Sarah Tavel: prediction

Transcript context

…Okay, so we've been talking about tipping of the marketplace. Is there anything else there that you want to share before we move on to the third layer? Yeah, there's two other things that come to mind. One, just as a reminder, and then one as a caution. So the reminder is in order to tip a market, you have to reach a saturation point in that market. You can't tip a market before you've penetrated it to some saturation level. And it goes back to level one of why you want to focus on a constrained market. Let's take growing a food delivery product in Des Moines, Iowa versus LA or New York. When you're growing in a small city and you're focused on restaurants, you're going to be able to get to this tipping point a lot faster and more efficiently than if you're going after a very big market. And so there's a real advantage to being able to prove out the playbook as quickly as possible and as efficiently as possible before you move on to bigger challenges. And so I think it underscores, again, why it's so valuable in the beginning to focus on something that is constrained. And again, Postmates focusing on San Francisco, the city. DoorDash focusing initially on the suburbs, much smaller opportunity, but one that they could really knock the cover off the ball on. They had no competition. They had a customer that was desperate for attention, and so they could make them happy. And that just sets you up for real success to go from strength to the adjacent market. The second thing that I'd say is, and this is so important is that not all markets are susceptible to tipping, right? We've all experienced this, I'm sure Lenny, with the companies that you work with, the companies I work with, where there are conditions of a market that make it vulnerable to tipping. I have six in my post just to name a couple classic ones. The first obvious one is just concentration on the supply side. In order to be able to tip a market, you need suppliers to want to lean in on your marketplace. My partner, Bill Gurley talks about how great marketplaces create the new incumbents. So you basically have suppliers who aren't the incumbents. The incumbents aren't going to lean in on your marketplace, they're already fat and happy, but you want to have these hungry suppliers who lean in. But if there's already concentration in your marketplace, in the ecosystem, the market that you're playing in, then you're not going to have sellers lean in, and you're not going to be able to create a flywheel that spins where the more sellers you bring on, the better the pricing or experiences on the demand side because the sellers are happy and there's nobody that's hungry or fighting. And so that's just a critical, critical point. Bill Gurley and I actually had a little Twitter debate once about supply versus demand and which one's more important. And basically his pitch was like, "All that really matters in the end, to build a successful marketplace, is can you find the demand? Can you bring the demand to your marketplace?" It makes all the sense in the world. Everything in the end is, "Can you find customers?" In the work I've done looking into marketplaces, what I find is the hardest thing to do, to bring people to your marketplace, is to find the supply and bring it to people, basically aggregate it. And your point here is exactly right, is that basically the value of your marketplace is to find this non-concentrated demand that's all over the place and bring it together and make it easy to transact with. So I think that is really important, just to double down on this point, that what makes the marketplace valuable is supply that is hard to find that you make easy to find and transact with. And I feel like that's almost the core of what makes marketplace work.…

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