The Leader Advantage In Marketplaces

The big news to be announced today that Uber China will merge with Didi shows once more the power of the leader position in marketplaces.

Uber, known for its ruthless execution, expanded in 76 countries within 5 years, enjoys a truly global brand and had raised more capital than Didi. Additionally Uber invested heavily in China and Travis the founder and CEO of Uber, made a personal commitment to the market having created a separate Chinese operation. Investment and focus brought results and quite soon Uber claimed to make more than a million rides per day in China.

Didi on the other hand entered their market first, cleverly used their local advantage, executed with the required urgency and defended their position. They were always ahead of Uber and relentlessly built supply and demand in as many as 400 cities in China. At best case Uber managed to grab a 30% market share of the market but still decided to let go of the costly war and merge with Didi.

The takeaway here is clear.

A global brand with deep pockets cannot uproot a local champion if the local player executes well. And just to clarify, executing well also means raising adequate funding to support growth.

Once you have a certain amount of funding (funding size depending on the geography you are taking on) a whole extra funding has no value.

There is so much you can efficiently invest in demand and supply generation and at some point it makes no economic sense to invest more. You have to merge or acquire the incumbent.

This provides a clear answer to many people who have asked me whether Taxibeat will be displaced by Uber in Greece or whether VentureFriends marketplace investments can defend against entry of deep pocketed competition in their local markets.

Local Marketplaces have local winners

That is why at VentureFriends we constantly focus the discussion with our startup founders on relentless and fast execution that will provide the timeframe to build a leadership position in every local market. We strongly believe that a bit more than a year of clear leadership in a local marketplace coupled with focus on continuous strong execution builds significant barriers to entry for new comers. We have seen that in the past with Taxibeat, E-food and Doctoranytime and now we see it all over again with E-table, Nannuka, Douleutaras, Funkmartini, Spotawheel, Pockee, Weengs, Instashop and Convibo .

We have chosen to work with amazing and driven founders who understand the urgency, have focused on executing and are working hard to become clear leaders in their respective local verticals.

In local marketplaces focus on securing the leadership position and then strong execution will get you far.