This is the fourth and final post covering speakers’ insights from our marketplace meetup held in San Francisco on October 20. If you haven’t already, check out previous posts detailing Andrew Chen’s (Uber) fireside chat on growth strategies, Anthony Marino’s (ThredUp) talk on managed marketplaces, and B2B marketplace dynamics from Shippo’s Mikhail Ledvich.
The first challenge for any marketplace is to solve the initial chicken and egg problem of supply and demand. As a marketplace figures out how to bring buyers and sellers together and builds liquidity, the virtuous cycle starts kicking in. A high number of quality suppliers attract more customers; then more customers attract more suppliers to join, until the growth of sellers and buyers quickly accelerates. The ultimate goal is that a successful marketplace startup grows into a big company.
However, scaling up is a challenge for any start-up, and it can be particularly hard for marketplace companies. This is why it was so great to hear from Indiegogo co-founder Slava Rubin on how Indiegogo grew by 1) expanding into different verticals and 2) expanding into different products. Here are some of the main takeaways from Slava’s talk.
Expand into different verticals
We always preach that marketplace and SaaS start-ups should find a niche, nail it, and then expand outwards. For eBay and Amazon, this approach worked especially well since there was some overlap between the buyer and supplier bases across different verticals.
Film was Indiegogo’s first campaign category when the platform launched in 2008. Filmmakers were an ideal target, since they needed capital to get their ideas on the screen. They also tend to be a very social group, and have video and cool perks to entice funders.
Indiegogo worked very closely with filmmakers to create successful campaigns that went well past initial funding goals. They then figured out how to apply those best practices to other verticals, expanding into other markets like hardware gadgets, comics and personal causes.
Slava offered these pieces of advice to marketplace founders starting today:
- Start tight and gather a lot of information
- Don’t spread across verticals too fast
- Use data to identify popularity; don’t rely on your (or other’s) perceptions alone
Expand into different products
The other way to grow the business is by expanding the product portfolio. Uber was very successful in adding uberX to its original Black Car service. They unlocked more buying and engagement with a new product that addressed slightly different buying needs (a more affordable, everyday transportation option). Slava gave some insight into how Indiegogo has expanded their products over time.
First, they removed the deadline requirement in campaigns and created an on-demand product. It was a small change with a big impact. That new product now represents 35% of their business. It also keeps people on the platform for a longer period of time.
Another big product development that formally launched in the days following our meetup is Indiegogo’s new equity crowdfunding platform, which lets entrepreneurs offer backers an equity stake in their projects and creations. Indiegogo is the first major crowdfunding site to take advantage of the new securities rule that took effect last May, letting ordinary, unaccredited investors back private companies. It will be very exciting to see what an equity-based model has in store for Indiegogo and crowdfunding in general.
Slava’s advice on product changes:
- Little tweaks can be very important
- Keep iterating the product, listen to users and track their behavior
- Learn from the feedback and data and keep iterating
As Indiegogo shows, a marketplace can grow by expanding both its categories and products. But, you need to tighten the focus and show product-market fit first. Only then can you think about growth.