5 Lessons Learned From Building a Marketplace and Failing At It

Two years ago I started on a journey to build an exclusive marketplace that made it simple for founders to build remote teams — RemotePanda. Our exclusiveness lay in better screening, personalization, and support during the project.

We did over 50 engagements, big and small, over the last two years.

We got acquired by Mindbowser Global Inc. I and the full RemotePanda team joined Mindbowser and luckily there were no job losses.

Still, I call it a failure because we ultimately fell short of the scale we hoped to achieve when we started. 50 contracts may seem like a lot, but for a marketplace it didn’t leave much revenue since we were only getting a part of the transaction and not the full amount. I want to share my experiences and what I might have done differently if I could. Hopefully, it helps fellow founders to build bigger and better.

#1: Standardize the Offerings

To start with, here’s what RemotePanda is/was: RemotePanda is the saner, calmer, and organized way to build your remote team. Our concierge service means you have someone to take care of your needs right from recruitment to hiring and throughout the project. We set the KPIs for the work and build accountability within the process for the remote worker.

Our real value is the last part: “We set the KPIs for the work and build accountability within the process for the remote worker.” We took responsibility for the gig’s outcome and not just connected people like our competitors.

That was a lot to take on. We were taking responsibility for the outcome of an IT project without having control over the execution. Since the work was getting done remotely by a freelancer or a team and not by us, it was really difficult to manage the outcome.

The problem was that for good work the team would get the credit. But for bad work, we were the one held accountable. Additionally, assessing good or bad is really hard in software outsourcing since projects are complex with many layers. On top of that, problems in software can’t always be fixed by replacing it with another software or new people. If it’s crappy, well, it’s a long night for you.

It's not like shipping a book or an item which you can just take back and issue a refund.

That’s the first lesson: Create a marketplace for things that can be standardized (like the way Amazon started with books). Things that can be replaced easily so that the marketplace can really fulfill the guarantee. And if standardization is not possible, make sure that switching to another vendor is easy for the user (like building a telehealth platform).

If the above isn’t possible then don’t make the guarantee. Now I understand why Upwork, TopTal, Fiverr do not provide a guarantee of anything.

#2: Don't Try to Sell Too Many Things

The next lesson comes from our growth stage. While our stronghold was development work, we also took on all kinds of contracts from testing to digital marketing and ads campaign and lead generation. At the time, we thought it was a great way to get a foot in the door with contracts with the idea that one kind of work will lead to another kind of work. But that didn’t happen because every contract also required us as the guarantors to really go deep in that area. Wherever we failed, the contract failed.

Don't spread too thin. For at least the first few cycles, just keep the marketplace for only those items which you can really optimize and swear by. We jumped to different offerings too early. Don’t do that.

#3: Count your profit and not revenue

For a marketplace, revenue and profitability are far apart. While our revenue crossed 100K within a quarter, we were still not profitable as we were not getting that money in our account. We were only getting a small percentage out of it. Connecting back to lesson #1, this meant while we took the responsibility to execute, we did not get enough reward out of it.

Also, I learned that profitability can be higher only when we really control a bigger part of the chain.

We did a few contracts where we ourselves hired people and let them execute the work. This led to both better control and high profitability. I understood why Amazon Basics exists on Amazon.

When looking at money don’t go by the revenue, but by actual profit created because you would only have that money to pay your people. Always think of moving up the supply chain by adding more indigenous offerings. Look at opportunities within the marketplace where you can yourself offer things rather than relying on vendors.

#4: Create Identifiable Value for Vendors and Customers

Marketplaces do have leakages and vendors hate paying you your percentages or the platform fees. They feel entitled to work directly with the customer. Hence, there should be enough value that you create so that all parties feel important within the ecosystem. This can be done with contracts, size, opportunities available, predictability, and so on.

Make sure your value offering is clear and enticing enough for the customers and vendors to stick to the platform. In our case, the responsibility of execution was a really strong value that attracted our customers.

#5: Go early for funding

For Marketplaces the only way to succeed is to go big — or else got to go home.

There ought to be enough suppliers and demand. As compared to a conventional business where you can grow linearly, a market place has to grow like a cohesion of two or more forces.

To strike this balance you need to fill in from your side whatever is lagging. You will have to find press, publicity, and growth hack all at the same time.

Money is important for all of these to happen. Hence I suggest if building a marketplace, go for funding at the appropriate time because you will need to hire really good people, get a board in place, and retain suppliers and vendors till a critical mass is hit.

Would I Do It Again? Absolutely

With all being said, Marketplaces definitely remain one of the best business models- AirBnB, Uber, Amazon to name a few.

The best part of solving a difficult problem is that if you solve it, you have a substantial advantage over others. Marketplaces are unique models where you have to balance a lot of different forces together.

While I take a bow, I remain a learner and an enthusiast of marketplace models. In my new role as CEO of Mindbowser Global, I continue to work with entrepreneurs helping them build marketplaces. Mindbowser is a full-stack design and development agency providing services in-app and web development, IoT, data science, data visualization, and RPA.

Happy to have a discussion or lend a hand to plan your marketplace strategy. Reach out to me at ayush@mindbowser.com