Andrew Chen General Partner at Andreessen Horowitz @a16z. Prev: Growth @uber. Newsletter: http://andrewchen.co Jul. 09, 2018 6 min read

The current generation of marketplace startups has been incredibly successful. Airbnb, Lime, Uber, Lyft, Instacart, etc. I've been doing a broad survey of the best writing on this topic and wanted to share my list of 20 best links I've seen.

We look at a lot of marketplace startups at Andreessen Horowitz @a16z - and we fund a lot of them! - so it's great to compile all the best thinking.

@a16z 1. To lead off this list, my colleague @jeff_jordan has an awesome preso that covers everything from the marketplace "wheel" - network effects, and how they're different than ecommerce products. Amazing, thoughtful preso. Must watch.  https://www.youtube.com/watch?v=n57UaE08h7A 

@a16z @jeff_jordan Now let's get to the links. First, here's a series of links on the "Chicken and Egg" problem of marketplaces. How to do you get the initial liquidity to get the flywheel turning? Here's a few links on the topic.

@a16z @jeff_jordan 2. Josh Breinlinger @jbreinlinger (early oDesk) on "Liquidity Hacking." Couple ways to do it: Provide value to one side: offer portfolios, community, tools. Find aggregators: Physical aggregators (like campuses), enterprise clients, supply aggregators, or scrape listings.

@a16z @jeff_jordan @jbreinlinger Narrow the problem: geo, niche, vertical. Curate one side. Read the whole thing here:  https://pando.com/2012/11/20/liquidity-hacking-how-to-build-a-two-sided-marketplace/ 

@a16z @jeff_jordan @jbreinlinger 3. Here's a nice podcast from Casey Winters @onecaseman (ex-Pinterest/Grubhub/etc) and Brian Rothenberg @bmrothenberg (VP Growth at Eventbrite) who talk about: The "chicken and egg" problem for marketplaces. Horizontal vs vertical. Online to Offline.  https://news.greylock.com/paving-the-way-to-marketplace-liquidity-76c8e7854cad 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg 3. Eli Chait @elichait (ex-OpenTable) on all the ways to boostrap a chicken and egg problem. Single player, Fill seats for suppliers, Create a marketplace where the buyers are sellers. Read the whole thing here:  https://blog.elichait.com/2018/04/09/how-the-100-largest-marketplaces-solve-the-chicken-and-egg-problem/ 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait 4. Anand Iyer @ai (ex-Threadflip) writes about using trust throughout the product: Ratings, Curation, Customer service, Mobile first, Good onboarding, Frictionless Payment, Social proof.  http://firstround.com/review/How-Modern-Marketplaces-Like-Uber-Airbnb-Build-Trust-to-Hit-Liquidity/ 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai 5. Jonathan Golden @jpgg (ex-Airbnb) on bootstrapping liquidity, adding host guarantees, reacting to competition, user experience.  https://medium.com/@jgolden/lessons-learned-scaling-airbnb-100x-b862364fb3a7 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg Next topic, the current crop of marketplaces has gotten huge for a reason. They're doing a lot different, but going more "full-stack," building deeper tools, etc. One important label is the new "market network" concept

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg 6) Another by Casey Winters @onecaseman (ex-Grubhub) on how new marketplace companies are evolving: 1) connect buyers and sellers, 2) own the delivery network, 3) own the supply (managed/verticalized).  http://caseyaccidental.com/three-stages-online-marketplaces/ 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg 7. Anand Iyer @ai (Trusted) again, talks about the evolution from leadgen/search-based marketplaces to full-stack where the platform helps manage: 1) customer UX, 2) supply software tools, 3) retention/frequency, 4) transactional model, 5) trust/safety/risk, 6) pricing mgmt +…

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg …guidance. Read the whole thing here:  https://medium.com/@ai/the-evolution-of-managed-marketplaces-3382290963b2 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg 8. James Currier @jamescurrier (of NFX) pens one of the classics of the last few years, defining the term "Market Network" - multiple participants, SaaS tools, with transactions at the center.

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier Key differences: 1) Market networks target more complex services. 2) People matter - complex services mean each client is unique and not interchangeable. 3) Collaboration happens around a project. 4) There's unique profiles of people involved.

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier 5) Long term relationships between participants. 6) Referrals flow freely. 7) Increases transaction velocity and satisfaction. Re-read the whole thing here:  https://www.nfx.com/post/10-years-about-market-networks 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier 9. Andrei Brasovean @algovc (Accel) gives a comprehensive list of Marketplace metrics.  https://medium.com/@algovc/10-marketplace-kpis-that-matter-22e0fd2d2779 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc Here's the list: GMV, net revenue, gross margin / contribution margin, MoM growth rate, Market share, Liquidity, AOV, Items per basket, Messages, NPS, User reviews, Cohort retention, Repeat orders, Whale curves, ...

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc ...Sector/Geo/Product concentration, Fragmentation, CAC, Channel scalability, Channel mix, LTV, LTV/CAC, Unit economics, Burn rate. A lot more detail in the essay.

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc 10. Borja Moreno de los Rios, ceo of Merlin, writes one of my favorite articles where he has a bunch of graphs/concepts on measuring liquidity:  https://techcrunch.com/2017/07/11/marketplace-liquidity/ 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc 11. Angela Tran Kingyens @ATKingyens (VersionOne) on a Marketplace metrics dashboard. GMV, revenue, Seller/supply metrics (engagement/overall), Buyer metrics (engagement/overall).  https://versionone.vc/marketplace-kpi/ 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc @ATKingyens Finally, I wanted to add a section for overall marketplace strategy - how do you know you're in the right vertical? What is a network effect exactly? How to think about frequency and retention?

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc @ATKingyens 12. Me! @andrewchen (ex-Uber). A few years back, I wrote this about Uber's virtuous cycle around acquiring more drivers, keeping the marketplace in balance, and how to think about the hyperlocal nature of the product.  http://andrewchen.co/ubers-virtuous-cycle-5-important-reads-about-uber/ 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc @ATKingyens 13. More from Jonathan @jpgg (ex-Airbnb) on defining a marketplace, global network effects (versus root density), homogeneous/heterogeneous supply, two-sided incentives, size and frequency of interaction, unit economics  https://medium.com/@jgolden/four-questions-every-marketplace-startup-should-be-able-to-answer-defb0590e049 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc @ATKingyens 14. Another from Casey @onecaseman on 4 strategies to win on low frequency marketplaces: 1) SEO (expedia model), 2) Better/cheaper (Airbnb), 3) Insurance (HotelTonight), 4) Engagement (Houzz).  http://caseyaccidental.com/low-frequency-marketplaces/ 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc @ATKingyens 15. The @reforge team takes on the TaskRabbit case study, focusing missed opportunities: 1) Fixed pricing. 2) Faster txns, 3) Going vertical, 4) Raising enough VC , 5) Reputation systems, 6) Gig economy verticals are a power law.  https://www.reforge.com/blog/taskrabbit-marketplace-growth 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc @ATKingyens @reforge 16. Bill Gurley @bgurley (Benchmark) has a classic: 10 factors to evaluate with marketplaces: 1) New Experience vs. the Status Quo, 2) Economic Advantages vs. the Status Quo, 3) Opportunity for Technology to Add Value, 4) High fragmentation, 5) Friction of Supplier Sign-Up, 6)…

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc @ATKingyens @reforge @bgurley …Size of the Market Opportunity, 7) Expand the Market, 8) Frequency, 9) Payment Flow, 10) Network Effects.  http://abovethecrowd.com/2012/11/13/all-markets-are-not-created-equal-10-factors-to-consider-when-evaluating-digital-marketplaces/ 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc @ATKingyens @reforge @bgurley 17. Josh Breinlinger @jbreinlinger (early oDesk) on the ingredients for a successful marketplace: 1) recurring 2) episodic 3) standardized work 4) little trust required 5) non-monogamous.  http://acrowdedspace.com/post/73232464154/the-ingredients-for-a-successful-marketplace 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc @ATKingyens @reforge @bgurley 18. My colleague @jeff_jordan again (a16z, on the Airbnb/Lime/Instacart boards) on how marketplaces must nurture and manage perfect competition. Gives a sense on why B2B marketplaces often don't work  https://a16z.com/2015/01/22/online-marketplaces/ 

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc @ATKingyens @reforge @bgurley 19. Worth a mention - not an essay, but The Perfect Store is a behind the scenes look at eBay that I read a long time ago that is great.  https://www.amazon.com/Perfect-Store-Inside-eBay/dp/0316164933 .

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc @ATKingyens @reforge @bgurley I've read everything out there about Uber but there's nothing good yet. @mikeisaac's upcoming book is the one to watch.

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc @ATKingyens @reforge @bgurley @MikeIsaac I'm still collecting/curating my list! So if you have clues for other great pieces, please let me know. Also interested in books if I'm missing anything.

@a16z @jeff_jordan @jbreinlinger @onecaseman @bmrothenberg @elichait @ai @jpgg @JamesCurrier @algovc @ATKingyens @reforge @bgurley @MikeIsaac More ideas/thoughts welcome! I read every tweet reply :)