Sameer Singh breaks down why marketplaces fail when they expand to new regions. Before you go into a new market, nail your product and messaging at home, make sure you have baseline liquidity, and understand whether your network needs to be connected across regions or can work independently. Localization isn't just translation: Airbnb had to rethink how hosts and guests thought about homes in different cultures.
Chapters
So the question I had was, if you have a marketplace business and maybe you're looking to move to a different region, so going from the US to Europe or maybe Europe to APAC, what are things that marketplaces during expansion often get wrong when they're tackling new regions?
So again, depends on the kind of marketplace you are. So if you're the kind of marketplace where the supply and demand both have to be localized to the same sort of continent, right? So something like, let's say I have a portfolio company called Home Cooks that delivers frozen food, right? There's no way in hell that food's going from the UK to the US. Like they can do it within the UK, they can do it within France, maybe even like France to Belgium, but it's not, it's sort of, there's a border to it. So in that case, you've got to be very careful about when, because you need to ensure that the playbook is perfected before you move on to the— there's an awful lot of testing you need to do to figure out what works, what doesn't work in your GTM, in your product, in your messaging. Once you perfect all of that, then you can expand. If you haven't perfected all of that, the problem is When you expand to a new region, there's going to be more local constraints, more local nuances to keep in mind. And you're trying to optimize for both of them. That's an awful lot of load on an early stage marketplace like that, especially if it's a new language, new cultural dynamics. I mean, forget about it. It's a nightmare. If it's a marketplace like an Airbnb where you're connecting supply and demand across those regions, then you kind of need to figure that out. It's again one of those marketplaces where your barrier to liquidity can be a little bit higher because I'm guessing in that type of marketplace supply is going to be a bit differentiated. But you kind of need to take that leap because it depends on where you have the most valuable supply. For Airbnb, the most valuable supply was Europe because that's where people wanted to travel. So they had to figure that out. You'd still have sort of some sort of nuance on ensuring you have sort of a base level of liquidity in your existing locations before you expand to a new one. But expanding to new locations is sort of a part and parcel of building liquidity here, whereas in the first case, it wasn't. So it really depends on, are these— is this an interconnected network or are these sort of discrete networks? That's like the biggest thing to keep in mind. The second is localization is a whole lot harder than it than it might seem. It's not just language. It's generally different behavioral traits. I had a portfolio company that was called Smitten, which expanded from Iceland to Denmark and Sweden. And they were flying everywhere except Denmark, and they couldn't figure out why for the longest time. And it's only later they figured out that smitten meant infected, which— and it was a dating app. So obviously that was not ideal for that company. Um, so there's awful lot of nuances, stuff like that, that you're honestly not going to know until you expand.
