Solving the Chicken and Egg Problem

My partner and I are in the development phase of a website which essentially is a new marketplace for a sector that we believe is lacking one.

However most of our resources are going for design and development leaving us with just a couple of thousands to solve the "chicken and egg problem" (reach critical mass) and we believe that it will be difficult to get funding before we have a proof that we have a business in our hands.

How do we attack this problem?

Focus on satisfying one side of the equation first. Pick the chicken, or the egg. Make sure they can see the value early in time.

Example: Del.icio.us, the founder made it valuable even if it's used by a single user (bookmark). It provides additional value as it reaches critical mass (share etc).

There are few techniques you can use to do that (references below). That's the best i can say without any clear idea what marketplaces you guys are building.

Few more links that you might want to read about this problem that kill heaps of startups:

• http://startupblog.wordpress.com/2009/09/04/inventing-demand/
• http://cdixon.org/?p=334
• http://anthillonline.com/the-market-building-dilemma/

Is it really a problem? I don't think so.

Your idea must reduce an inefficiency that currently exists, this is my start-up equation -

execution

High inefficiency + efforts/investment --------------> Low inefficiency + Benefits/Money