Marketplace: From Broker to Full Stack Operator
Hi there, we’re Point Nine a VC firm focused on SaaS and marketplaces.
The following post and infographic is a result of many discussions I had with entrepreneurs who are building a Marketplace. The goal is to give a very simple and brief overview of the different building blocks, features and development steps of a Marketplace. I hope this helps entrepreneurs and product managers to evaluate where they’re currently standing, how to think about a Marketplace and possible features.
If you look at the underlying business model of the most valued tech companies, a significant proportion is built on the idea of a Marketplace (e.g. Uber, Airbnb).
Quite simply, Marketplaces connect supply and demand without building an inventory themselves and enable two or more parties to conclude a transaction. This sounds fairly easy but to offer an end-to-end solution many companies face lots of challenges on their way — just think about getting the right amount of supply and demand at the same time.
The following infographic highlights the evolution towards a Full Stack Marketplace from an operator’s perspective. As Chris Dixon states it, a Full Stack startup is a “complete, end-to-end product or service”.
The infographic includes a brief summary of the features and tools the Marketplace operator can offer as well as the characteristics of each developing step including some examples of companies for each step.
From Classified to Marketplace
In the earlier days lots of Marketplaces started as classifieds or comparison sites to replace brokers such as agencies for example. That was possible because people just searched for what they needed and were happy with an overview of the demand or supply.
This still holds true for industries with a relatively low degree of digitization (e.g. construction, home care). In those industries, it is partially still possible to start as classifieds or a tech-enabled agency, meaning that you use some tools to connect supply and demand without having a Full Stack approach.
However, today both parties are asking for more and more features and tools. If you are operating in a fairly digitized industry, it is really difficult to compete only with listing.
Nowadays, you have to add more Full Stack features in order to offer more value to the supply and demand sides that goes beyond just the transaction and for a stronger operator integration and defensibility.
Development process over time
In general, there is no clear path but the infographic above pictures a typical process to a Full Stack Marketplace from an operator’s perspective. Over time, the operator tries to offer more tools for both demand and supply to cover their needs and to increase the stickiness.
Airbnb can be seen as a very good example for this development. At the beginning, it started as a classified site, only listed the apartments on its website with a simple messaging tool and soon implemented payment to avoid being “just a messaging site”. To ensure the quality of its listing and further increase supply, it used professional photographers and added insurance. These days, Airbnb expanded its product portfolio and is now also offering experiences besides places to stay.
At Point Nine we believe that marketplaces are shaking up many industries at the moment. If you are creating more efficient ways to connect supply and demand, discussing next possible features for your Marketplace or moving up the stack, we are more than happy to hear from you.
Many thanks for reviewing Clement, Mathias and Pawel.
