions of events and allowing custom reports in fractions of a second.  Just the simple notion of being able to create reports and see instant results has caused a behavior change in users. They are more likely to create and use more reports, and therefore get more value out of the platform. 

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At oDesk, we found improvements in customer satisfaction when we decreased the time between a job posting and the first supplier application.  In the beginning, everything was manual and it would frequently take us 24-48 hours and a few phone calls to get the first applicants to a job.  Once we built and scaled the marketplace, we were able to get those first applications in a matter of a few minutes which was amazing for customers. 

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Google took their blazing fast search results and just kept trying to make them faster.  Here is Marissa Mayer on her usage of Google Instant

“One of the things I’ve seen in my own personal usage,  is that while each search is faster, I spend more time doing searches. Because I actually Continue reading "What On-Demand Teaches All of Us"

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