Does "marketplace" business have a bad rep?

I noticed that talking to people about so called "marketplace" business (bringing together different groups with complementing needs) ideas gets a lot of people excited, but it seem to quickly turn off investor folks.

Is it just my perception? If not, is it because it is hard for money folks to see a quick exit? Or perhaps because it most likely going to be a long haul? Probably much longer then any Twitter-related byproducts... I personally think that those that can overcome the initial challenges would be in a better position to withstand the competition and sustain the test of times. But it's just my personal opinion. What do you think?

Business Plan Business Marketplace

asked Nov 11 '10 at 15:59

Usabilitest
1,698 points

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What do *you* mean by a "marketplace" business, since it is a loaded up word with many different meanings? What's the value proposition? – Alphadogg 14 years ago
Two groups that can benefit from each other. For example: actors and filmmakers, or sellers and buyers (EBAY). – Usabilitest 14 years ago

1 Answer

I think that most investors are discouraged about marketplace businesses because they know most of them have a low entry barrier and also have the chicken and egg problem. As a consumer, I don't want to go to a marketplace website that does have little or nothing to offer me (imagine ebay with only 100 items) and as a seller, why would I want to list my product(s) in a site that only gets fewer visitors per month... as a seller I want as many eyeballs as possible and a buyer always wants variety and plenty to choose from.

Investors are very aware of this problem, and unless you have a "real" solution to the chicken and egg problem for your marketplace business, you are going to have a tough time getting investors excited about your idea.

answered Nov 12 '10 at 14:20

Ricardo
4,815 points

I'm afraid there is no simple formula for this. What I try to do is to add features that benefit both sides... In turn, community continues to grown. It is a slow process though. There's some sort of tipping point when majority begins to accept it, but before that happens you have to to work hard and enjoy small victories. – Usabilitest 14 years ago
If you have someone on your team with a proven track record of getting these type of business booming then investors are likely to situp and take notice. – John Bogrand 14 years ago