People Don’t Understand Marketplace Models & Their Timelines

I’m currently the founder of a mobile marketplace app.  And one of the most surprising things when I talk to people — businessmen outside tech, entrepreneurs in different tech verticals, you name it — is how little they understand about how to build and scale an online marketplace.

I constantly find myself in conversations with people, having to explain to them why the frameworks that work to build say SaaS companies are different than what it takes to build a marketplace.

If I could name the single most important takeaway in regard to building a successful online marketplace, I would say it is “patience as it relates to time.”  Here’s why…

A lot of marketplaces have what’s called the “chicken and egg problem.”  While I am generalizing in that there are all sorts of hybrid models out there (like Airbnb in which both sides of the marketplace can be both buyers & sellers), in general, there is a buy side and a sell side.

The general thinking is to build up the sell side, aka the supply side, and then open up the app to the buy side.  This is called building marketplace “liquidity.”

And this is where “patience as it relates to time” comes in.  You can’t just onboard a handful of the supply side, open up the app to the buy side, and expect magic.  Nor should this be indicative that you approached your marketplace incorrectly.

You & your investors need to exercise patience & give yourself time to onboard your “magic #” of vendors in a specific area (density) and then go from there.

This is why I believe that marketplace models should have much longer periods of time “in the field” listening to customer feedback and the current problems in the market you are attacking.

Then once you have spent that time in the field, you should see if you can onboard your sell side.  Once you have proven that you can onboard your sell side and you have spent extensive time in the field listening to the needs of the buy side, then you should raise your first round.

And here’s the rub: the mistake are people who have the mindset that you should wait to see monetary conversions in the marketplace as indicative that said marketplace is worthy of an investment or is solving an actual problem.

The key metrics that should be focused on prior to a seed round are to make sure that you can onboard a certain # of vendors in a specific geographic area & that you have spent time in the field listening to the buy side and validating that they want less friction via technology being able to discover and book the sell side (hint: film videos of your buy side conversations and show those to investors).

A marketplace takes time to build.  And you are going to have to build features that remove friction & onboard your sell side, usually with some sort of vetting process (another hint: don’t just aggregate Yelp reviews, you need a proprietary system unique to your marketplace that ups the level of trust and safety for your platform because that should become a core competency and competitive differentiator for your company –and one you should trumpet in your marketing messaging).

Once you have validated you can onboard the supply side and you have validated that the buy side really needs a solution — your solution — to getting to aforementioned supply side, then you need to raise a round for the reasons outlined below…

  • Engineers beyond your cofounder CTO so you can move faster through fast cycle iterations because…
  • Once you start onboarding via your onboarding team (hired after your seed), you are going to need to pattern match what is necessary to build next in order to continue to remove friction in your marketplace
  • You need that onboarding team — your vetting process for who you let into your marketplace is very important and needs to engender trust & safety on the part of your buy side so they know that if they book, they are ensured quality
  • You need a publicist

The last point is going to be the most surprising of my bullets but here is the reasoning.

I believe that online marketplace should give themselves a 3 month “level up” period post seed infusion — your CTO has an expanded engineering and design team, so with $, now allow him to level up over this 3 month period.

Then  you need to engage the services of a publicist to start doing hyper-local press (you don’t need national press attention yet, you should be growing your marketplace at the hyper-local level).

The reason is that you need to switch your onboarding process from one where you are “reaching out,” which is what you were doing prior to the seed infusion, to one where the messaging on the part of the publicist starts to educate the market about the value of your company and the trust & safety of your brand…

You need to start shifting your onboarding to a process that is a mixture of both inbound and outbound vendors coming to you in order to be vetted and if they pass, then put on the platform.

And this relates to my ultimate point, you need to find investors who understand that marketplace models require raising more capital at the seed round than say SaaS companies or social networks.

To review:

  • Spend more time in customer development before you raise your seed round if you are building an online marketplace than you would with other internet models
  • You have waited too long to raise a seed round if you are trying to prove out revenue at this early stage — prove you can onboard your supply side & film your customer development journey to validate the buy side really needs friction removed in your vertical to get to the sell side
  • If you find investors who push you hard on bullet 2 to focus on revenue, find other investors who understand the uniqueness of marketplace models more.  By the time you have onboarded enough liquidity to start to generate any meaningful revenue, you will have waited too long to raise.
  • Do not just aggregate Yelp reviews or simply rely on past customer reviews, you need to generate a system that is unique to your marketplace that will enhance the trust & safety you offer to the buy side — this is mission critical and will be something that will in perpetuity be part of your marketing messaging
  • Raise more $ in the early rounds than you would for other types of internet companies — Fred Wilson himself said that even VC’s constantly underestimate the amount of capital it takes to get a company going & this could not be more true than for marketplaces.

Do NOT let an advisor/board member/fellow entrepreneur/investor try to put a framework around your marketplace that may work for a different type of internet company, or even a different marketplace.

Just like you should analyze market size by bottom up, or you should raise an amount of money by backtracking what is necessary to achieve the milestones of the next round — you need to know the uniquenesses of your marketplace and find investors who have strategic alignment because they buy into the vision via the fact that  you’ve validated you can get the sell side onboarded & that the buy side needs this bridge to the sell side and needs friction removed…

And the journey you are agreeing to go on together are the 1,000 iterations to make sure that “bridge” that your marketplace provides is as seamless as possible for your customers.

There’s plenty of thought leadership out there — from Version One’s marketplace write up to Bill Gurley over at Benchmark — but it seems that most people just haven’t mentally connected the dots about the uniquenesses of this type of model.

As always, and I know it’s hard to do because I’ve had to do this myself, do NOT take $ from people who are not strategically aligned with the vision of your company.  BUT always always entertain the notion that someone else may have a better idea than you, and when they do, then instantly mentally pivot because it does not matter who has the best ideas, it matters that the best idea wins because then the Company wins.

Make your company great.  Make your marketplace great.  And heed the above advice.

 

 

 

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People Don’t Understand Marketplace Models & Their Timelines

Oscar Predictions 2016 – Review

So per my last post where I made educated guesses, I will now review how I did…Overall, I guessed in 18 categories, and was right in 13/18 times for about 72% accuracy.

Picture – Wrong

Director – Right

Original Screenplay – Right

Adapted Screenplay – Right

Cinematography – Right

Film Editing – Right

Sound Editing – Wrong

Sound Mixing – Wrong

Original Score – Right

Production Design – Right

Costume Design – Right

Makeup & Hair Styling – Right

VFX – Wrong

Actor – Right

Actress – Right

Supporting Actor – Wrong

Supporting Actress – Right

Animated Feature – Right

Note:  my analytics do not predict who wins in what Oscar category. They evaluate $(CV) [content value] — this exercise was purely my making educated guesses in regard to my gut instinct of what I thought the Academy would reward.

Oscar Predictions 2016 – Review

Oscar Predictions 2016

NOTE 1:  The below does not reflect all categories.  I did not put in my 2 cents in categories I am not knowledgeable enough in this year.  The following reflects my guesses based on categories where I have seen enough content to have an opinion on what I think the Academy sentiment will be.

NOTE 2:  these are NOT my personal picks for what I feel should win, these are my guesses as to what I think will win based on Academy sentiment.  Please note this difference.

Picture – The Revenant

Director – The Revenant

Original Screenplay – Spotlight

Adapted Screenplay – The Big Short

Cinematography – The Revenant

Film Editing – Mad Max: Fury Road

Sound Editing – The Revenant

Sound Mixing – The Revenant

Original Score – The Hateful Eight

Production Design – Mad Max: Fury Road

Costume Design – Mad Max: Fury Road

Makeup & Hair Styling – Mad Max: Fury Road

VFX – Star Wars: The Force Awakens

Actor – Leo DiCaprio

Actress – Brie Larson

Supporting Actor – Sly Stallone

Supporting Actress – Alicia Vikander

Animated Feature – Inside Out

Looking forward to seeing how accurate my guesses are!

 

 

 

 

 

 

Oscar Predictions 2016

What Makes A Good Manager (Leader) – Part 4

NOTE: Continuing this series…

In the last post, I discussed E.Q. in the context specifically of “business E.Q.” and how it related to the fundamental theorem of leadership:  [Vision] + [E.Q.] = CEO/leadership material.

I’m now going to drill down and focus on one of the most important elements of E.Q. which is…

Emotional Control Stemming From Internal Fortitude

In your journey as a manager, you will encounter people within your organization who are skeptical of your decision-making.  You may hear things like: “he’s difficult to work with” & “he never chooses my suggestions” & “he’s too opinionated.”

In your journey, you will encounter naysayers from outside your company who look at your decision-making as sub-optimal, heck, they even may label it flat-out “stupid.”

You need to be able to maintain calm, project confidence, & continue to be the “rock” upon which the company is built, even when you are confronting the haters, the doubters & the whispers of people who don’t concur with your decisions.

Internally in your company, you need to have processes to allow people to verbalize their opinions – give people that forum. I’m a believer in holding big, internal meetings so that the rank and file can get exposure to the top of the org chart.

Your job as a leader is to deal with the uncertainty, the negativity, & the hate that comes your way. And your job is to show up to work ready to inspire your troops & projecting confidence, even at the times when you yourself may be questioning.

And if you are questioning, then you need your own process & systems to get your mojo back – whether it is confiding in a trusted mentor, or simply taking a day or two off in order to get mental clarity through collecting your thoughts.

Having “alone time” & “thinking” – being a ‘thinker’ – is critical to leadership because it’s critical to vision – and as we’ve discussed, “vision” is one of reactants in the fundamental theorem of leadership.

To be a leader is to forge your own path against the tidal wave of uncertainty & negativity that will at certain points on the journey be leveled your way.

If you have the need to be loved at all times on the journey, then the role of leader is NOT for you.

To consistently need external validation is not being a leader, it’s being a “counter” – one who requires a prerequisite external “numerical vote” (a “count”) in order to execute decisions.

If you’re a leader, you need to have the courage of your own convictions & you need to have an inner place where you summon the internal fortitude to maintain emotional control against the tidal wave of hate/negativity/doubt/questioning [pick your adjective] that will come your way.

Clarity of purpose matters.  And that starts internally, in one’s own psyche.  If the “head” of the leader is not right, then how can you expect the rest of the “body” to function?

What Makes A Good Manager (Leader) – Part 4

What makes a good manager (leader) – Part 3

NOTE: Continuing this series…

I left off my last post with the equation that [vision] + [E.Q.] yields CEO/senior manager material. 

I’ve addressed the idea of vision in my previous posts, but now want to focus on how E.Q. fits into this equation.

According to wikipedia:

Emotional intelligence (EI) or emotional quotient (EQ) is the ability of individuals to recognize their own and other people’s emotions, to discriminate between different feelings and label them appropriately, and to use emotional information to guide thinking and behavior.

To clarify, I am talking about a very specific type of E.Q., which I will deem “business E.Q.” (henceforth many times in this post, I will just refer to it as E.Q. for short because all of this is in the context of ‘business’).

This is an important distinction because people can have “high E.Q.” but not necessarily specifically “business E.Q.”  Example:  someone who throws great parties in school, is well-liked by their peers, & has charisma because they navigate the interpersonal waters of relationships well – that person may very well have high E.Q.

But you can have high E.Q. but not necessarily high “business E.Q.”  Therefore, it’s important to make the distinction that in the context of business, there is an I.Q. component to the E.Q. matrix.  That’s where “vision” comes from.

Vision requires intelligence because it requires foresight to things that have not yet occurred, or the ability to put together strategies to create a reality that has not yet occurred.

Tying back to the difference between a more general E.Q. & business E.Q. – it’s this “vision” component that is a fundamental concept & differentiator, because it directly relates to how E.Q. is executed in the context of business.

Again, going back to our above example of the great party-thrower in school, this person may have high E.Q. because she is (i) fun to hang out with in the moment ; (ii) understands peoples’ emotions & adjusts accordingly so is widely-liked by many different types of people ; (iii) finally also has a high ability to regulate her own emotions, which makes her someone that rarely makes people uncomfortable.

The above definitely is high E.Q. …

But E.Q. in the context of business leadership requires vision – and that means that you’re not always in the present moment. And in order to get the company to a future reality that has not yet come to pass, it means having to utilize E.Q. to understand the various people around you in the company: their psychologies, their motivations – and then use E.Q. to push everyone on the journey to get to the vision that many times only you see.

The above is not always a “party” (meaning not always “fun”) and that’s the reason I chose that example of a great party-thrower…

E.Q. in the context of a more general social dynamic can be very much about “being in the moment.”  Business, and especially creating increasing future value for an enterprise, is about the future.

Important:  most people DON’T see the future.  That’s why most people AREN’T leaders/CEO’s/senior managers.  That’s why most people view the CEO/senior manager position as “easier” than their job: ‘all that guy does is make decisions after listening to people, hell, I could do that‘ – no, you most likely can’t.  It seems easy in theory, but is infinitely complex in execution & practice.

So the E.Q. component of leadership in the context of business is really about utilizing social skills to drive your people toward a vision that will result in increased company value.

You can’t always just do what’s the highest E.Q. (happiest-making) decision for the individual you are addressing in that particular moment because business is not all about the current moment.  It’s not a party, where everyone is your guest & you’re trying to make everyone be comfortable and have fun.

No, business is about driving toward future goals, it’s about creating a sustainable entity that will increasingly create ever-more value for shareholders, and most importantly for customers.

Business is about the future because it requires vision to imagine a future before said future has come to pass.

But E.Q. are the tools you need to guide the ship & its people on the journey to getting to that vision – to realizing that future.

That’s why the most important skill for success in business leaders is people management.  And “people management” is a synonym for CEO/senior managers.  And as defined above, the reactants that catalyze to output ‘people management’ are [vision] + [E.Q.].

So…

You need to be inspirational to help your troops stay motivated when they themselves don’t have the ability to see the future that will come to pass.

You need to balance carrot & stick motivational techniques, dependent on what is effective for the individual troops who are under your purview.

You gotta be able to recruit and hire fantastic talent & then retain them throughout the highs and the lows that are inevitable in business.

And you have to have “internal vision” – and know what you yourself are either (i) weak in ; (ii) or that you don’t have the time to deal with on a daily basis…so then use your social skills to attract hires & architect your team around the things that you yourself need to plug…and realize that you personally can’t become amazing at all skills & understand what needs to be done to plug those deficiencies in yourself & others already in the company.

Vision is the ability to see the future, but you don’t get to that future unless you have the E.Q to attract, hire, inspire, motivate, and retain the people who can help you get there.

Success & failure in business is directly proportional to the ability of teams of people to work together.

E.Q. can collectively be thought of as the tools that you need to create the team & make your decisions in regard to the team – ones that allow you to ultimately realize the value of your company, which was originally only seen in your mind’s eye because at that time, it was only “vision.”

What makes a good manager (leader) – Part 3

What makes a good manager (leader) – Part 2

NOTE:  Continuing this series…

In the below, I am going to list some of the factors that I think are critical for great leaders but almost universally they revolve around one core concept: high E.Q. as it relates to “people management”…

  • Ability to consistently make good choices in the face of “incomplete information”
  • Ability to make “tough calls” especially when there is not consensus
  • Related to the above, ability to exit non-performing members of the team and/or bad “cultural fits”
  • Ability to hire & retain the best executive talent
  • Ability to inspire others that the choices you’re making as a manager are always coming from a place of what is best for the company as a whole & its long-term sustainability & value
  • Ability to anticipate problems & take care of them before they become bigger, or to see them coming from a mile away and take steps to avoid them altogether

Ultimately, in regard to building value for a company, I do not believe in “democratic leadership” in which you get your direct reports around a table, take a vote, and the highest vote wins.

This is a huge mistake – and I think it’s one that many people make when they first become CEO’s & senior managers (guilty as charged, I made this mistake).

When I started as a CEO, I was still too worried about “everyone getting along & being happy.”  And that leads to poor decision-making because you are not putting the company first & you are also not acknowledging a fundamental component of business…

You’re the CEO (or in a senior management position) BECAUSE you have vision – this means you have a skill that 99% of people DO NOT HAVE.  And giving equal “weight” to everyone’s opinion fails to acknowledge the stone-cold fact that not all opinions are created equally.

Therefore, I am a strong proponent of “democratic listening” to the opinions of the people who report to you.  This means you give the opportunity for everyone who you respect around you to inform you of her perspective, to voice it.

Don’t get me wrong – you should ask for peoples’ opinions, and you should hear them out & listen to them.  But “listen to them” is not synonymous with execute them.

Ultimately, it’s your job as a leader to make the call.  And making the call is inclusive of choosing which inputs to listen to or not listen to.

Let me clarify the above further because it’s a crucial concept…

If a report comes to you with the optimal strategy, it is still your decision to then execute based on that.  While you should always give credit to the good ideas/work of others, the sooner you get comfortable with the idea that even if someone else “thinks of it,” it’s still you’re making the call because you are allowing that idea/strategy to get executed.

Anyway, I think there are really 3 main courses of action and I define them below:

  • One of your direct reports actually has the optimal strategy, so it’s then your ability to recognize this is the optimal strategy & help everyone understand that this is what they should be executing on
  • Your direct reports have elements which make up the optimal strategy, so it’s your job to synthesize all of this information, and then output the strategy that combines all of these positive elements coming from different sources – and then that becomes the strategy you execute on
  • Your direct reports are “off” & are not able to either (i) come up with the optimal strategy ; (ii) there are vastly differing opinions on what that optimal strategy is (and they’re not optimal in your mind) – so it’s then your job as the CEO or a senior manager to come up with the optimal strategy – and then execute that

That 3rd bullet above is the most uncomfortable for many (it was for me) when you first find yourself in a senior position.  Basically, there will be times when you have to have the internal temerity to tell everyone that they are not approaching this optimally, and then put forth what you want them to do.

I do not believe in “flowery word choice” in which you say things like: “You all thought of really good ideas, but here’s what we have decided.”

I believe in being straightforward: “I listened to what everyone had to say & I’m not confident moving forward with any of the strategies that have been presented thus far. So here’s what I’ve decided we’re going to do...”

Then list what that strategy is. And make sure everyone knows that if they are not clear how it applies to their job, then the door is open to seek further clarity.

People respect those who are bold enough to execute on their vision in the name of creating long-term value.  That applies at both the macro level (press, shareholders, etc.) & the micro level (the day-to-day people you work with).

If you’re going to be a leader, then there is no more ultimate test than when you must disagree with the group.  And then get everyone onboard to execute an endeavor that while it may be uncomfortable & unpopular in the short-term, you are confident that over time, the results will allow those around you to see that you are one to have confidence in, because you indeed have vision.

And [vision] + [E.Q.] = CEO/senior manager material.

 

 

What makes a good manager (leader) – Part 2

What makes a good manager (leader) – Part 1?

NOTE:  This is Part 1 of many posts

There is so much literature around the topic of management.  And the thought leadership around how to be a manager spans a wide array of opinions & strategies.

Before I list what I think the optimal alchemy is for leadership, I want to state at the outset that in my opinion, most people are not leaders.

Despite the various literature out there that gives off the impression that anyone can become a manager/leader, I tend to fall on the side of the best leaders are a result of a combination of nature & nurture, but critically:  there is a “nature” element in that not everyone can just “try hard” & then end up a good leader, there has to be some good raw materials to work with at the outset.

Therefore, pursuant to the above, I’m confident that to be an effective leader, you need to…

  • be born with a set of traits in your DNA that give you the genetic predisposition to have the opportunity to mature into being a leader ;
  • have the opportunity to make mistakes in a working environment, so that over time, you can hone your natural abilities & get both mental clarity & inner confidence around the executable process it takes to be a leader ;
  • #2 above evolves from studying other leaders who you respect & trying out strategies in your own environment, then seeing them either execute to a positive or negative result & then personally iterating based on those results – that’s what over time gives you the aforementioned “clarity” & “inner confidence”

Let me start by listing 3 leaders who I think are excellent CEO’s & who I have personally studied.  They are:  Bob Iger (Disney) ; Jeff Bezos (Amazon) ; Jeff Weiner (LinkedIn).

And I’ll give you summary bullets as to what I think each of them does particularly well…

  • Iger combines a commanding sense of inner strength, but not to the point where it’s off-putting, where it comes off as: to be in his presence would be to feel empowered. When he speaks, you not only feel that the ship is in good, strong hands – but that he knows how to hire other good managers below him.  And then to let these managers do their job, while still making sure those managers understand the overall direction & strategic vision of the mothership (Disney). Iger would probably do well as a CEO across many different industries, not just necessarily the media sector in which he currently operates. If you had to point to one man who is the definition of a “CEO,” Iger would be “it.
  • Bezos is the most visionary of the 3 I am going to cover here.  He is also the only one who founded a company from the beginning & built it into what is now one of the biggest companies in the world.  Bezos combines a strong sense of the future, with the internal fortitude to guide his vision there, regardless of naysayers who want more immediate (read: quarterly) results.  In the end, this combination of foresight & the internal temerity to stick to his guns and guide the company there, is what not only allows Bezos to maximize shareholder value, but also makes Bezos one of the greatest visionaries of our time.
  • Weiner is probably the most “naturally” talented leader of the 3 mentioned here. He has such an effortless way of handling himself in interviews & in conversation that there’s a nobility to him that shines through.  Whether he’s talking to Oprah or Ari Emanuel, he maintains an uplifting, inspiring demeanor that almost makes one want to do anything & everything to make sure that “wherever that man is going, I’m following him there.”  Whereas Iger has a gravitas that is more overt, Weiner’s gravitas is so organic across delivery, clarity of purpose, & vision that he makes it look as easy as breathing.

I have learned, continue to learn, & incorporate elements of each of these mens’ leadership styles through a combination of private study of them & trial and error in the workplace to see what personally works for me.

I intend this to be a series of posts, so I am going to stop here for now – but To Be Continued – as I outline my thoughts on management & leadership.

 

 

What makes a good manager (leader) – Part 1?