Why Two-Sided Marketplace Startups Aren’t For Everyone

Offering everything to everyone could result in offering nothing to anyone

Joe Procopio

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image by katemangostar

2020 was the come-to-mainstream year for marketplace startups.

There’s certainly good reason for the marketplace startup trend to continue — fueled by a perfect storm of user-friendly no-code options for prototyping, a quarantine-accelerated demand for digital business models, and the headline-grabbing IPOs of several success stories — AirBnB, DoorDash, and Vroom, just to name three.

There’s never been a better time to at least try to build a market of buyers and sellers around almost any product or service. And truth be told, a lot of marketplace startups are finding success. The question is: Is that success sustainable?

We’re still in the early stages of 2SMs as fertile ground for disruption. But their success will only be sustained if those marketplaces are built properly. To do that, they need to avoid the mistake I see most often.

A marketplace should never try to be everything to everyone.

“A costly, painful, and time-consuming failure.”

That is a word-for-word quote from a fellow entrepreneur who watched their marketplace customer base splinter, fragment, and then fade away, done in by a problem he described succinctly in just two words:

“Shitty vendors.”

In 20-plus years of building startups and digital products, I’ve spent a bunch of that time focused on marketplaces, from my first self-founded startup — writers network Intrepid Media — to my most recent project — a startup advice-on-demand app called Teaching Startup.

In that time, I’ve learned that even if you choose the exact right product or service sector to disrupt, even if you develop amazing technology, and even if you perfect the customer experience, the success or failure of your marketplace startup will be determined solely on your sellers meeting the expectations of your buyers.

It doesn’t matter if the vendor side of the marketplace is made up of providers, producers, or procurers, they have to be consistent and the marketplace’s offering has to be…

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Joe Procopio

I'm a multi-exit, multi-failure entrepreneur. NLG pioneer. Building TeachingStartup.com & GROWERS. Write at Inc.com and BuiltIn.com. More at joeprocopio.com