In this short dialogue, Speaker B explains that the most powerful lever in a marketplace is what he calls “incentive engineering” – the alignment of supply‑side and demand‑side motivations that drives liquidity and transactions. He illustrates the concept with two case studies: a volunteer‑translator marketplace he built (Terjumbly), where instant‑gratification and gamification motivated volunteers and created the world’s largest translator community; and Nash, a marketplace where merchant reliability and supplier predictability were the critical incentives. Speaker A adds that savvy investors evaluate marketplaces by consistently thinking from a multi‑sided perspective, ensuring that solutions for one side do not neglect or harm the other. The conversation underscores that investors often overlook these deeper incentive structures, focusing instead on surface metrics like transaction volume, and that understanding the balance of incentives is essential for assessing marketplace potential.
Give us the critique on the investor community. Do you think people understand marketplace companies? Is it too weird? Is it just because it's not a social app? What's your take on this sophistication?
I think one of the most powerful things about marketplaces is kind of what I call incentive engineering. I learned this from Terjumbly, the volunteer marketplace I made, which is— I think one way to evaluate a marketplace is the transaction. And you say, oh, great, liquidity, transactions, is there movement? And what I think is fundamentally, as a thesis, more important and will lead to liquidity and transactions is the incentive alignment of your marketplace. I think it's very easy to set up a place where you say, Well, demand wants to have access and kind of supply wants to sell more. And the best proxy for this is liquidity. I think one fundamental aspect of are people's incentives aligned? And I'll give you an example. In our first company, the marketplace has volunteers on one side and has humanitarian NGOs on the other side. And for one of the hardest things we thought about upfront is how do you incentivize this marketplace to have liquidity? And we thought about gamifying it. We couldn't pay people because you don't have the money. Who pays them? And one of the biggest learnings that volunteers get this instant gratification when they help someone. And that was the core thing that built this marketplace. And when we understood it, when we understood that Hey, volunteers get instant gratification from doing free work if it's scoped and filtered for them and you ensure you're not wasting their time. All of a sudden you build the largest volunteer community for translators— or sorry, it's the largest translator community period in the world, service more than 100 languages. Every NGO in the world would use it because now there is supply that's available. The NGOs care about reliability and availability. The more kind of basic things. But now when you evaluate this marketplace, you can say, okay, great, there's liquidity, there's transactions, but it would have been impossible if the fundamental incentives were not there. And I think for Nash, these incentives were the merchant side needed reliability. I think they care about 10 things. The most fundamental one is reliability. When I tell a customer your goods are on the way, they need to arrive, and they need to be reliable. The supply side needed predictability. They needed a lot of other things. They needed price. But predictability was the big thing. If you crack it, if you figure it out— and I think this is not necessarily something that in your conversation with an investor it's very easy to sell. But it's so fundamental to you as a marketplace to understand the incentive engineering.
Right. Well, and just to build on this point, I mean, I think— This is one of, in my opinion, one of the fastest ways that you can figure out, as all of you are evaluating investors while you're talking with them, is do they think of every problem from a multi-sided perspective?
Yeah.
Because it's easy to say, you know what? I wish I could hit a button, and then the car is going to show up, and the driver shouldn't have to talk to me. Do not talk to me button, and I should have a— and all these things where you're kind of like, OK, yeah, you're thinking about one side of the market at the expense of the other side. And you don't even understand what the hard side of the market actually is meant to be. And so no, I think this incentive engineering thing, I think, is exactly about the balance between each of these pieces.
