Lenny Rachitsky: observation

Transcript context

…It's hard because to me, the two are most independent. Maybe this is a hot take, but I feel like product market fit is independent of your marketplace dynamics. You might have a great product, and it provides amazing value to both sides, but you have yet to crack the flywheel on the supply side for how to bring those people. You don't have the right product channel fit, for example. And so, this will have a massive impact on the dynamics of your marketplace. And so, to me, my answer would tend to be pretty classical, it would be like measure your product market fit the way you would for a normal company. So yeah, it's a bit of an art more than the science, but I like the classic if we were to take this product away, what percentage of users would be significantly disappointed or have no other solution? So, questions like this I think go to the heart of how valuable is your solution to users, and you can do this on the supply side and the demand side. I think here my advice is typically to consider that you have two product market fits essentially. You want to make sure that you have a compelling enough value proposition on both sides of the marketplace, and very often at the beginning you find product market fit on the demand side, but you realize it's not compelling enough for your suppliers because your margins are too high or something like that. So, realizing that you have both those things, but I think you can measure them in a way that's relatively traditional, and that's independent of marketplace dynamics. I love that. We actually just had Sean Ellis on the podcast talking about that exact survey, the Sean Ellis test of asking people how disappointed would you be if they left, if the product didn't exist. And I just love that you keep coming back to this point that I 100% agree with, that most of the challenges you have with a marketplace business, 90% are the same challenges you'll have with a non-marketplace business. And people over-focus on, "Oh, I need to think of this like a marketplace, and all the marketplace science behind all this stuff." And really it's all the same stuff every founder is dealing with product market fit, except you have two sides of it growth strategy, but you have two sides of it. So, I love that you keep going back to that. Something that I definitely want to touch on is when people are thinking about starting a marketplace company, what are signals that a marketplace is a good model for the idea? Because I think a lot of people come into and be like, "I want to build a marketplace. Oh, I'm going to connect these two sides. It's going to be great," and there's no marketplace in this business, in this vertical. What are signs that marketplace dynamic and a business model is right for an idea versus no, it's not? No one ever say like, "Oh, I'm going to build Airbnb for X," it's not something that people say. I think the signs that come to mind are one, higher fragmentation. I think you want this long tail of buyers and sellers without a handful of big players controlling the market, because this is where you can provide value by doing this job of aggregation. I think you also want a relatively uniform set of needs. That means that it can be, like your supply can be commoditized to some extent. This is what's so tricky, by the way, about services, service marketplaces like Thumbtack, because unlike eBay, where sellers, they just want to sell very clear and distinct inventory, on Thumbtack you have electricians who only want certain types of jobs, but they only want it if they're available that day. And they might take a job and cancel it because something better comes up. And so, this makes for a very fuzzy definition of supply, and you have very different set of needs. One electrician wants something, the other one has a very different perception of the same unit of demand, and that makes it very, very difficult. So, it's feasible, but I would say that is not a compelling attribute for building a marketplace. So, a relatively uniform set of needs. And the last one I'd mention is a high enough bearer in the matchmaking or the creation. I think how hard it is for people to find each other today, and how much effort do they have to put in to vet each other, I think is another great sign. The higher it is, the bigger the opportunity because it means you come in, implement the right processes to simplify this exchange of value.…

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