I’ve been investing in early stage marketplaces for over 5 years now and was recently prompted by ASU W.P. Carey School of Business to put together an “Assessment Tool” that their students can use to stress test potential marketplace business opportunities.
It was a great way to codify some of the thinking around how we at Fika Ventures evaluate marketplace opportunities, boil that down into a framework, and share it explicitly.
In 2015, my Partner Tianxiang Zhuo wrote a great post around his 20/20/20 Rule for successful marketplaces. A lot has changed since 2015, namely the growth and maturation of companies like Airbnb and Uber solidifying the fact that the marketplace business model is here to stay. With their success and popularity, the marketplace approach has become the status quo. It’s no longer interesting to see a business that “just” connects supply and demand and cuts out the middle person. Nowadays, marketplace investors want to see more opportunity for quality control, supply side optimization tools, barriers to entry, and network effects.
With all of this in mind, I took a crack at creating a “marketplace calculator” to help evaluate potential opportunities on more than just one or two variables. I’ve assigned weights and scores to each question (variable) and provided a few famous examples of both successful and not-so-successful outcomes.
While there are always many factors behind investment decisions (as you can see, even Uber was only ~87% by this framework), these questions include some of the most pressing you’ll face when raising money and ultimately scaling your marketplace.
I’d love your feedback, and if you are working on a marketplace tackling a unique industry, please let me know.
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