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Apps like Swiggy, Dunzo are good examples of On-demand delivery marketplaces. Swiggy is the largest food delivery service in India, with 5,000 restaurants across 8 cities. It delivers food from restaurants through a 3,000 strong fleet, in less than 30-45 minutes. They even automated refund processing via bots. It has more than a million app downloads. You have a delivery executive and more than 1-2 suppliers working on a transaction with buyer. When an order is placed, everyone gets paid!
What makes these startups grow strong? Pure play demand-side economy of scale more because it already has so many users in its network, and got more retainers who are ready to offer huge discounts to improve their sales. What Zomato spent on advertisements, Swiggy offered on cash-discounts growing the demand.
Lets talk the classic chicken-egg problem. Who to onboard first – "demand" or supply’ side? Demand-side of the network is hard to retain and to put in simple words "priceless". There are always businessess that compete each other. Like relationship, it takes considerable level of emotional play to get attached to one and stick together for too long for mutual benefits. Life on the supply side is more complicated – unsold product inventory, workforce waiting to be assigned.
UrbanClap is another good example for one stop destination for local services, where plumbers, cleaners, technicians get rated. No complaints. Apps like UBER/OLA are good examples of DS-gap filler marketplaces, but few years since their inception, seems pretty clear that these companies has "no network effect". Data has long been treated as the new oil, or competitive moat for companies, but now its not.
Marketplaces are aggregators of sellers. Marketplaces help you bridge the demand-supply gap. But, will it frankly help with repeat business? Collaboration, however, is a pretty vague phrase. MarketNetworks intend to build these verticals. There is no value in building islands of sellers. The sell-side of marketplace is perhaps the easiest to grow. There are opportunities everywhere and easy to replicate like drop-shipping marketplaces. What major startups lack is an emphasis is on organically building a "collaborative" growth.
If you have more than one startup strategies on your plate, and figuring out how to go about into market, get introduced to HoneyBooks, project management SaaS solution runs on a market-network model that has emphasis on Network Effects. The model insists startups to build more than one complementing product/services & focus efforts to use each entity's uniqueness to generate sales.
Every heard generating network effects for your startups? It's a B-plan model intended to thrive relying on expanding own network, and not depend on market-factors. “Marketplaces” provide transactions among multiple buyers and multiple sellers — like Uber, Etsy, AngelList, Swiggy & many more! What are the silent triggers? #1 The abilty to operate independently from multiple platforms, and #2, the accured value to belong those who operate in the network. But, let's skip talk of decentrailization for a bit on the 2nd part.
But why N-sided? Referrals. The big catch why companies need a market network more than few social accounts is to work in a trust-based economy. Refferal matters to increase sales velocity and volume. Remember LinkedIn? The N-sided marketplace helps to increase geninue c-sat scores, credit ratings, transperancy in referrals which is bound to happen more frequently and with increased transperancy. Unlike GigEconomy, with an N-sided marketplace the trust factor kicks-in organically, and that's broadly sums up how NetworkEffects works. Customer experience combined with network effects will create great companies which will be the cornerstone of new age startups.
“If you can get multiple people collaborating around a project, it has natural vitality and network effects, positively impacting both growth and retention.”
The idea is to build multiple complementing startups, and not just one. So, before we dive what's the cons? It's an uphill task. Building N+ startups take massive time, investment and efforts, which is why one could partner with early stage founders in this space early-on and build as single entity. Start small. Build one block at at time. And, have the patience to accept how a market works, especially for developing countries. Unlike isolated and containerized e-commerce marketplaces, when your trust is decentralized, the network entirety becomes your market.
Many investors don't readily subscribe to the view of building 3+ startups. They might never consider funding a startup that takes too long to Go-to-Market and generate revenues. A good reason why you might find investors scared and shying away is when they want to play "risk-averse" pointing to the fact, it will take more than 2-3 years for real operations to even begin & scale!
"It can be tricky to get investment to build network effects. But that's why you can drive revenue opportunities".
Investors expect quicker return on investments like 3x-5x in 18 months for their investments. However, startups could work with micro-teams, and build small traction, and not just run behind the best investors for a while till you get market acceptance, brand maturity and revenue. Take your time to find like-minded co-founders, and build your network that complements each other.
There is a startup called Honeybooks which took approx few years to build itself as a "MarketNetwork" for Events Industry. There are some hyper-funded startups in several genres/sectors aiming to capitalize as “one-stop platforms” for respective trades like Event Planning, Legal, Fitnesss/Healthcare, Realty, Matrimony Services. Market Networks target more complex services. Most common entities in a MarketNetworks are built the below fashion.,
- B2B SaaS/Workflow platform
- Marketplace (Inventory/E-commerce)
- Market Niches for Onboarding (B2C)
Each entity acts as a seller/buyer network that complements one another. It takes time and patience to build a strong interconnected seller/buyer network.
But, before you take a step to build a MarketNetwork, investors need validation that your idea has potential. Show them the numbers. Start early, and build your traction. If it's possible to build few ecosystems that “talk” to each other, its sell time. Trust is a subject that complements both sides.
In short, “[The users] come for the tool [and] stay for the network.”. The intent is to create an N-sided marketplace ecosystem where transactions happen in a 360-degree pattern, that complements each other, and cross-sell within the network. Read more about sales anti-patterns.
Here's few more examples,
- Ever wondered why India based *.FIT (mind.fit, eat.fit, cult.fit, cure.fit) is selling fitness lunch boxes, selling healthcare insurances, and gym subscriptions?
- DotLoop based in Cincinnati works on residential real estate brokerage industry. Joist, Houzz based in Toronto, is a market network for the home remodel and construction industry.
- Mammoth Biosciences, a 2-year-old, San Francisco-based CRISPR-based platform for disease detection. This startup plans to do precision edits to any DNA, and a search engine for nucleic acids — which has many business applications.