Supply or demand first: choosing where a new marketplace starts
Members of the Growth work group test each side against the first completed transaction: whether suppliers earn enough, listings bring buyers and buyers return.
Updated
Build whichever side gets a buyer to a completed transaction while giving the supplier a reason to stay, in one narrow market, and track matches, supplier earnings and buyer repeat use before scaling acquisition.
- Set a target for each side in each market. Casey Winters says Grubhub signed restaurants with no fee until an order came through and had roughly four months to get each to about two orders a day before it risked churning. Once restaurants per search crossed a threshold in a market, diner conversion and retention roughly doubled. That gave each city two targets: choices per search and orders per restaurant.
- Check that each transaction pays the supplier. Adriel Frederick recalls a Lyft pickup that took 15 minutes for a two-minute trip. He would recruit drivers in a tight place and time window, then check completed rides, pickup time, driver earnings after unpaid time and rider repeat use. If drivers reject the trips on offer, another batch of driver signups will do little.
- Test whether new supply brings its own buyers. Luc Levesque says TravelPod focused on product while a rival with a product he thought was poor grew ten times bigger, and ranking second for "travel blog" was a real constraint. Where inventory is searchable, he would recruit supply in the smallest useful category and check whether its pages bring qualified buyers and completed transactions.
- Fulfilling requests by hand isn't proof of demand. Gustaf Alströmer warns that a team can find a supplier for every request and still lose buyers if the match arrives after they've moved on. He would measure time to a usable match, completion rate and repeat use. His example is Voxer, a network product rather than a marketplace, where roughly the first year went into address-book matching so a new user's first session was useful.
- Build the inventory before buying traffic. Archie Abrams says Udemy's first push into selling courses to companies, around 2014, failed for lack of the content those buyers wanted and a business product that needed work; a later try with a deeper library and dedicated product took off. If trips are unattractive to drivers, he adds, more buyer traffic can make the first experience worse.
- Let the constraint pick the side, market by market. At Lyft, Archie says, the constraint moved by place and hour, so the team weighed another driver's hours against another rider and adjusted incentives. For a new marketplace he would run a smaller, manual version in one narrow market and build whichever side improves completed transactions, supplier earnings and buyer repeat use next.
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Growth
Frequently Asked Questions
How do you choose a startup's first growth channel?
Pick a channel the product can feed, test it with one narrow segment on a set budget and date, and judge it by how many users reach value and come back.
What should a founder check first when growth stalls?
That the data is right, then cohort retention split by segment and channel. If curves trend toward zero in every slice, fix the product before spending more on acquisition.
How do you tell a growth problem from a product problem?
Bring in a small batch of users from one clean channel and read their cohorts. If they activate and return but there aren't many, it's distribution. If they leave within the first week, product owns the fix.
What moves activation in a new user's first few days?
Find where users drop, then match the lever: pre-answer setup for users who stall, make the first action an earned win for users who feel nothing, and bring back users who got value.
Who should own acquisition and retention, growth or marketing?
Most members would split near signup, with marketing on channels and the promise and growth on the path to first value. The line still has to follow the growth model, and both teams judge channels by the cohorts that stay.
Should a growth team report to product or marketing?
Wherever the biggest lever is. For most product-led companies that is product, next to core rather than inside it, and once paid spend matters too, one growth leader owns acquisition and activation.
Which lifecycle emails should a team build first?
The ones aimed at the steepest drop on the retention curve, usually the activation email. Depth and renewal emails come next, and win-back to fully churned users comes last.
How do you bring back signups who went quiet?
Watch a few try the next step and fix where they stall, then test the message with and without the fix against a holdout, and count retained use rather than opens.
When should a product-led company add sales?
A founder can start working accounts where usage is spreading and retaining. A sales team follows once deals need security reviews and procurement that self-serve can't handle.
Which self-serve accounts should a sales rep call?
Ones big enough to pay for a rep's time, with use spreading inside the company and a need self-serve can't meet. Hold some flagged accounts back to check that sales added value.
Which early action should count as activation?
Use two measures: an early action onboarding can move as the team's operating metric, and a later repeat action to check that those users came back. Randomize the onboarding change so motivated users don't skew the read.
What makes a good north star metric for an early product?
A retention measure built from how often the problem occurs, the action that solves it and the user it describes, with activation as an input. Drop it if the team can raise it without users getting more value.
When can a marketplace copy its first city?
When service holds after subsidies come down, a new manager can run the launch playbook without the founders, and the team knows whether the channel behind market one's demand starts warm or cold in the next market.
How should you test a landing page?
Show visitors what they searched for before the ask, start with the page's first clear funnel drop, and count activated users per visitor alongside signups.
Should a startup with a few dozen users stop acquisition?
Stop broad acquisition but keep a small hand-picked flow from one segment, onboard those users live, and count only return visits nobody prompted.
How does a B2B startup find its first paying customers?
Have founders sell by hand to one narrow buyer, starting with warm intros and asking for payment early. Then check who actually paid, and at what price, before choosing a channel to scale.
