Thread by @lennysan

A guide to expanding your marketplace into a second market—a thread.

Based on lessons from @Instacart @OpenTable @Snackpass_ @Caviar @Grubhub and @Peerspace

Read on 👇

1/ How long does it normally take to expand from a single market to a second market?

On average, 8 to 12 months. A few marketplaces, like Caviar and OpenTable, launched their second and third markets at essentially the same time, while Grubhub took three years.

2/ When should you expand to a second (and third) market?

As soon as your first market starts to work.

Expand too early and risk both markets failing. Expand too late and you give your competition a chance to race ahead.

2b/ "We were ready to expand to Chicago when we nailed operations in SF and built the tools to actually launch another city. This actually required breaking all kinds of fundamental assumptions that were hard-coded at the time."
—@Max, co-founder of Instacart

2c/ "We expanded once we had a playbook to make a market successful, and the resources weren’t fully absorbed in executing the market expansion playbook in our first city."
—@onecaseman, former head of growth at Grubhub

2d/ "We expanded once we wanted to show we could transfer our nascent operational playbook to another large market. We also wanted to demonstrate we could repeat the growth trajectory in multiple markets prior to our Series A raise."
— @b4bendetta, co-founder of Peerspace

3/ How do you pick which markets to expand into?

Create a spreadsheet with 3 to 5 attributes that tell you whether a city will be a good fit, and then stack-rank them.

For example, here’s Grubhub’s early spreadsheet (courtesy of @onecaseman):

Here’s a rough breakdown of what each of these marketplaces put in their ranking spreadsheet

“You could take the Zagat guide and quickly establish the most important dining cities in the U.S. Ultimately, it reflected the major metropolitan cities like SF, DC, Chicago, NYC, LA, etc.” —Mike Xenakis

“We chose several market archetypes: college towns, suburban/rural, and urban. By having multiple archetypes rather than the same, we gained confidence that Snackpass would succeed beyond one type of market.” —@ktizzel_

“Every city has unique characteristics. For example, NYC requires a different logistics algorithm that accounts for some deliveries happening on foot. LA is subject to sprawl, so there are multiple zones in that metropolitan area. ...

"Chicago, on the other hand, launched as one big zone, similar to how we operated SF at the time." —@Max

4/ What should your launch team look like?

Start small and sales-driven.

Here’s a breakdown of what launch teams look like, initially and down the road.

OpenTable: "The launch team involved a sales director and usually one or two other sales execs. They would land in a city and set up shop for a month. During that time, they would hire a local sales exec and an operations manager. ...

"...Together the team would make the initial push to get 20 restaurants signed. Once up and running, the launch team would move on to the next city."
—Mike Xenakis

Snackpass: "For us, it was essential to have people on the ground who understand the local nuances—which restaurants moved the needle, what were the customer experience issues, etc. ...

"...In the beginning we had one restaurant-facing launcher per market, while user growth was a centralized team. We still use this model but added in an AE and AM distinction on the restaurant side."
—@ktizzel_

Instacart: "At first, we as founders launched new cities with a few early engineers to build the tooling on the ground. Then, we trained a set of ‘city launchers’ who then cross trained new launchers in subsequent launches. That allowed us to launch multiple cities in parallel...

"...Eventually the city launch function was centralized into an expansion team based in SF that would launch each city, hire local Area Managers and then move on to the next launch.”
—@Max

5/ What does a launch playbook look like?

Read the full post to get the gory details.
lennysnewsletter.com/p/marketplace-…