4 Simple Questions for Future Marketplace Start-ups

Launching a new marketplace platform seems like a bright idea especially when no one has done it before, but often there can be myriad of reasons which can make the execution of that very thought is quite challenging. Let’s assume for a moment that the idea is really good, then what to do next?

The market scenario is constantly changing with the companies going to the wall, rising from the ashes and making highlights with ground-breaking IPOs every single day. The secret behind a successful start-up is to break it down into different areas making things simple to handle.

Every start-up needs to answer these 4 simple questions well to ensure its progress in the right direction.

Where is the growth coming from?

The marketplace has the potential to benefit the global audience for every new listing and service. This is an of the global network effect and is expected from the travel marketplaces such as Airbnb or Expedia.

In comparison to this, there is a local approach of creating networks in which the multiple parallel systems emerge as a part of the same larger marketplace. Deliveroo and UberEATS are perfect examples of the same. One living in New York City does not really care about someone not getting the same service in Paris as the local network is delivering is still delivering in NYC.

It is remarkably important to know the category of the marketplace to establish meaningful growth projections.

What is really understood by supply?

There could be a supply chain in which each supplier is offering a similar type of product or could be a chain in which everything is unique. While the former one is easy to replicate and easier to scale, the latter one is hard to replicate and even harder to scale. The financial marketplace would need to match clients to reputable lenders in a way not to price the client out of the market. Flexibility and adaptability would be required on the part of the marketplace

How to solve the seller vs buyer mindset?

Considering the financial marketplace example, the sellers re the lenders and the buyers are the clients looking to borrow. The marketplace cannot survive without both, so a balance needs to be maintained between both.

For a truly disruptive event in the world of lending to occur, it’s going to be necessary for a new class of lenders to give easy access to credit a large number of people who may not have had access to it through conventional setups. Typically, lenders will cover themselves against risk with exorbitant interest rates, and that is precisely the term in the equation that will need to change to establish trust with the consumer. The confusion then is whether to focus on the dollar amount or the frequency of transactions.

Airbnb or Uber?

One would opt for high dollar, high frequency if possible but that is just not on the table. Where Airbnb focuses on the dollar amounts, Uber, on the other hand, prioritize the frequency of its lower-value transactions. The frequency side of things should be pushed as hard as possible while getting things up and running. This will give the brand exposure to the larger audience and will create the liquidity needed to expand and be competitive.

Final Thoughts

Tech ventures are alive and doing pretty well. The recent Uber IPO shows that the world is still enthralled with online marketplaces. The real takeaway point here is that the tech side of the things can be dealt sophisticatedly but it is crucial to have some basic grounding in the way marketplaces function, else the revolution in the lending world will have to wait for someone else to come along.

About Matthew Ledvina

Matthew Ledvina works as a cross-border tax adviser, with US taxation among his specialities. He has worked with many high-profile clients and high-net-worth individuals. Follow Matthew Ledvina on LinkedIn, YouTube and Instagram for future updates.