Marketplace is one of the most difficult business model used online. We have seen few spectacular cases that are now worth billions of dollars like Uber, Udemy, Lyft, Airbnb, Spotify. Nevertheless, there are a lot of examples of companies that fail in their attempt to grow. In this presentation I will show you in 9 steps how to build a marketplace: • Find an idea • Do the market and customer research • Create the MVP • Model the business in Excel • Solve the Chicken & Egg problem • Get the first customers • Find scalable ways to get customers and suppliers • Create organization that is able to scale • Get funding to scale fast I will also talk about key issues and KPIs that matter in the case of marketplaces. In short thanks to this presentation you will learn how to build a successful marketplace while minimizing your risk and spending little money

1. 1
How to create a successful
marketplace
Practical guide for startup founders

2. 2
Thanks to this presentation you will
learn how to build a successful
marketplace while minimizing your
risk and spending little money

3. 3
Most of startups choose one of 6 basic models. Marketplace
(2-sided market) if executed properly can bring big returns
SaaS
E-commerce
Media site
Marketplace
(2-sided market)
User Generated
Content
Mobile Applications

4. 4
We have seen few spectacular cases that are now worth
billions of dollars

5. 5
How 2-sided market
business model works?
Marketplaces are being build in every aspect of our life and
some of them have experienced huge success

6. 6
In this presentation I will try to show you how to build a successful
marketplace

7. 7
To build the marketplace you have to do 9 things. Before we
go into details lets see what is the mechanism of the
marketplace
Find an idea
Do the market and
customer research
Create the MVP
Model the
business in Excel
Solve the Chicken
& Egg problem
Get the first
customers
Find scalable ways
to get customers
and suppliers
Create
organization that is
able to scale
Get funding to
scale fast

8. 8
How does a marketplace
business model work?

9. 9
Marketplace is trying to create a connection between the
demand and supply enabling them to match and do the
transaction
Patient DoctorMarketplace
• On-line booking
• Reviews
• Statistics for doctors

10. 10
Marketplace is one of the type of 2-sided markets. Below
some general examples
▪ On-line sale of
physical products
Marketplace
▪ On-line sale of
on-line products
▪ Purchase of
services
▪ Crowdfunding
Networks
▪ Infrastructure
▪ Energy market
▪ Telecommunication
market
Sharing
platforms
▪ Sharing physical
resources
▪ Sharing on-line
resources
Matching
models
▪ Dating sites
▪ Work Platform

11. 11
Just to remind you some examples of 2-sided markets
Type of 2-sided market Product offered
▪ Marketplace
Revenue sources
▪ On-line courses ▪ Commission from sold
through Udemy courses
(3%-50%)
▪ Marketplace ▪ Driving / taxi services ▪ Commission from trips
made (20%)
▪ Marketplace ▪ Designs; mainly delivered
through
▪ Commission from contest
(5-40%)
▪ Revenue from sold ready-
made designs
▪ Sharing platform ▪ Shared trips ▪ Reservation fee around
10%
▪ Sharing platform ▪ Sharing knowledge ▪ Donations
▪ Marketplace ▪ Apartments rental ▪ Commission from provider
– 3% and from
guests 6-12%

12. 12
Just to remind you some examples of 2-sided markets
Type of 2-sided market Product offered
▪ Matching model
Revenue sources
▪ Peoples CVs and their
strength appraisal
▪ Advertising
▪ Added services (for
recruiters)
▪ Matching model ▪ Tinder paid version▪ Hot or not selection of
interesting people with a
chat service
▪ Marketplace ▪ Subscription plan from 0-25
EUR per month for doctors
▪ Booking visits at the doctor
of your choosing
▪ Marketplace ▪ Commission from sellers –
above 10%
▪ All sorts of mainly physical
products
▪ Marketplace ▪ Markup on store prices
▪ Commission from stores
▪ Delivery of groceries fro
chosen shop

13. 13
To understand the logic of 2-sided market model have a look at the
visualization of how it works
VISITS
ACCOUNT CREATED
ADDITIONAL
SERVICES
RESULTS
SHORTLIST
FRAUDULENT/
FLAGGED TRANSACTION
BUYER RATES SELLER
LISTING
EXPIRED
CHURN RATE
ONE-TIME
PURCHASE
ACCOUNTS CREATED
NOTIFICATIONS
OPEN
SELLER RATES
BUYER
DISENGAGEMENT/
OPT-OUT
SELLERS BUYERS
Buyer churn
Buyer lifetime value
Signup
rate
Searches/
visit
Click- through
Good results
Conversions Ratings, rate
Click-through rate
Gross revenue
Net revenue
Seller lifetime value
Seller
churn
% blank searches
Other revenue
conversion rates
Seller
visits
VISITS
REPEAT BUYER
CLICKS
Fraud rate
Ratings, rate
Listing count
REPEAT SELLER
LISTINGS CREATED SEARCHES
DELIVERY
ACCOUNT
CANCELLED
DISENGAGEMENT
EMAIL BOUNCE
Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz

14. 14
The things you will see in this presentation is a summary of my on-
line course devoted to building startups. You can find them practical
information on 4 different business models. For more details check
the course
Check the course
How to build cheaply and efficiently
your startup?
$95
$15

15. 15
Step by step guide to
building a marketplace

16. 16
Let’s start with the first subject – finding the idea
Find an idea
Do the market and
customer research
Create the MVP
Model the
business in Excel
Solve the Chicken
& Egg problem
Get the first
customers
Find scalable ways
to get customers
and suppliers
Create
organization that is
able to scale
Get funding to
scale fast

17. 17
Finding the idea is the easiest step

18. 18
There are 3 main sources of idea for marketplaces
▪ Go through concepts
that work in other
countries
▪ Check Crunchbase –
most are called on-
demand or
marketplaces – more
than 500 firms
▪ Check Google for top
10 marketplaces on
developed markets
Clone existing idea
Find a segment that is
currently poorly
served
▪ Check existing
marketplaces and look
for suppliers or
customers that are
badly served on current
marketplace (created
for the general public)
▪ This is to some extent
the way in which
Airbnb was developed –
they targeted owners of
apartments that were
badly served by
booking.com
Professionalize
currently free service
▪ Find a service that is
offered for free and try
to make the paid
version
▪ The service has to very
popularized
▪ A good example is
BlaBlaCar – a paid
version of hitch-hiking
and Airbnb – a paid
version of couch-surfing

19. 19
Once you have the idea it’s time to gather some data and
check how good this idea is
Find an idea
Do the market and
customer research
Create the MVP
Model the
business in Excel
Solve the Chicken
& Egg problem
Get the first
customers
Find scalable ways
to get customers
and suppliers
Create
organization that is
able to scale
Get funding to
scale fast

20. 20
There are plenty of cheap way to do market research. Check
my presentation that will show you in details how to do it
Market research
Practical guide for startups and entrepreneurs
presentation

21. 21
Now it is time to create an MVP
Find an idea
Do the market and
customer research
Create the MVP
Model the
business in Excel
Solve the Chicken
& Egg problem
Get the first
customers
Find scalable ways
to get customers
and suppliers
Create
organization that is
able to scale
Get funding to
scale fast

22. 22
What is MVP?
The minimum viable product is that version of a
new product which allows a team to collect the
maximum amount of validated learning about
customers with the least effort
(Eric Ries)

23. 23
What is MVP?

24. 24
Characteristics of MVP
▪Has to be much cheaper than the end-product
▪You can do it much faster than the end-product
▪It consists of ONLY the most important features
(from the perspective of customers)
▪You can easily modify it as you get feedback from
customers
▪Enables you to test most of the hypothesis
comprising your business model (especially the risky
ones)

25. 25
Marketplace is one of the most difficult on-line business models. That
is why it is worth looking for MVP that will enable you to test fast
whether your idea makes sense
Costs : 1 – 10 M
Lead time: 24-48 months

26. 26
MVP of a marketplace can be a…..smaller marketplace of 1
product
▪ Lower costs
▪ You faster reach
the required by
customer depth
▪ Easier and
cheaper to get
suppliers and end-
customers
▪ Easier to define
and control the
quality
Costs: 50-400 K
Lead time: 6-24 month

27. 27
A good of MVP for marketplace is a simple on-line store / e-commerce
done from standard solution. Here you can mainly test the end-
customers without the need to get it right with customers
▪ You can test whether the
niche you want to enter is
of the right size and nature
▪ You can test the demand
for the product without the
need to build the suppliers
network
▪ You can create the quality
standards that later you will
impose on others
▪ You create brand in the
niche
▪ You can test sales
techniques (to the end-
customers)
▪ You get first customers
Costs: 10-300 K
Lead time: 3-12 months

28. 28
MVP can be also a physical market, fair, event or sale
▪ You can check the
reaction of
customers to the
product and how
do they make
their decisions
▪ You can get first
customers
▪ You can find there
first suppliers
Costs: 10-200 K
Lead time: 1-6 months

29. 29
Sometimes you can start the marketplace by building a discussion
group, forum or ranking. In this way you will test the demand,
understand the customer and create a strong sales channel
▪ You check the demand
▪ You get first customers
Costs: 10-30 K
Lead time: 1-6 months

30. 30
As an MVP to the marketplace you can also use any MVP
shown for on-line store
Sales at other marketplace
(more general)
Landing page Tool that enables you sales from your
webpag i.e Gumroad
Sales at other dedicated
marketplace

31. 31
….or off-line store
Physical off-line store Island in the shopping mall

32. 32
5 500
225 155 105 20
Marketplace Marketplace of 1
product
E-commerce Off-line events /
sale
UGC
36
15
8
4 4
Marketplace Marketplace of 1
product
E-commerce Off-line events /
sale
UGC
Average investment needed
In thousands of USD
Average time needed to create Product/MVP
In months
….when you wonder what MVP you should choose compare
them in terms of time and money needed and also….

33. 33
….and you have to decide what you really want to test
with MVP. We recommend taking care first of the most
risky elements of the business
▪ Marketplace
▪ Marketplace of 1
product
▪ E-commerce
▪ Off-line events
/sale
▪ UGC
Product
Creating and
testing demand
Complementary
sales Pricing Brand awarenessMailing bases

34. 34
After the MVP you have to check in Excel whether the
business makes economical sense
Find an idea
Do the market and
customer research
Create the MVP
Model the
business in Excel
Solve the Chicken
& Egg problem
Get the first
customers
Find scalable ways
to get customers
and suppliers
Create
organization that is
able to scale
Get funding to
scale fast

35. 35
Before we go to Excel let’s talk about the logic we used to
build the marketplace Excel model
▪ Conversion rate
Visits # of transactions Revenues
Gross MarginNet MarginOperating Profit
▪ ATV
▪ Cost of traffic
▪ Cost of logistics
▪ Transaction fees
▪ Fixed Costs
▪ % Gross
Margin
# of needed
partners
# of partners to
be acquired
Cost of acquiring
partners
▪ Churn
▪ Current # of partners
▪ Offers per transaction
▪ Offers provided by 1 partner
▪ Average CAC
▪ Provision of the
marketplace

36. 36
The first step in modeling is finding the KPIs. The second is using
them to build the model in Excel
# transactions
Average
revenue per
transaction
Total revenue
x
% Fee of the
marketplace
Average
transaction value
Total searches % conversion
x
x
Total Costs
Total margin
-
Rent
People
Cost of traffic
Ratio of visitors
to searches
Average cost of 1
visit
+
x
Development

37. 37
If you want to download ready made business model of a
marketplace in Excel and to see how to use it go to my on-
line course
Check the course
How to build cheaply and efficiently
your startup?
$95
$15

38. 38
One of the biggest problems in marketplaces is the so called
chicken & egg problem
Find an idea
Do the market and
customer research
Create the MVP
Model the
business in Excel
Solve the Chicken
& Egg problem
Get the first
customers
Find scalable ways
to get customers
and suppliers
Create
organization that is
able to scale
Get funding to
scale fast

39. 39
The chicken & egg problem boils down to 2 things: suppliers
will not come to the marketplace if there are no customers;
customers will not come if there are no suppliers

40. 40
There are number of ways to solve this problem. Below some
of them with examples of companies that have used them
Be the first supplier / buy the
required products
Convince suppliers to bring
their own customers
Convince the customers to
bring their own suppliers
Fake it till you make it
Use preordering
Concentrate only on one side
and ignore the other one

41. 41
It is time to get the first customers. This is by no means easy
Find an idea
Do the market and
customer research
Create the MVP
Model the
business in Excel
Solve the Chicken
& Egg problem
Get the first
customers
Find scalable ways
to get customers
and suppliers
Create
organization that is
able to scale
Get funding to
scale fast

42. 42
Getting the first customers will be totally different than the
regular sales. Here you have to get by all means possible the
first paid customers and check whether the business model
makes sense.

43. 43
Below some of the methods you can try
Mailing your potential
customers
Paid ads (AdWords,
YouTube, Facebook)
Content marketing
Direct sales by founders
Traffic from suppliers and
partners
Tapping into existing
marketplaces
Cold calling
Creating a physical
marketplace

44. 44
Most likely you will start by analyzing performance of each an
every method using the sales funnel analysis

45. 45
Once you have already some customers it is time to find
scalable methods to grow
Find an idea
Do the market and
customer research
Create the MVP
Model the
business in Excel
Solve the Chicken
& Egg problem
Get the first
customers
Find scalable ways
to get customers
and suppliers
Create
organization that is
able to scale
Get funding to
scale fast

46. 46
The first suppliers you can easily get, yet to scale the business
you have to find scalable methods of getting new suppliers
that will provide the needed liquidity to the marketplace

47. 47
Below some of the methods you can try
Buying suppliers or their
service
Paid ads (AdWords,
YouTube, Facebook)
Content marketing
targeting suppliers
Direct sales force
Word of Mouth
Tapping into existing
marketplaces
Cold calling
Events and Conferences

48. 48
If you now how to scale the business there are 2 steps left:
prepare the organization for scaling and getting sufficient
amount of money
Find an idea
Do the market and
customer research
Create the MVP
Model the
business in Excel
Solve the Chicken
& Egg problem
Get the first
customers
Find scalable ways
to get customers
and suppliers
Create
organization that is
able to scale
Get funding to
scale fast

49. 49
When it comes to preparing the organization for scaling you
will have to do a couple of things
Define KPIs
Define and describe
processes
Create a organizational
structure – a simple one
Define the ideal
employee and his skills
Create a recruitment
machine
Tapping into existing
marketplaces
Cold calling
Events and Conferences

50. 50
KPIs that you should pay
attention to when building a
marketplace

51. 51
Basic KPIs for 2-sided market are connected with the supply
and demand creation
▪ Buyers who have bought at least 1 product
during the last 30 days
Engaged
buyers
Definition Why it is important?
▪ Shows you how many willing to buy
people are on the market
Active
suppliers
Total searches
▪ Total revenue from transactions (i.e.
commission) divided by the number of
transaction
Average
transaction
▪ Tells you how much on average you
generate revenue per transaction
Transaction to
searches ratio
▪ Number of suppliers that have sold at least 1
product in the last 30 days
▪ Shows you how many suppliers are
providing products that can be sold
▪ Searches done by buyers through your
company to find a product
▪ Tells you how many searches are being
done by buyers on your market
▪ Number of transaction divided by the number
of searches
▪ Shows you to what extent searches are
converted to transactions
▪ Total number of products (number of SKUs) on
the market divided by the number of suppliers
Average
number of
products per
supplier
▪ Shows you how many on average products
are offered by a supplier
▪ Total number of searches divided by the
number of engaged buyer
Average
number of
searches per
engaged buyer
▪ Shows you how many on average searches
are done by engaged buyers

52. 52
Other KPIs look at cost of acquiring and the value of the
customers for the 2-sided market…
Definition Why it is important?
▪ Total margin generated by a buyer from start to
the end of his relation with you
▪ LTV=Average transaction*% Gross Margin*
Number of transaction during the relation with
the customer
▪ Analyze it by cohorts / segments
Life Time
Value of the
Customer
(LTV)
▪ Shows you how much your customer is
worth from cradle to grave
▪ Helps you make decision on acquisition
techniques
▪ Cost per engaged buyer
▪ Should be calculated by methods of acquisition
▪ Should be calculated by groups of customers
Customer
Acquisition
Cost (CAC)
▪ Tells you how much you have to spend to
acquire new engaged buyer
▪ Helps you estimate your CF burned with
scaling of the business
▪ Helps you optimize acquisition methods
and select the right source of traffic
▪ Cost per active supplier
▪ Should be calculated by methods of acquisition
▪ Should be calculated by groups of customers
Supplier
Acquisition
Cost (SAC)
▪ Tells you how much you have to spend to
acquire new active suppliers
▪ Helps you estimate your CF burned with
scaling of the business
▪ Helps you optimize acquisition methods
and select the right source of traffic

53. 53
Key issues to remember while
building a marketplace

54. 54
You should test and find optimal solution for the following
key topics in a marketplace
▪ You will face the following vicious circle: the
suppliers will not come to the market if there
are no buyers and buyers will not find the
market attractive without the sufficient
number of suppliers
▪ Usually you should try to produce artificial
supply and start with 1-sided market –
concentrate on the buyers
Chicken-and-
egg problem
Description Goal
▪ Main differentiation between 2-sided markets
in the same filed comes from different level of
centralization for major areas: who sets prices
and how, how supply and buyers are added,
who finds the right product, customer
experience, customers support, payments
Level of
centralization
▪ Map the level of centralization of your
competitors and think about different
variants of centralization that would make
your offer more appealing to at least one
side of the market
▪ Every markets has to be liquid for the buyers
and suppliers to stay on the market
▪ Liquidity is connected with the width and
depth of the product range offered as well as
the sufficient supply of products
▪ Liquidity can be supported – activation plan for
suppliers and buyers
Liquidity
▪ Create activation plan for buyers
▪ Create activation plan for suppliers
▪ Do not introduce too man categories of
products at the same time – better
introduce one by one and provide
sufficient width and depth of the product
range
▪ Come up with 10 ways how to generate
initial supply – preferably for free
▪ Come up with 10 ways how to get the
buyers for free

55. 55
You should test and find optimal solution for the following
key topics marketplace
▪ Creating 2-sided market is a 24/7 job for a big
devoted group of people; without this it will be
difficult for you to succeed
▪ It takes 2 x more time and it is 4 x more difficult
than startups with only one group of customers
Understanding
the customer
and loving the
problem
Description Goal
▪ Understand very well both groups of
customer
▪ Have exceptionally good understanding of
one of the groups and spend time
researching and working for them in
person
▪ In a 2-sided market you cannot satisfy (at least
in the early stage) both sides equally due to
limited resources
▪ You should pick one side to concentrate on for
which you will provide exceptional experience
Choosing the
right side to
concentrate
on
▪ For the chosen side of the market try to be
much above the market standard and at
least 75% of ideal solution for this side
▪ For the other side be at least on average
market level
▪ It is relatively easily to build the platform but
without the right tactics to get the people to
see it (distribute the info about it) and
activating them you will have empty platformDistribution
and Activation
▪ Have a list of 50 activities how to get
suppliers and test them
▪ Have a list of 50 activities how to get
buyers an test them
▪ CAC should lower than 30% of LTV
▪ Optimize SAC and minimize the churn rate
of suppliers

56. 56
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57. 57
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