This is Part One in a Four-Part Series on Lessons Learned on Scaling.
Be reactive when scaling to new markets, and go to where users are banging on your doors. This is quite simple - let your users tell you when they are ready for you, and provide them with the means to do so. Many startups do this informally through recording inbound emails, Twitter outreach, and Facebook polls. Skillshare popularized the “unlock your city” model which has since been adopted by several startups in various manners. This is a great way to gauge over all interest for bringing your marketplace to a specific location - but there are critical differences between interest from the supply and demand sides of your market. Take this metrics-driven model a step further by being reactive to the supply side of your market.
Online-to-offline location-based marketplaces are two-sided markets. As examples, TaskRabbit has Rabbits and Posters. Airbnb has Hosts and Guests. Skillshare has Teachers and Students. The former are the suppliers and the later are the demanders. When first seeding a market, your suppliers and demanders effectively switch roles. Rabbits demand Tasks, Hosts demand Guests, and Teachers demand Students. Who wants to apply to run Tasks, offer their homes to strangers or market their skills when there aren’t Posters who need their help, Guests to fill their beds or Students who appreciate their talents? Your suppliers need an incentive to supply their good or service, and that incentive is the benefit of the demand - usually money but it can also include ego and/or warm and fuzzing feelings. It is critical for new markets that the suppliers’ demand is met (through market means or even hand touch) to prompt other would-be suppliers to continue to build that side of the market. If you can prove the value of your market to your suppliers by helping them to easily complete tasks, solidly book their apartments and sell out classes, the supply side of your market should grow organically from there. [Note: This does not mean you will attract good suppliers. That is dependent on strategic positioning and content marketing. Nor does it mean that the demand will grow as quickly as promised to investors.]
Your first user signups are very likely be whichever side of the market that is most attracted to your value proposition - Rabbits, Hosts and Students. But pay attention to whether these signups are suppliers or demanders. Go to where the supply side of the market is chasing you. If the supply side is chasing you, your challenge to scale is marketing. If the demand side is chasing you, your challenge to scale is your market itself - a much bigger, but not impossible problem.
The supply side of your market should have a low barrier to entry, an easy transaction facilitation, and high and nearly guaranteed returns. This should be the (relatively) easy side of your market to grow. The successful marketplace models out there are supply driven - Ebay, Etsy, Meetup. All three of these models have suppliers that exist regardless of whether or not the marketplace exists. The marketplaces are just more efficient than existing workarounds, and even better, encourage other would-be suppliers to join the marketplace because of supplier success. If your marketplace supplies something valuable, the demand should find you even before you start marketing.
If your marketplace happens to be demand driven with a lackluster supply side (ex: Zaarly, Redbeacon, Skillshare), figure out what you can do to artificially reverse these roles and what you can offer to the suppliers to make the transaction uniquely valuable - a creative positioning challenge. Redbeacon, which recently expanded from San Francisco to an additional six cities, has done exactly this. Pros (supply) provide home services such as yard work and plumbing to Service Requesters (demand). However, this marketplace is worthless to Pros if Redbeacon cannot deliver a reasonable volume of work. As such, RedBeacon has converted itself into a lead generator for Pros and actively markets itself to Service Requesters, effectively converting Pros to the demand side of the market; Redbeacon supplies Service Requester leads (supply) to Pros (demand). From recent observation, it seems that Zaarly is moving in this direction as well - a smart move.
Likewise, Skillshare’s marketplace is driven by Students (demand) who want to learn from Teachers (supply). However, Teachers only have an incentive to put themselves out there if they are confident that tickets to their class will sell well, but tickets for many classes are far undersold. Effectively, Skillshare is still in the early market phase in which the supply side of the market (Teachers) is effectively switched with the demand side (Students) because the incentives for Teachers fall short. This issue is already somewhat addressed with the pilot class feature. However, my recommendation here is to flip the market - make the Students the supply side of the market and ask them what they demand. Make it “open source” and empower both Teachers and Students to drive the content by creating a “Teacher Assistant” model. Allow Students to create pilot classes on topics of their choice, gather interest from fellow Students and then recruit a Teacher who already knows that the class is likely to sell out (financial incentive) and is flattered by the request (emotional incentive). Students could even TA peer learning groups. In this model, Skillshare’s marketplace provides Students (supply) to would-be Teachers (demand). This is also cost-effective because Students are the easier side of the market to acquire, and they can take the initiative in marketing to Teachers. Think that this sounds crazy? Well, it worked for Meetup.
Meetup started out by dictating what their users wanted with 600 cities and 250 topics. Within a year, it was clear that the initial topics were off point, and they collected over 70k submissions on new topics. Later, they also realized that the in-person connection that they were creating was valuable enough that people would organize themselves (see tomorrow’s post for more info), creating a supply market for organizers. The lessons here are: Understand what motivates your users to be suppliers and leverage that. Let your users tell you what they want and where they want you.
Regardless, letting markets chase you doesn’t mean that you should neglect the effort and time to explore other markets or even put some active feelers out there. Every person on your team from your lead designer to your CEO should be tasked with growing new markets. But take a back seat by providing potential markets with the tools to let you know when the supply side of the market is ready for you to invest further efforts. If you have a great product, solid business model and patient investors, don’t worry too much about chasing new markets.