Underlying some of the internet age’s most prominent success stories are marketplaces. These range from actual marketplaces like Uber—platforms that bring together previously disconnected supply and demand audiences—to business models that leverage markets to increase efficiency. From a business and venture perspective, marketplaces capture the imagination both rationally and emotionally. In this series of posts we will look at both points of view through the lens of several successful marketplaces. To capture these common threads, I created a Marketplaces Tracker spreadsheet and encourage you to take a look.
How does pricing affect liquidity? What is the current power dynamic between consumes and suppliers? How do we balance the risk of transparency? These are some of the many questions to be answered as marketplaces seek to balance supply and demand. The path to a sustainable and defensible marketplace is littered with failure so, to kick-off the series, I want to highlight thought leaders on this topic:
- Benchmark has invested in eBay, OpenTable, uShip and some of the largest digital marketplaces. Bill Gurley uses 10 dimensions to evaluate marketplaces and applies this framework to DogVacay, their recent investment in a marketplace for dog boarding.
- Union Square Ventures is an investor in Etsy, LendingClub and other marketplaces. More broadly, they define the USV investment thesis as “large networks of engaged users, differentiated through user experience, and defensible through network effects.”
- Lightspeed Venture Partners has invested in marketplaces like TaskRabbit. Jeremy Liew discusses strategies for growing two-sided markets.