Thread by @lennysan

My handy-dandy ever-evolving checklist for evaluating a marketplace business (thread 👇)

1. Demand-side PMF
2. Supply-side PMF
3. Scalable with quality
4. Non-monogamy
5. High frequency and AOV
6. High fragmentation
7. Reason to stay on-platform
8. Payment flow

But first...

1/ Before you get too focused on the marketplace element, make sure you look at the *business* like you do any other business. Most marketplaces fail not because of the marketplace, but because of more fundamental reasons.

2/ Some things to look for in any business:

1. Is this something people want?
2. How big is the market?
3. Why this team?
4. Is there a moat?
5. Why now?
6. How strong is their business model?
7. Are there network effects?
8. Do they have a smart growth strategy?

3/ Next, is this idea suited to be a marketplace business? The more of these you have, the better your chances.

1. Demand-side PMF: Is this better than the non-marketplace alternative? Is it much cheaper or easier? Most marketplaces fail because of this, e.g. Cherry, Homejoy

2. Supply-side PMF: Does supply make meaningful income? Are you able to make this level of income, with a similar level of work, elsewhere? Many marketplaces are unable to scale for this reason, e.g. Exec

3. Scalable with quality: Is there enough “supply” out there? Can you scale this marketplace while maintaining a high quality, consistent, experience? e.g. Handy vs. Lyft

4. Non-monogamy: Will customers need to come back for more, or is one relationship enough? e.g. a restaurant vs. a doctor

5. High frequency and AOV: The more frequent, the higher AOV, the better. But OK to have neither.
a16z.com/2020/02/20/mar…

6. High fragmentation: Is supply and demand currently fragmented? Could they easily find each other without you? e.g. an Uber vs. a plane

7. Reason to stay on-platform: What keeps supply or demand from taking this off-platform? Usually guarantees, convenience, or obfuscation.

8. Payment flow: Do users transact through your platform? Can you take a cut of the transaction? e.g. Airbnb vs. Craiglist

Much inspiration drawn from @bgurley, the godfather of marketplaces.

If you've seen any other attributes be critical to marketplace success, I'd love to hear!