10 Laws of Successful Marketplaces
It has many names: The Sharing Economy, Collaborative Consumption, The On-Demand Economy, and even most recently by Presidential candidate Hillary Clinton; the Gig Economy.
Whatever it’s called, one fact is clear: on-demand marketplaces are big, and they’re mainstream.
Venture capitalists have funneled more than $12 billion into the sharing economy, more than twice what was invested in social networking startups like Facebook and Twitter, according to a 2015 Deloitte report.
From transportation to food delivery, car sharing to laundry, the sector is getting immensely crowded and valuations are skyrocketing, leading many to speculate on whether we are in a bubble. Because of this, it’s more important than ever to understand the key factors that go into building an enduring business vs. a flash-in-the-pan that can’t withstand market volatility.
Companies like Uber (a Menlo portfolio company) and Airbnb boast incredible market potential and long-term defensibility that results from network effects. Entrepreneurs entering the space today should follow these 10 laws of marketplaces to optimize for long-lasting success:
1. Go vertical not horizontal
2. Cater to services rather than goods
3. Think local before international
4. Consider the impact of on-demand
5. Create consumer habits
6. Understanding curation is instrumental
7. Consider the shadow market
8. Focus on NPS
9. Don’t neglect your suppliers
10. Seek opportunities to boost rake