Sam Altman says marketplace startups should start tiny: find a small, desperate user base on both sides, get them passionate, then expand. Trying to launch big fails. The hard part is balancing growth on two sides at once without churn.
Chapters
2 gen 2 thoughts, 1 general about startups and one specifically about marketplaces. The first one is a general observation about startups. We went through and looked at our history of our most successful startups. Everyone says they want to capture a large market, they want to dominate a large market. And there are two ways to do that. One is you start with a small market, take all of it over and then expand. And the other is you start with a large market and then and take a small part of it over and then expand. And in either case you sort of go horizontal first or vertical first, but eventually you try to have all of a large market. Now, the thing that surprised me is when we looked back at our own data, all of our successes, I think literally all started with capturing a large part of a small market. And in fact, I think many of our failures that I was very bullish about failed because their initial markets were too big. And I can talk more about why, why that doesn't work if you're interested. But in any case, I think what you really want is to find the smallest possible cohesive subset of your market, the most narrow, smallest market you can find with users that desperately need what you're doing and go after that first. Once you take over that market, then you can expand. And I think this is true for marketplaces, but it's also true for Reddit or Dropbox or Stripe. Anything we've funded has had this characteristic. The markets that are too big are too hard to really take over all of. And you do need to get to a point where you have very high penetration in some specific market. And by far, it's easier to get there if you have users that really, really want what you're doing. So specifically on marketplaces, the hard part of a marketplace is that you have two sides that you need to move up the ladder at roughly the same pace. And the reason that quality generally works more than quantity is the same idea of you need to start with the most passionate users and if the marketplace gets too big on either side, someone's going to be unhappy. So in practice there's this ramp up period where you want to start, usually almost always with a small number of people on both sides and super high quality, as in people that really, really want it. Hi.
