Network Effects in Marketplace, Communities and Social Platforms
These days, we’re hyper-focused on marketplaces, communities and social platforms. We love these platforms for many reasons, but the primary one is the power of their network effects and how they create a high degree of defensibility for startups. What are network effects? “Network effects” is a frequently used term and it is sometimes confused […]
How we determine valuations for marketplaces
I often get asked about how to determine the valuation for a marketplace startup that is starting to scale. So I’ll run through some basic math for how we value marketplaces at version one. The main multiple we like to use for marketplace businesses is GMV (Gross Merchandise Volume…the total volume of goods sold on […]
Marketplace KPI Dashboard
A few months ago, I wrote about the questions that we typically ask when evaluating a marketplace opportunity. Now, inspired by our friend Christoph Janz at Point Nine Capital who created a KPI dashboard for early-stage SaaS, we have put together a KPI template for marketplaces. We recognize that every marketplace is different, but each […]
How to scale a marketplace
As a marketplace figures out how to bring buyers and sellers together and builds liquidity, the virtuous cycle starts kicking in. The growth of sellers and buyers quickly accelerates. The ultimate goal is that a successful startup grows into a big company. But as you begin to scale, there are new considerations and strategies to […]
Growing a marketplace: how to spark the virtuous cycle
The virtuous cycle is the holy grail for online marketplaces. In this positive feedback loop, a high number of quality suppliers attract more customers; then more customers attract more suppliers to join. This cycle continues as a self-sustaining growth engine until both supply and demand reach critical mass to be “winner takes all.” But how […]