Business

Launching a two-sided marketplace: How to kickstart supply and demand

This is a guest post by Oisin Hanrahan, the CEO and co-founder of Handybook, a two-sided marketplace for cleaners, plumbers, and handymen.

Ask a smart investor how they feel about starting a two-sided marketplace, and you’ll likely here the same response: “It’s difficult — maybe impossible.” And they’re right. Two-sided markets, or economic platforms that have two distinct user groups that rely on one another for goods and services, are hard to develop and even more difficult to maintain.

Since co-founding Handybook in January 2012, and a few years prior when I co-founded The Undergraduate Awards, I’ve learned that getting two sides of a market together requires an initial (preferably face-to-face) spark, followed by a unique combination of hack and hustle.

One element of launching a successful two-sided marketplace that is often overlooked is the initial spark, or the little drop of supply and tiny inkling of demand you need to kick your whole idea off into a successful market. There is an over-reliance on using technology to secure these wonderful drips of interest that will eventually turn into the transactions responsible for driving your business.

As a serial entrepreneur, I know we tend to focus too much time on changing increasingly small parts of our product or marketing material, and too much effort on finding ways to scrape listings in the hope that it will somehow negate the need to get out there and just find the right supply. It’s the same as a salesman who thinks that by finding more creative ways to organize his or her files and present materials, it will somehow make the need to do fifty cold calls a day disappear, only to find it won’t — the cold calls still need to be made.

It’s the same with sparking a two-sided market. Technology won’t spark your market. You can scrape listings and figure out clever ways to pull content from other platforms when you’re trying to grow and scale, but you shouldn’t be dependent on these things for multiple transactions. You need something to spark your supply long-term. The right technology and hacks will facilitate growth and scale but it won’t provide that initial spark you need to amplify your supply. You need quality, real-world people who are willing to hustle, both online and in the real world.

When we were first working to develop a scalable two-sided market, it meant going out and scouring to find our initial supply of home professionals. It meant meeting local home cleaning companies and local handymen. It meant spending lots of time in Starbucks buying coffee for maids and asking them who was the best maid they knew and how they cleaned ovens. (I even learned to clean an oven.) It meant meeting local handymen and conversing about the single job they were most proud of.

When Paddy Cosgrave and I launched The Undergraduate Awards, hustle meant we trekked from Dublin to New York to San Francisco and spent time with university presidents, student groups, and professors to explain the value of a global awards program to get our first couple hundred entrants. The tactical way founders of Airbnb, an online community site for finding places to stay, met hosts and photographed spaces to rent in order to build a strong two-sided marketplace. Airbnb’s tactics have since become legendary amongst entrepreneurs.

Is it possible to find this initial spark online? Maybe, but you miss out on so much rich information on the supply side of your market place. If you meet people in person they’ll tell you what they think they want, and from that you can try and infer what they actually think. If you don’t meet them, you’ll miss out on what they think about the other side of your market. But most importantly, by seeking your supply solely online means you compromise quality of your supply, and your future supply will become copies of your current supply. All other things equal, if your current supply is below average then your future supply is destined to be much worse. The bottom line is that you need to find the very best initial supply to seed your marketplace to fuel optimal growth and scalability.

Sparking the right supply on a two-sided market requires an act of magic, as many who have walked the walk can attest. It requires convincing the best supply possible that you will soon have demand and that the initial time-cost of the sign-up and on-boarding process will be well worth it. Then within this tiny window when you have both interest and mind share of quality supply, you need to convince some customers to engage.

A number of startups have successfully launched and maintained two-sided marketplaces, and the ones who took these smart steps from the beginning are seeing the most success now. You can’t start a fire without a spark — and you can’t spark the right supply without hustle.

Oisin Hanrahan is the co-Founder and CEO of Handybook, an online platform for booking household services. Prior to founding Handybook, Oisin founded MiCandidate, a service that provided real-time political content to media companies in 25 European countries. MiCandidate was acquired in 2009. He also founded Clearwater Group, a real-estate-development business in Budapest, Hungary.

Coffee meeting image via LANTERIA/Shutterstock


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