Andrei Hagiu discusses how to solve the chicken-and-egg problem for a low-cost meals marketplace in LATAM. He recommends starting with large company customers on the demand side rather than chasing individual consumers, and explains why supply-side fragmentation among chefs and restaurants requires different tactics than typical network effects.
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Hi, Andrei, how are you doing? I'm from Sobroso. What we are doing basically is a marketplace for low-cost meals in LATAM. So picture like something like Rappi or Uber Eats, but aiming for low cost and aiming for companies, right? So my question is, how would you recommend we calculate like the liquidity of the marketplace and what's the sweet spot to aim for the first steps? According to the trends, right? Like for 1,000 new users, what's the sweet spot? For like 10,000, what's the sweet spot? Like that.
So your users are companies, is that correct? They're businesses?
Yeah, they're companies and workforces in LATAM. Like for example, if you're in an office space or if you are in a company that gives food to their employees.
And the supply, so what's the supply side?
The chefs or the restaurants that cook for these companies.
Right. I mean, so again, what's interesting with this is like each user, quote unquote, if it's a business, it depends how large it is, right? Like, and in some sense it makes it, again, I don't think it's a magic formula, but it's easier than getting users like individual consumers one by one because presumably if you get like a bit, like one or two big companies, you already have a bunch of liquidity, right?
Yeah.
If you have a couple companies And they have many, I don't know, like hundreds of employees. And then they order like, you know, they also have predictable demand, which is nice. Maybe they say like, you know, we're going to order 2 or 3 times a week. I think that's awesome. So in some sense, I would say for you, it's like, I, I wouldn't worry like what's the formula for liquidity. I would just get a bunch of companies like this and make sure you have, you know, you have enough demand, you get that to work. And then maybe you ask them like half and then you start saying, okay, well, now you're getting food from this one or 2 restaurants. I mean, would you like to switch around like every month or something? Do you want to try it different? And then you bring new chefs. Again, this is the type of marketplace where I would say it's less fragmented than the usual like individual consumer with individual chef or something, which I think has the advantage that it makes it easier to get past the chicken and egg problem, get liquidity.
Yeah, I mean, right now we're aiming for both spaces in the B2B and the B2C. But yeah, frankly, the B2B is the one that scales the most faster because exactly company represents 500 users.
I think there's lots of good things about it. Like, you know what I wrote in the sort of in the article. So I'd say, so here's how I think about this fragmentation, by the way, is another big question for marketplaces. So Eventually what I want, I want fragmentation, the more fragmented, the better because the stronger network effects. However, in the early stages, fragmentation makes the chicken and egg problem harder, right? So if you're in a situation like yours, you can start like not very fragmented. So you get these big, big users on either side. That's great. But after, so what I think once you get the ball rolling, once you get a few, like, you know, start like you said, B2B or B2C. Yeah. Once you get those, I would definitely start adding consumers. Again, I want like, if you're like to get this marketplace to like bigger network effects, eventually you want it to be more fragmented, but it makes it easier. Like once you get the businesses, then it's easier to say, well, okay, now I have these chefs, they have, if they have additional capacity, well, now they can basically serve, they can also serve consumers.
