How startups can thrive against the odds


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In the high-stakes world of startups, founders often find themselves faced with a paradoxical challenge: how to attract buyers without sellers and sellers without buyers.

This chicken-and-egg problem has derailed more promising startups than we care to count. The truth is that you can overcome this dilemma. Successful marketplaces like Airbnb, Uber and Etsy have already achieved this by creatively laser-focusing on one side of the market before moving to the other.

Single player mode

The key to solving the chicken-and-egg problem often lies in temporarily ignoring it. Instead of trying to build both sides of your market at the same time, focus on creating value for one side first.

Airbnb, now a household name, began targeting hosts in New York City during major events. They manually reached out to potential hosts, helping them list their properties and even offering free professional photography services. By providing a reliable supply of attractive listings, they created a compelling reason for travelers to use their platform.

As a rule of thumb, identify which side of your market is most vital to buy and start there. We are about to launch an ad network and faced the same dilemma months ago. So we've bought some niche products that appeal to creators, such as newsletter directories. As a result, we have a creative network that can support the launch and further growth of our platform for the foreseeable future. Now, all we need to do is get advertisers on board. So in similar cases, create an offer that provides value to a group even without the presence of the other party.

Related: Why you should choose your co-founders very carefully to ensure startup success

Fake it until you get it

In the early days, your market may seem a little empty. Do not allow this hinder you. Instead, roll up your sleeves and start curating content by hand.

Reddit, in its early days, faced the challenge of appearing active and engaged without a user base. The solution? The founders created multiple fake accounts and populated the site with interesting content themselves. This created the illusion of an active community that attracted real users who then contributed their own content.

Turnover strategy

Why build a network from scratch when you can use existing ones? This strategy involves identifying the platforms where your target users already congregate and bringing them to your market.

PayPal executed this brilliantly by integrating with eBay. They targeted electricity retailers and offered a more efficient payment solution. As these sellers adopted PayPal, buyers naturally followed, and both sides of their payments market grew rapidly.

Related: How to build the perfect C-Suite for sustainable business growth

Franchise gambit

Nothing drives demand like franchise. Limiting access to your market can create a sense of scarcity and desirability that attracts buyers and sellers.

When Spotify entered the US market, it used an invite-only system. This allowed them to manage growth and created buzz and anticipation. People clamored for invites and were more likely to actively use the platform when they finally got in.

Plus, that way, you're not building up expectations of breaking into the mainstream right away. A smoother market would be acceptable and expected by your existing users.

The leader of the loss

Sometimes, you have to sweeten the deal to get your first users on board. This may mean operating at a loss initially, but it can pay off in the long run.

In the early days, Uber offered heavily subsidized rides to passengers and guaranteed minimal profits to drivers. This two-way subsidy quickly created both supply and demand, which created the network effects necessary for sustainable growth.

The network effect

Design your product with viral growth in mind. Make it not only easy but also beneficial for users to bring others to the platform.

Dropbox achieved this by offering free additional storage to users who referred friends. This encouraged users to become platform advocates and rapidly grew the user base at minimal cost to the company. The beauty of this approach lies in its simplicity and scalability – each new user became a potential vector for further growth and created a self-perpetuating cycle of expansion.

Related: 5 Ways to Network Your Way to Business Growth and Wealth

Trust and reliability

In the world of market startups, trust is your most valuable currency. Without it, buyers and sellers won't feel comfortable transacting on your platform, no matter how slick your UI is or how extensive your offerings are.

Etsy met this challenge head on. They implemented a review system that allowed buyers to rate products and sellers. They also introduced secure payment methods and buyer protection policies. These measures created a secure environment for transactions and encouraged more buyers and sellers to join the platform.

Another great example is Airbnb's implementation of host and guest verification processes. Requiring users to verify their identity significantly reduced the perceived risk of peer-to-peer transactions in the short-term rental market.

Solving the chicken-and-egg problem in marketing startups is no small feat. It requires creativity, persistence and a willingness to experiment. By focusing on one side first, manually curating initial offers, leveraging existing networks, creating exclusivity, offering irresistible incentives, designing for viral growth and building credibility, you can overcome this hurdle and establish your market on the way to success.



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