"Getting to product-market fit is the race. Getting there, fast, means being creative," noted Greylock Partner Simon Rothman, previously at eBay Motors having built it into a $14 billion business within six and a half years. Al Roth, Professor of Economics at Stanford University and Andrei Hagiu of Harvard Business School joined this debate at Startup Grind 2016, opining on whether a startup could create a dominant marketplace model without Uber's capital.
"Do you need a launch team in each place? What prevents you from doing it remotely with some software?" Simon wondered.
The Future is Already Here
As one of Startup Grind's favorite VCs, Marc Andreessen of Andreessen Horowitz has been quoted often as saying, "software is eating the world" and, with the increasing power of machine intelligence, there's every potential for franchise, on-demand marketplaces such as Uber and Lyft's to be self-managing with remote software rather than need local human teams.
Before we become concerned that employee rights and opportunities will be eroded by AI, and the emerging gig economy model dissolved, Hagiu provides some reassurance:
"It's a continuum with more flexibility. The reality is the shift won't be 100%. What are its advantages? It caters to the larger diversity of consumer preferences."
However, when he suggested that, "surgery would be beyond the reach" as part of the gig economy, Roth shared that in surgery there are examples of surgical residents who rotate on a gig basis.
Trust at the Center of the Marketplace
Hagiu observed that, "With services, the biggest problem is reliability. We'll need to write contracts and put in mechanisms to produce that trust there." Although the panel didn't explore this, developments in smart contracts on the blockchain may provide a way forward here.
In terms of capital-intensive, operations-based marketplaces like Uber, the panel agreed that it was a matter of taking the playbook of a successful launch, localizing it and driving a wedge into the market; the "sharper the wedge the better" as Rothman pointed out with Hagui highlighting the importance of "economies gained by specialization".
Becoming a Winner of the Gig Economy
Once a vertical is conquered, though, it opens up horizontal areas for the marketplace to expand into. Roth noted he could, "Imagine AirBnB going more horizontal and getting into restaurant recommendations and airline tickets" but "the first rule of a marketplace is to get thick."
Rothman expanded on this point with, "Getting to liquidity first is everything. The companies winning now are defined by how fast they can go. So fast that it's hard to copy them." He set a challenge for startups that are so confident in their "competence of speed" that they open source their business models!
So if you're starting out to build a marketplace: go software first, go fast and go drive the sharpest, thickest wedge you can!