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I about to venture into a startup that will address two types of users who have a relationship with each other. Let us call one of them X and the other are their users (let us call them Y). My startup helps both of them. My startup acts like a mediator or broker between the two.

I can imagine the issues one has when bootstrapping a startup which is focused on one kind of users. However one does not lose focus there as one has to worry only about one specific kind of user.

Here, I want to get sufficient number of X AND Y together as soon as possible. My worry is that X may not come to use my product if sufficient number of Y is not present and similarly, Y may not come in if sufficient number of X is not available. Can anyone help me with ideas on how to ensure that I get enough number of BOTH X and Y?

Examples could be a Real Estate Broker service or a used car service. There too, one need to handle two different types of users. One is the buyer of used car/realty and the other, the seller. How did such startups get both types of users together when bootstrapping?

Unfortunately, unlike Real Estate brokers or used car sites, my startup is not concentrated on any particular geography. It is supposed to work all over the Internet.

Thanks

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3 Answers

up vote 3 down vote

This is a regular chicken-and-egg situation in a two-sided market. An excellent strategy for handling this has been outlined by Chris Dixon (ladies night strategy) here: http://cdixon.org/2010/10/16/the-ladies-night-strategy/

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up vote 1 down vote

You are in a two-sided market, that is you are not trying to sell a product into a market but act as an intermediary between two types of customers. Lets stick with your examples and call them sellers and buyers.

As you have correctly asserted, you need to position yourself so that you can attract both of these two customer types. Your ability to do so will have a high impact on the success of your business. To a certain extent, the problem you have can be described with a special network effect, that is if you don't have sellers you wont attract buyers and vice-versa. Ebay is a classic example for this kind of business model.

To be successfull, you need to focus on one of these customer-groups and try to bring them onto your platform. Ebay focused on buyers right from the beginning: The auction mechanism is a highly interactive process that capture and retains the buyers attention and Ebay charges their margin from sellers instead of the buyers.

Why did they chose to focus on bringing the buyers onto their platform first? Because the buyers had the higher barrier of entry. Previous to Ebay there was no proof that people would buy goods on the internet from people they've never seen before. It's a reasonable assumption that sellers have less risk in an online-auction: they know if the goods they are selling are as good as they described it, they can refuse to send the goods and just keep the money etc.

Similarly, you should ask yourself which of your customer-groups has the higher bar of entry. Your choice of price mechanism and terms will influence who that will be. Promote the customer group with the higher bar of entry, but do not forget that you need to get the others on board too.

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up vote 0 down vote

Read all you can about building online marketplaces and communities from scratch.

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