Andrew Chen discusses how to measure and monetize marketplaces before they're profitable. He covers SaaS-enabled labor platforms, quantifying engaged but unpaid communities, estimating off-platform transactions like Good Dog and Stonks, and what investors look for in GMV, lead gen, and take rates.
Chapters
I'm in the space where SaaS-enabled labor marketplace. And my question to you is, as we go into our next round and think about our next valuation, how do you think about, I guess, quantifying and qualifying an engaged community that you're not necessarily monetizing from? So we've got like a multiple on SaaS and GMV, but any thoughts in terms of the supply side of the community and how you Kind of talk to that?
Yeah. Well, I think the good news is that there has been a long history of companies where settlement— so there's kind of 2 flavors of this, right? So one is where the settlement of the actual transactions does not happen inside the marketplace, but you can kind of like estimate it. So like a good example in New York, is a company called Good Dog, which is all about pet adoption. And it's basically like a lead gen business ultimately, because it's a multi-thousand-dollar purchase and it's sort of a long sales cycle. And so the reality is you maybe don't settle on there, but they've attracted a tremendous amount of investment because one of the things they can point to is they're able to point to the idea that the leads that they're sending are worth a certain amount. And it's sort of like one step before GMB. It's sort of like a qualified interest, like dollars amount. I have a company that we recently invested in that's called Stonks that does the same thing. It's basically like a demo day product. You can basically run demo days on it, but you can't settle on the platform right now. You can't invest in the company on the platform. But what it does is you can say, well, I want to invest $100K, and then it'll connect you off-platform, and then they can count that. So that's one flavor of kind of like off-platform transactions. The other version as well is, I think one of the pieces of good news is that when you look at a product like Pinterest, for example, that's a product that has a lot of fundamental user engagement. They look and feel like a social network. It's sort of a monthly actives kind of based product, but at the same time, you know that it's at least mid-funnel in the purchase cycle. And so you can also just look at and talk about your product as if it's a social network with the idea that if there's some embedded amount of commercial intent, then the monetization story ought to be easier as a result. And so, and then frankly, Laura, basically the earlier the businesses, the less you're focused on, you know, the revenue piece of it. And so, 'cause we often see, you know, lead gen numbers, we often see take rates that are like way out of bounds of what it's gonna end up. And so as an investor, you kind of have to close your eyes and imagine, you know, where it's gonna go over the next couple of years.
