Ep. #1176 - The Key to Marketplace Success
In today’s episode of Startup Hustle, Matt DeCoursey and Shirish Nadkarni explore the key to marketplace success. Matt and Shirish first define what a marketplace is. Then they discuss how to build and sustain one. Further, they share the essential factors of defining your marketplace’s success.
Covered In This Episode
Understanding what customers want and addressing pain points is often a tall order. Shirish Nadkarni provides the key to marketplace success.
Listen to Matt and Shirish discuss the marketplace and how to build it by creating a unique value proportion. Shirish details the ingredients to become a key player in any marketplace, including the pricing strategy. They discuss the challenges, including fees, keeping people in the marketplace, and the ability to adapt. They touch on signs that the marketplace is not scalable and the importance of scalable technologies. Both agree that trust and speed of delivery are critical to Amazon’s success.
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- Shirish background (1:10)
- What is a marketplace? (2:25)
- How to build a marketplace (2:57)
- Understanding what customers want and addressing pain points (7:00)
- Creating a unique value proposition for your marketplace (8:08)
- Ingredients to become a key player in any marketplace (11:02)
- Pricing strategy (15:01)
- The challenge of fees (16:25)
- The ability to adapt and innovate (17:24)
- Keeping people in the marketplace (20:20)
- Signs that your marketplace is not scalable (24:03)
- Trust and speed of delivery are critical to Amazon’s success (24:57)
- The importance of having scalable technologies (28:03)
- Sustainability and keeping people interested (34:01)
- Shirish’s books are available on Amazon (36:44)
- TiE: a global nonprofit that fosters entrepreneurship around the world (42:08)
- Populate both sides of your marketplace (42:52)
Asking questions that match people up with the solutions is, is the kind of data-driven decision that I think a lot of marketplaces need to make. You look at all these different things that you might see in an app or a website or a user interface. And you know, it’s the data-driven decisions about each and every buyer or seller that can help you. Look, the more stuff you put in front of people they’re interested in, the more likely they are to stay in the marketplace.– Matt DeCoursey
So you have to start all over again, in establishing the marketplace in a different location. So that’s one thing that you need to pay attention to. Second thing that you need to pay attention to is, you know, supplier, liquidity, and time to close the sale, and so forth.– Shirish Nadkami
Nothing’s more frustrating than having buyers and sellers lined up, and you can’t open the front door.– Matt DeCoursey
Any marketplace that doesn’t have stuff for sale, buyers are going to walk in and walk right back out, an equivalent of a store with empty shelves. You’re gonna walk in, you see it right away, and you turn right back around and getting those people to come back again, exponentially harder than it was to get him to come in the first time. So give a lot of thought to how you’re going to do that and do what it takes to populate both sides of it. And then you truly have a marketplace.– Matt DeCoursey
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Following is an auto-generated text transcript of this episode. Apologies for any errors!
Matt DeCoursey 00:00
And we’re back, back for another episode Startup Hustle, Matt DeCoursey here to have another conversation, I’m hoping helps your business grow. If you listen to the show, you know, I’m a big fan of marketplace and marketplace dynamics. If you want to find key to marketplace success, there is a formula for that is exactly what we’re going to talk about on today’s episode of Startup Hustle, which is powered by FullScale.io. Hiring software developers is difficult and Full Scale can help you build a software team quickly and affordably and as a platform to help you manage that team. Go to FullScale.io to learn more, there’s a link in the show notes to help you get there. With me today I’ve got Shirish Nadkarni, who is a serial entrepreneur and author specializing in entrepreneurship amongst other things, you can go to ShirishNadkarni.com. Now look, don’t try to spell that just scroll on down to the show notes. And click the link straight out of Medina, Washington. Shirish, welcome to Startup Hustle.
Shirish Nadkarni 01:01
Thank you. Great to be with you.
Matt DeCoursey 01:03
Yeah, I’m looking forward to diving in I love this topic. But before we get started, how about a little bit about your backstory?
Shirish Nadkarni 01:10
Yeah, so I’m a native of actually Seattle, Washington. I’ve been here for about 35 years, I started my career at Microsoft. In the very early days of MS DOS, if you might remember that.
Matt DeCoursey 01:23
I’m old enough to remember that.
Shirish Nadkarni 01:24
Yeah, you old enough to remember that. And then I in 2000, I started a career as an all steel entrepreneur, I’ve done multiple companies, had multiple exits. And now I focus on writing books, and investing in and advising startups.
Matt DeCoursey 01:43
So I you know, as an author of three books, I’ve learned that the best part about writing a book is finishing it. Yeah, as far as Alright, so you know, we’re going to talk today about the the key to marketplace success. And, you know, when we talk about a marketplace, I mean, a marketplace could could be an industry, I think when it comes to when I think about the marketplace dynamic, I often think of any location, whether it be physical or online where buyers and sellers meet to perform transactions. When you think about marketplace, and how do you have, let’s start with your definition of it.
Shirish Nadkarni 02:25
You’re exactly right, which is that marketplace is a gathering place where consumers and suppliers can meet. And they can consummate transactions. Marketplaces can be two-sided, they can be multi-sided. Instacart is a good example of that, in that they have, you know, consumers, they have grocery stores, they have drivers, and then they have advertisers all part of that marketplace.
Matt DeCoursey 02:57
So you know, marketplaces are tricky by nature. And I think a lot of start, I’ve talked to so many startup founders, and you know, as, as the CEO and founder of Full Scale, we help build a lot of stuff. And I have talked to a lot of entrepreneur hopefuls, and they often say, you know, let’s kind of start with one of the problems that marketplaces have in. I think it’s, it’s learning how to populate them. Because a lot of times people will build a marketplace, whether it be a website, or a store, or a true market. If you don’t have buyers and sellers in there, then you’re gonna have a very difficult time getting anything done. And I think that a lot of startup founders and entrepreneurs, especially in the early stages, underestimated the difficulty of getting both of those parties together in one place to meet. How do you solve that problem if you’re a brand new company?
Shirish Nadkarni 03:48
You’re exactly right. You know, there’s a chicken or the egg problem, you know, getting enough suppliers and consumers so that you don’t have an empty marketplace when people come to visit and buy things. So I talked about that, in my book, Winner Takes All. And one of the strategies there is to initially focus on a small geography. So don’t try to build a nationwide or global marketplace. Start by focusing on a specific geography and then focusing on suppliers. And to know if you can get suppliers into your marketplace, even without necessarily having them be official, members of the marketplace that’s ideal. Give you an example of, of Instacart, which I’m sure you’re familiar with. When they got started, the founder Apoorva Mehta, he actually scraped content from surface website to populate the grocery content on his site and then people would place orders he would then actually go to the grocery store, pick up the items and he delivered them himself. Same thing with DoorDash. They started in Palo Alto initially, and they populated their website with menus of Palo Alto restaurants. And when somebody called in to place their order, they will turn around and then call that restaurant to place the order on behalf of the consumer. So that’s, you know, those are scrappy ways in which you can get going and establish a strong marketplace.
Matt DeCoursey 05:27
Yeah, and you know, for those of you if you’re still not grasping the concept, use a site like eBay, who was just one of the kind of the original online marketplaces in many ways. And, you know, if you went to eBay, and you wanted to buy baseball cards, and there weren’t any baseball cards, you’re gonna go somewhere else where there is a populated marketplace. So yeah, I just felt like that was a good thing to lead in with. And, you know, I really do talk to a lot of startup founders that seem to algo will get all these all these sellers in there. Okay. Well, the buyers, I don’t know, I think one of the things that kind of like you mentioned, that’s an interesting story, I didn’t realize that about DoorDash, it doesn’t surprise me that that’s the way that it started. But in some ways, like, you need to do whatever you can to get both parties to go in there. And some of the early lumps that you may have to take as a business is letting them in there for free or reducing fees or doing something that gives them an incentive to be in there. Because guess what, folks, there’s a lot of marketplaces that sell a lot of stuff. And there’s a lot of competition for it. Now, you know, when now, if we talk generally in the marketplace, I mean, I think that, you know, the number one reason that startups fail is a is a poor product market fit. And so I think maybe going with understanding what your customers need and want maybe a key component of that. What goes into that?
Shirish Nadkarni 07:00
You know, you really need to make sure that you are pursuing a opportunity, where there’s a real need or real, you know, pain point. You know, going back to the examples of Instacart and DoorDash. You know, Instacart did really well in the pandemic because people were scared of going to grocery stores. So there was a real need for online grocery shopping. Same thing with the DoorDash people were afraid of going to restaurants. And both of these marketplaces really expanded rapidly during the the pandemic and that continued to grow since then, but they were addressing some real pain points and needs that people are willing to pay the extra fees to order stuff online.
Matt DeCoursey 07:52
Now with that, you talked about DoorDash, which there’s competition for that you’ve got UberEATS and Grub Hub. And there’s other stuff out there, how do you create a unique value proposition for your marketplace when there’s other similar ones out there?
Shirish Nadkarni 08:08
Yeah, I mean, so you really have to, I mean, you right? In the, in the food delivery market, there were probably 50 different competitors, that does a very crowded market. And then out of that, you know, it’s become a winner take most scenario with, like, three different players, DoorDash, UberEATS, and Grubhub are kind of some of the survivors that have the main in that marketplace. But let’s take the example of DoorDash. Unlike some of their competitors, they actually focused on the suburbs, where there was less competition, and the order size was much bigger because families, you know, tend to live in the suburbs. And you know, they will be ordering food for the family. And so that was a key way that they differentiated versus their competitors. So each situation is different. But you have to find a particular niche that you can focus on and then expand from that niche to other areas.
Matt DeCoursey 09:10
I’m not going to call out which one it was, but there was a food delivery service that three straight times couldn’t get my order right. And I tried another one and they kept getting it right. And you know that quality product or service sometimes can be that differentiator. I think that in the world of software and apps and stuff like that, I am at Well, I do use DoorDash I am actually really impressed with what they do. It makes it very easy for me to order. And, you know, it’s it’s got, you know, I have a six year old and an eight year old so the moment that I order food, they’re immediately asking when dinner’s gonna arrive. So being able to actually, you know, the tracking mechanisms and stuff that are in there. But, you know, once you get people into your marketplace and they’re operating successfully, you’re on to something Yeah, make sure but it’s easy to lose them too and lack lack of choice and diversity. And then if you run if you just have poor quality and terrible delivery, and you’re a delivery service, you’re probably not going to stick around. Now for for upstart businesses, one of the things I think if you have a marketplace component or dynamic to what you’re doing, you’re probably going to embrace a pretty high marketing and you know, marketing and branding and just advertising costs in the beginning because no one knows who the heck you are, you have to go through, you mentioned, like Instacart, which is big, you know, a big thing now, but so many people weren’t used to that in the beginning. Do you think that, I mean, if you want to, if you want to be a key player in any marketplace, and these beginning years do you need to a lot and extraordinary amount of your resources and financing or in funding to brand awareness?
Shirish Nadkarni 11:02
Yes, that is true for many of the marketplaces like Instacart and DoorDash. I remember, with food delivery, eyes to see ads from all the different delivery services, offering, you know, $10 off, or free meal for the first meal that you ordered, and so forth, and it becomes a became a very expensive game. And the way that again, DoorDash. And some of these players survived, versus the other players who were either acquired or or failed, is that, you know, DoorDash, as I said, you know, focus on the suburbs. And they could, they could show that the unit economics economics worked well. And then they were able to get funding, which is crucial for growth, and then use that funding to grow into other markets continue to prove the unit economics. And that’s how they grew. So funding can actually be a key strategic advantage, assuming that you can show that unit economics work in your favor. So you always have to keep in mind the unit economics, making sure that your cost of customer acquisition and LTV are balanced. Generally, they say your LTV to CAC or customer acquisition cost should be no less than, you know, at least we get one if not five, to one. So keeping that in mind is very important.
Matt DeCoursey 12:28
And that that still holds true to the point though, it takes time to establish a lifetime value if you gotta get to the three to five to one over your customer acquisition costs. And in some places, they you it might take years. Yeah, there’s a very interesting documentary about Uber. It’s not a documentary. It’s mockumentary, I guess it’s about the Uber story. And, you know, talking about how competitive that was with Lyft and they had other competitors early in there. And there’s one scene in there where the guy, the venture capitalists, I can’t remember what his name is in real life. But he’s talking to the founder of Uber. And he says, well, how sticky is it? He says, if they ride twice, they’re you. They’re our customer for life. Yeah. But you see what they went through? I mean, you’re talking to you that in an effective pricing strategy, in those cases, they were losing tons of money. Yes, that’s to get people in there and keep them because they needed them to have that second ride somehow. And sometimes that was giving away the first ride. But they knew that once they got him in there, and you know what, I looked back at that when I saw that, and I was like, so I use Uber. I’m not I don’t need it very often. I’ve never even tried Lyft I made it to that second, I made it to that second ride. And I was part of that sticky category. Because once again, now these are the more closed marketplaces like Uber obviously controls that marketplace, it might be a little easier to dictate what goes on and those kinds of, do you consider something like DoorDash is to have an actual marketplace?
Shirish Nadkarni 14:07
Yeah, because they are basically enabling transaction between consumers and restaurants. So yes, actually, I consider, you know, DoorDash, Uber all of these marketplaces.
Matt DeCoursey 14:18
Yeah. Now what about the pricing strategy on that? Because that’s one of the complaints that we’ll people will have about, we actually get our groceries at our house through Instacart. And I don’t mind the markup because the that I value our time, a lot higher than that. But that pricing strategy in the beginning, because here’s the thing is that money, the money that that the marketplace operator requires to keep the marketplace going. It’s got to come from somewhere. So it’s either going to come from marking up someone else’s products or taking a fee for participating in the marketplace. I know that a lot of we’ve been talking about things, like, DoorDash a lot, a lot of the marketplace or a lot of the business owners, they don’t like those fees.
Shirish Nadkarni 15:02
That’s, that’s true, you have to be very careful about, I have a section about business models in my book, you know, you have to be very careful about understanding the economics of the suppliers on your, on your marketplace. You know, DoorDash, for example, you know, charges between 10 to 20% take rate, and, you know, restaurants are very slim margins and, and then you have, you know, fees on top of that delivery fee and all that. So, and you also find that, restaurant owners will actually mark up their menu in order to pay DoorDash a fee. So suddenly, you know, $50 order, you know, become $75, $80 any dollars and becomes really very expensive. And that can depress demand. So you have to be careful about, of course, you have to make a profit at the end of the day, but you have to keep your costs down, so that you’re not charging too much in fees and making this, you know, a very expensive proposition for your consumers.
Matt DeCoursey 16:06
If you’re an entrepreneur that’s wanting to or to either start any kind of marketplace or or grow one you’ve already got, what are some of the things that you’re likely to not think about that are going to come up and be a big deal?
Shirish Nadkarni 16:25
Yeah, I would say, you know, the, the the challenge of fees, that you in order to be profitable, you spending a lot of your VC money, right, and you’re burning through all that cash. There’s a temptation to kind of layer in a variety of different fees over time to make your business more profitable. And that’s something that you don’t really understand the unit economics until you get into it, and you have to make a profit, especially as you go do an IPO, you need to show that, you know, within two years of your IPO, you’re going to be become profitable. And so you start layering fees, and so forth. And that depresses demand from your consumer. So those are things that you don’t really fully understand until you actually get into the economics of the situation.
Matt DeCoursey 17:24
I feel like the cost of customer service and support is something that can be grossly underestimated. Just meaning like you look at like, and I know, we keep using DoorDash as an example, but if half of your meal doesn’t come? Yeah, I mean, I’ve noticed a lot of the the platforms have found ways to automate a lot of that, because the overwhelming cost of people doing that, or the inability to keep up with that at scale is probably very difficult. And, you know, like I said, if a if a delivery service forgets half your delivery, and you don’t get a reply on that for two days, that’s not very good. So yeah, you probably, you know, you have some scale abilities, scalability issues that could come up. And I think another thing too, is, is, well continuing to adapt, because, you know, we’re talking about, like, DoorDash, and that, to me, that was like the third or fourth meal delivery thing, because like Postmates was out there, and a lot of other stuff first, you know, GrubHub, and then you kind of see this, you know, who’s learning to adapt and who’s learning how to, you know, marketplaces can change. I was a ticket broker for eight years of my life and you want to talk about, that’s a fully dynamic marketplace, I mean, fluid prices changing all day, every day, and the ability to adapt to things that were going on now, like with event based stuff. You could have an outdoor event, and now here comes a rainy day. And something that you have that was very valuable one minute is now almost trash if you can even smell it. And I think that your ability to you know, successfully adapt to changes and I don’t know, continue to innovate and find new products, I don’t know find new people to put inside the marketplace. I know that a lot of marketplaces in general really are are cashflow negative for so long. So
Shirish Nadkarni 19:32
Customer Service and Support is another big factor that drives the economics of the business and they’ve had to tighten up on that. I mean, I remember there was a case on DoorDash once the order arrived like 45 minutes later than they had anticipated, which was already an hour you know, and to not be an hour 45 minutes, so I complained about it expecting that they will give me a $10 off certificate or something of that sort. But they didn’t, they just said sorry. But there was no compensation for me. So I suspect that that’s happened because of the economics of the business. They just can’t afford to give away, you know, free, free product or, or dollars off and so forth.
Matt DeCoursey 20:20
Yeah, you know, now, we’re talking about micro marketplaces, my business is similar to that. It’s very close. Now, you know, Full Scale is the sponsor, Startup Hustle. And if you want to find expert software developers, it doesn’t have to be difficult, especially when you go to FullScale.io, where you can build a software team quickly and affordably. And you talk about these like many marketplaces. Now, I’m not a true marketplace because we’re the only vendor there and we only let certain buyers and but it feels similar to it. Asking the questions that match people up with the solutions is, is the kind of data driven decisions that I think a lot of marketplaces need to make. You look at all these, I don’t know, you look at you look at all these all these different things that you might see in an app or a website or a user interface. And you know, the it’s the data driven decisions about each and every buyer or seller that can help you look, the more stuff you put in front of people that they’re interested in, the more likely they are to stay in the marketplace. What are some, what are what’s some knowledge that you can transfer on about keeping people in the marketplace environment?
Shirish Nadkarni 21:37
I meant the biggest way to do that is to ensure, you know, a wide range of suppliers. So, you know, Amazon, for example, is very successful versus somebody like Walmart, I mean, Amazon has 2.3 million sellers, and Walmart has also tried to become marketplace and they have only 50,000 sellers. And, and these days, I can think of virtually any kind of need, and go search for that on Amazon, and there’ll be a product that will show up that satisfies my needs. So I’m not going to base you know, I’m not gonna waste time searching on Walmart, I’m just gonna go straight to Amazon because they have a wide range of suppliers to, to meet my needs. And and, you know, it becomes difficult for a supplier to be on multiple marketplaces because just being on Amazon is a full-time more than a full-time job. And so that’s why you see many more suppliers on somebody like Amazon versus Walmart, it’s very hard to multi-tenant and be on multiple marketplaces.
Matt DeCoursey 22:48
I mean, Amazon’s probably the king of all marketplaces in North America, at least by volume. And it’s, you know, it’s interesting to think about that, folks, you know, Amazon, well, Amazon does own some of the products they sell now, but they didn’t start by making them, they’ll go in and acquire some of the companies that they find to be interesting. And then they become Amazon’s choice or something like that. But, you know, Amazon’s in the logistics business. And if we want to talk about data-driven decisions, they also may be the king of that Amazon will look at an employee, and how many steps do they take? How many, how many times do they turn to the left? Or they turn to the right, what can we do to reduce that or streamline that? And it’s because across hundreds of thousands of employees, two extra steps per person per day turns into billions of steps, and wasted time. And they that’s where they carve out their margin, and all of it? And yeah, it’s definitely data-driven. You know, what, when do you realize that your marketplace or your concept or what you’re working with, like, what are some signals that might not be scalable?
Shirish Nadkarni 24:03
Yeah, I mean, it’s, it’s, you know, it’s totally a function of, you know, the supply side of the equation. If you’re not getting enough suppliers on your platform. And I said, you don’t have to build a marketplace initially, on a nationwide or global basis, you can just start on a in a specific region to make your life a lot easier. But if you’re finding that it’s getting very difficult to get suppliers on board, then obviously you don’t really have a strong value proposition. And so you have to think about, you know, you have to be scrappy, like, DoorDash and Instacart, to figure out how to get that content initially onto your platform before you actually sign up the supplier. So that’s, I think, a critical piece of the equation.
Matt DeCoursey 24:57
I think that goes back to that original statement that I made. And, you know, 20 minutes ago or about if you don’t have buyers and sellers in there, and I think that’s where you know you there are a lot of marketplaces. There’s a lot of places to put your attention. And like you mentioned, the more of those you’re selling in, the more balls you have in the air while you’re juggling at the business. And you know, it’s gonna be very difficult to attract a lot of new distributors or sellers of product if you don’t have buyers in the marketplace. But if you have a ton of buyers there, you might have a different problem of how, how can I get the sellers in here faster? Yeah. You know, and you also think about as we look back at, you know, Amazon has gotten goat has gone through an evolution as well, because you know, they’ve had quality control issues, they’ve had issues with counterfeit, fake, weird stuff coming in. And you know, that’s back to that’s back to, you know, a quality product and service that needs to exist. Because, you know, as a buyer, you only need to experience that one time. I think that when you talk about being an Amazon user, and you know, we are at our household, you buy with it. Well, first off, it’s easy to buy, there aren’t a whole lot of obstacles, if you want to grow the marketplace, make it easy for buyers and sellers to do transactions. And you know that that’s what you’re paying for when you pay the Amazon fees as a seller, you’re paying for the logistics. You’re paying for them to deliver it for all of it. Yeah, you got to have a little bit of respect and understanding around that. You know,
Shirish Nadkarni 26:35
Building that trust with your consumers is very important. I mean, we today we have a lot of trust in Amazon. You know, first of all, you have the views and rating system. So And what’s interesting, is that Amazon problems without
Matt DeCoursey 26:55
too, yeah, yeah, I mean, even they want to clean it up en masse.
Shirish Nadkarni 26:59
Yeah, for sure. But these days, Amazon is also including information about what you know, what kind of returns the vendor is seeing, if you sort it’s a signal to the buyer that hey, if this if this supplier has lots of returns, don’t buy this, this product? And if you do you have the ability to return it most of the time, but at no cost to you. So they made it really, you know, they’ve created a lot of trust in the system that you feel comfortable buying products from vendors who are not Amazon. And so that worked really well for them.
Matt DeCoursey 27:37
Yeah, I think the speed of delivery is just a key part there. You know, I bought something on Amazon yesterday, and they brought it to me yesterday. All right. More surprised when that happens.
Shirish Nadkarni 27:49
Yeah. And in fact, they have delivery options for like 9pm to 3am in the mornings, and the same day. It’s just amazing what they’ve accomplished.
Matt DeCoursey 28:03
So let’s talk about things from a technical standpoint. And, you know, I always I, when I talk to startup founders, I noticed that most of the time they’re planning seems to all be structured around what to do to prevent the sky from falling, which is natural, but very few seem to be planning for what will happen if everything in the plan goes right. And there’s, you know, some you know, there’s things that I don’t know, if you can’t support the if you don’t have a scalable technology, infrastructure, meaning your marketplace, if you are a tech, tech-driven marketplace, you don’t have the ability to have all of the buyers that are coming in. You can’t handle that you’re going to just kind of sully your own reputation and a hurry. Yeah. But at the same time as as businesses like, Yeah, I think the thing I’ve learned about about building software is nine women don’t make a baby in a month. So you can’t just always you have to go through an evolutionary process of of, you know, figuring out how to support the technology side of it. I mean, if it’s always crashing, or it’s broken, or something’s wrong, then you don’t really have much. What have you learned about that over the years?
Shirish Nadkarni 29:28
Yeah. You know, investing upfront for success is, is, is very important. You know, one of the companies that I started was, was in the language learning space. And over time, we had over 15 million members in 20 different countries. And we created a marketplace where we connected language learners with language tutors. And we had over 300,000 language tutors and so and the success came pretty quickly. So we had to really scramble to make sure that and this was a time when AWS didn’t really exist. This was in 2007. I mean, they were around.
Matt DeCoursey 30:17
Yeah, that was, that was back when you get like a radio host wouldn’t want to mention your website, because the moment they did, they’d crash you.
Shirish Nadkarni 30:25
Yeah. So it was doubly difficult for us to scale. But these days, given the fact that you can build your system on AWS, and you can scale up and scale down, if you gotta, you know, we had actually mentioned in the New York Times, and boy, did our traffic just go through the roof because of that. And so, these days, it is a lot easier to scale up resources on Amazon, for for temporary blips, and then grow beyond that. So things have become a little easier from that perspective.
Matt DeCoursey 31:05
Yeah, I remember you mentioned being in the ticket, event ticketing business, and one of the things we did was build the actual marketplaces that facilitated transactions between buyers and sellers. And, you know, we had multiple that we owned and operated, but the main one that we had, which, you know, had a lot of search engine optimization success, we’d sometimes come to it and it’d be crashed. And of course, at the end, this is in 2008, 2009. And, you know, there weren’t the kind of notification tools to let you know, but what would happen would be that, you know, an artist or performer or a band would announce the tour, and everyone would get really excited. And they’d go search and they’d find our website, and this big influx of people, it just crashed the whole thing, because this was pre-cloud. Yeah. And it would exhaust the server resources. And, you know, I remember that, that one of our websites, ranked first for the term Justin Bieber tickets. And I was terrified that Justin Bieber would announce the tour. Yeah, it was good, what it could occur at that point, it could have crashed our website for days, you know, like it could end and bringing the rest of the marketplace to, well, not a good place. So yeah, there are I mean, the world of technology has definitely caught up with that. And if you’re not aware of what Cloud Servers really do, it means if you exhausted the ability for the server, your your thing exists in it will draw on, on extra resources from all the servers that are around it, and prevents a lot of that stuff. So yeah, that’s, that’s, that’s a big thing. So yes. Can talk about your, your, your, your, your language marketplace. Did, did that same software product also facilitate the conversations between the tutor and the student?
Shirish Nadkarni 33:03
Yes. So we had a lot of bandwidth. Yeah, there was a chat-based system that would allow language learners to connect with tutors and then practice over our network. Yeah, yeah.
Matt DeCoursey 33:15
Do you think about that? You said there was 15 million users?
Shirish Nadkarni 33:18
Yeah. And during different countries? Yeah.
Matt DeCoursey 33:22
And 200 countries? Wow. Yeah. That That seems like a lot to keep up with. Yeah, yeah. Yeah. And like you mentioned, sometimes the things that you want as an entrepreneur, like, you say, you had a Wall Street Journal mention?
Shirish Nadkarni 33:35
New York Times
Matt DeCoursey 33:36
New York Times, okay. Sure. You’re like, Yeah, I can’t wait till we get that. Then you realize, oh, my God, what are we just we got what we asked for. And that’s a real thing. So
Shirish Nadkarni 33:46
I’d say no, this was in 2007. That’s when we got started. And as I mentioned, AWS was also getting started at that point. Over time, we were able to migrate our service to AWS. And so things became a lot easier in terms of scaling the system.
Matt DeCoursey 34:02
That was probably 2009 2010. Yeah, yeah, exactly. We were in that same boat. And I just remember that. Nothing. Nothing’s more frustrating than having buyers and sellers lined up and you can’t open the front door. Yeah, that’s definitely that’s definitely an issue. All right. So you know, so much of all of this is coming down to being able to run a sustainable marketplace. And I don’t necessarily mean from the environmental standpoint, but, you know, what are some of the tips that you learned about ongoing sustainability, keeping people interested? I think that for those of us that are old enough to remember using MS DOS, is that a way to say that we’re like 50 or older? Yeah. But yeah, so but, you know, we’ve seen so many things come and go, we go back to eBay, eBay still out there. It’s not quite the Titan that it was when first came out, but it’s definitely sustained itself. What are what are some of the things you learned about keeping things sustainable and keeping people coming back? You look at like, you know, Facebook just launched threads and got like 100 million users, and then two weeks later, has a 70%. Decline. Yeah. And all that means that they’re not doing a good job of keeping people engaged and keeping people excited. I mean, what are some of the things you learned about how to do that?
Shirish Nadkarni 35:29
Yeah, so, you know, you have to, you know, in my book, I talk about metrics, and what are some of the key metrics that you need to drag. So one of the things that you need to keep an eye on is liquidity in the marketplace that, you know, that whenever I conduct a search, for example, that multiple suppliers that can be brought to the attention of the buyer, or, you know, in the case of Uber, that if I want to go on a ride somewhere, that you know, that I can get a ride in within five to max, you know, 10 minutes, right? So as you grow, you know, you may scale into new markets. So you have to start all over again, in establishing the marketplace in a different location. So that’s one thing that you need to pay attention to. Second thing that you need to pay attention to is, you know, supplier, liquidity, and time to close the sale, and so forth. So there are a bunch of metrics that you need to track that I talked about in the book that are important to ensuring sustainability of your marketplace.
Matt DeCoursey 36:43
I think some of the keys are, well, don’t underestimate how quickly people are going to forget about you. Yeah, and what you do, you know, you got to continue to find a way to retarget the audiences. And you know, I noticed that a lot, a lot of successful marketplaces are really good at that the get back to the data driven decisions, you know, you ever get an email from a marketplace you’ve been at? And it’s like, Hey, are you still interested in XYZ? Because we have some more of them. Yeah. And you know, that’s that’s retargeting and look the, it’s going to take some transactions before you’re the go to marketplace for a lot of people just because you did one doesn’t mean you got him, you got to get in there 2, 3, 4, who knows how many times before they turn to you first, I think you got to continue to find ways to tell people there’s something new, there’s something different. There’s, there’s something that here’s a reason to come buy something now, like, Prime Day. And I mean, think about the Amazon has literally created their own two day holiday. And it it’s pretty serious, man. I mean, they do billions in sales on those days. And you know, and that’s a reason for you to come in and buy stuff. It’s a reason for sellers to stock up on their merchandise, it’s a reason for them to get more competitive in that marketplace. And you know, that’s in the world of sales and promotions, that’s often known as the coming events, meaning, like, the event comes and goes, and if, you know, Prime Day isn’t there, the third day, you gotta have a reason to buy. So I think that that, you know, that’s offering people value. However that is, and in that particular case, it’s a huge assortment of things that you didn’t know you couldn’t live without. Until you went in there. I gotta find a way to erase the Amazon App from my wife’s phone during Prime Day every year because I there are definitely a large assortment of things that we didn’t know we could live without. You know, as we’re running out of time, a couple of things. You have two books you have Winner Takes All, which is a case study in how online marketplaces are creating modern monopolies. Also, From Startup to Exit An Insider’s Guide to Launching and Scaling Your Tech Business, which it looks like you co wrote that with with Tom Parks, and those are those are available on Amazon, you know, and a very effective marketplace. You can order those today folks and have them in two days. It’s funny as an author of three titles myself, a lot of people don’t realize Amazon often prints these books as people order them.
Shirish Nadkarni 39:34
Yes, that’s amazing. Yeah. Exactly.Yeah.
Matt DeCoursey 39:38
Yeah. And it’s I’m recording this on a Monday we’re at about noon here in Kansas City. And according to Amazon, I can have either your books by Wednesday. Think about that, folks, they are going to print most likely print a copy of it, right? I think once they figure out your order flow, they may print a couple ahead of time.
Shirish Nadkarni 40:00
It’s a good thing because I don’t have to pay for inventory. Otherwise, I’ve had to, you know, print a certain number in advance, keep an inventory, pay on demand for holding it, all of that. So that cost is all, you know.
Matt DeCoursey 40:12
I got a funny story about that for so I wrote my first two books came out just a couple months apart. I actually wrote him at the same time, and I want I needed copies for myself. So I ordered 2500 of each without truly considering how big that was, like, so I had all the sudden I had a truck outside my office that had two pallets of my books. And the guy said, Yeah, what do you do you have a forklift or anything to get these out of the truck? I was completely unprepared for that kind of delivery. So and you know, if you don’t know much about truck deliveries, that driver isn’t responsible for getting anything off the truck. That’s your problem. But yeah, so we sat there for about 30 minutes. Looking like looking like you know, the volunteer line or trying to people trying to stack up sandbags to stop a flood you know, one box, one box, one box, and we’re a little sore from that the next day. So yeah, 5000 books takes up a lot of space. But ordering one of each of Shirish’s has does not so why don’t you go ahead and do that. Here we are at the end of another episode, Startup Hustle brought to you by FullScale.io. If you need to hire software engineers, testers or leaders Full Scale can help with the people and a platform to help you build manage a team of experts. Just go to FullScale.io where all you need to do is answer a few questions and let our platform match you up with our fully vetted, highly experienced team of software engineers, testers and leaders. At Full Scale, we specialize in building long term teams that work only for you. Learn more at FullScale.io. There’s a link for that in the show notes. There’s also a link to Shirish, his website where you can learn more about him and his book and go grab a couple of copies of that. Shirish, Shirish, what would you like to say to everyone on the way out today?
Shirish Nadkarni 42:07
Well, maybe I’ll just, you know, mentioned that I spend a lot of my time actually helping, advising entrepreneurs. I’m a member of an organization called Tie, t-i-e, which is a global nonprofit that fosters entrepreneurship around the world. And I have actually a program called Tie Entrepreneur Institute, which helps, is a program with 10 different sessions covering all kinds of topics from company formation to startup, you know, vetting a startup idea, fundraising, etc. It’s a great program to help you get started as an entrepreneur.
Matt DeCoursey 42:52
Yeah, on the way out, I got a couple of comments about marketplaces, I just want to go right back to that beginning state, man. If you’re trying to start one give, get, you got to really dig deep into what it’s going to cost to fill the marketplace both from a buyer’s and seller’s perspective. I find that so many early-stage founders are have a really good plan for getting one of the two in there. If you don’t have both, you don’t have a marketplace. You just have a place where a bunch of sellers or buyers might be hanging out. And I will tell you right now that any marketplace that doesn’t have stuff for sale, buyers are going to walk in and walk right back out, equivalent of a store with empty shelves. You’re gonna walk in, you see it right away, and you turn right back around and getting those people to come back again, exponentially harder than it was to get him to come in the first time. So give, give a lot of thought to how you’re going to do that and do what it takes to populate both sides of it. And then you truly have a marketplace and you might be on to something. Shirish thank you so much for joining me today. I’m going to catch up with you down the road.
Shirish Nadkarni 44:05
All right, great, great being with you today.
Matt DeCoursey 44:07