Every successful business starts with a great idea. Congrats! You got that. Now what?
Well, if you are not a company with a significant budget then it is time to enroll friends & family and start putting together your seed money. As great as your idea is, investors will want to see more. VCs want to see that you can enroll others to invest in your idea and that you have skin in the game. If you won’t invest and you can’t raise initial funds for your idea, why would a VC invest? Would you?
The programming of the marketplace will be the most expensive part of the process, all the more reason to get it right from the start. Moving a skyscraper 3ft on paper is easy, moving it once it is built is not so easy.
Wireframes are like the blueprints of your dream house showing exactly what will be built. They map out all use cases, every button is accounted for. A typical marketplace wireframe is between 100-150 pages.
By the way, if you’re hiring a team to build your marketplace and they don’t take you through an extensive wireframing process—run, don’t walk away. Get it wrong in the wireframe process and you will be paying for it exponentially later. It might not be the most exciting process because you have to think in a very granular way about every possibility but it’s an effort well worth making. A good wireframe helps you organize your thoughts, figure out workflow, payment methods, dispute, shipping, etc. Now that the process is predictable and organized, a good development team should be able to give you a fixed price and turnaround for the build.
After this process (which should include challenging every assumption) you will be fluent in your marketplace and able to answer any question a VC might throw at you about the “how” of your marketplace. They want to see that you have thought “of it all” already.
Now you know your idea can actually work. Good idea, substance.
How important is a brand identity (logo)? Companies don’t spend billions on building and protecting a brand because they don’t matter. While it might be difficult to put the value of your brand in a spreadsheet, it is either helping you or it’s a barrier and there are enough barriers you can’t avoid, this is one you can.
We all know that if a brand over promises the customer is unhappy. When a brand “over delivers” based on the low expectation set by a poor brand, yes, the customer might be “pleasantly surprised” but they will not value your service as much as if you had a good brand.
If you bought a $1,000 coat at a fancy retail store and lost it and then found the same exact coat being sold off the back of a truck, would you pay $1,000 for it? Same coat. Of course not— same product, different brand, different perceived value. If you want big bucks from VCs, make sure you have maxed your perceived value first.
And again, you get what you pay for. If a design studio isn’t asking you questions as part of their branding process, well you know what to do. Run.
Find the right team to help you translate your message visually. First impressions count so you want to make sure your logo is communicating the right message.
Great idea, substance, message.
Now you have to get people excited. You can’t be everywhere all the time. A “sizzle presentation” should explain what your value proposition is in an inspiring way. How are you going to make my life better, easier, save humanity?
It can be a click-through emulating the experience a user will have or a short video inspiring users to join—or both. Whereas the wireframes are the substance, this is the sexy part. Now the VC can see the 3D model of your house rather than just the blueprints. Now we are getting them excited.
Great idea, substance, message, inspiration.
Of course the more you have done, the better but often business plans are full of conjectures with little based in reality and VCs know it. Most of the facts they will be interested can be covered in an executive summary—especially in the seed stage. Later, yes, you will need a full business plan but at the start where every hour, every dollar counts, your resources are better spent on the 4 basics.
It’s not a free ride and you’ll come up against many obstacles but as you overcome each you get closer and closer to seeing your idea become a reality and then it happens and that is an amazing day indeed. Go for it!
Every successful business starts with a great idea. Now is the time to enroll friends & family and start putting together your seed money. VCs want to see that you can enroll others to invest and that you also have skin in the game. If you won’t invest and you can’t raise initial funds for your idea, why would a VC invest?
Wireframes are like the blueprints of your dream house. They show exactly what will be built. They show VCs how you intend to serve your users. Now you know your idea can be a reality.
How important is a brand? Well, if you bought a $1,000 coat at a fancy retail store and lost it and then found the same exact coat being sold off the back of a truck, would you pay $1,000 for it? Same coat. Of course not— same product, different brand, different perceived value. If you want big bucks from VCs, make sure you have maxed your perceived value first.
The Sizzle presentation can be a click-through emulating the experience a user will have or a short video inspiring users to join or both. Whereas the wireframes are the substance, this is the sexy part. Now the VC can see the 3D model of your house rather than just the blueprints. Now we are getting them excited.
Forget MVP, Most Lovable Product is what you need. Better to build small but really well than have a broader system that “kinda” works. Users are sophisticated and have very VERY little attention span. Loose them once and they are lost. Great idea, great brand, great presentation, you gotta have great user experience too. (How many apps do you have you don’t use on your phone right now?)
Woo Hoo! ParTay time right? Absolutely. You’ve QA’d this left and right and now it’s ready for primetime. There’s just one more thing missing—users!
Nothing gets a VC more excited than seeing you have traction. Why? Less risk. If you have proven people want your service then their investment is at far less risk. Makes sense, right?
There are few off-the-shelf platforms that have a useful setup with many features. Yet there are certain scenarios in which these are a perfect solution. If your business is a small local marketplace and you intend to keep it that way, and your business requirements fit the default functionalities offered on these platforms, then this is a good way to go.
For example, say you have an urban farm community for exchanging goods and have no aspirations to go national (let alone global) and are just looking to maintain a nice small steady income, then an off-the-shelf solution could be a option.
There are a few key elements investors in any tech company will want. #1 above all is owning unique IP nobody else has. When you use an off-the-shelf solution you are copying what anyone else could also copy.
Your secret sauce is what makes your company unique: your secret algorithms, custom user interface, deep domain knowledge, unique features. However, if you are on a shared off-the-shelf platform, you lose that special uniqueness.
When off-the-shelf platforms speak of “customization,” they are talking within their strict parameters. You can change colors, fonts, images but not much (if anything) in terms of functionality. And there’s a good reason for that. The solution can be leased to you relatively cheaply because there is one code base for everyone. So maintenance is centralized. If they allowed for true customization, they would have many derivatives of the code base and need to support all of them thus driving their costs (and yours) through the roof. That would kill their main value proposition. So they cannot do that nor will they down the road.
Off-the-shelf solutions tend to be full of general features most of which you will not use because they are not specific to your needs. Much like all those great apps on your phone, they seem great but you never use them. So you look and think “wow, this does everything” until you start using it and realize that key features that are unique to your business are not there and you have to see if you can cobble together a work around, forcing square pegs through round holes or just doing the missing part manually. Clearly not a strategy for growth.
The off-the-shelf solutions are not designed for major growth with multi-server platforms handling large spikes in traffic. You might need partner integration, API, or other unique workflow. So you will have to rebuild your marketplace ideally with a specialized developer team who can build you a site for growth in which you will own the IP and for which you will have every feature you need to be successful.
To date there are no real successful cases that we are aware of that got funding or acquired while having their marketplace on a off-the-shelf solution. If you know of one, I’d love to hear about it: email@example.com.
There was a time when that was a viable strategy. Here’s the problem. You know all those apps on your phone we were just referencing? Well, you’re a sophisticated consumer and guess what? Everyone else is now, too. Thanks to Facebook, Google, and Youtube, the bar has been raised significantly. Users expect not just an ok experience, they expect an excellent experience. And what’s worse, they don’t even realize they are expecting a lot. We’ve declared the MVP dead and it has been replaced by MLP, Most Lovable Product (we didn’t coin the phrase). The name says it all.
Our recommended strategy is go deep and do it really well rather than wide and shallow. To go deep you need a custom build. There are countless stories of founders having a great idea, dropping the ball on execution, and someone else comes in, sees the mistake, does the build right, and wins. While a great idea may be great, it is simply not enough to have a successful marketplace. You must build an experience at the outset that can live up to your great idea.
If this is a hobby or just a mom-and-pop set up, then an off-the-shelf solution is the way to go. If you have big projections in your business plan, will want funding or will want to sell someday, this is not your solution.
Having your own full-time, fully flushed out in-house development team is great—if you can afford it. As most funded startups have limited funds, the question then becomes at what point does it make sense to bring on a full-time in-house team such that you maximize the bang for your buck.
In short, it is “Time & Money” that is the big challenge. You need to get to market, if not first, as soon as possible and funds are typically not unlimited.
Marketplaces are simple in concept and complex in execution. There are many moving parts all of which must work flawlessly. Users are both hard to get and unforgiving once gotten. They are easy to lose and almost impossible to get back. You have to get it right—out of the gate.
Since time is money. Everyday you are not launched, you are paying out cash with no revenue. That runway has a very definite end. You need to get this baby out the door as soon as you can.
Very. The core of a marketplace is the concept and the execution. If you have a great idea and the execution is substandard, you will be hurting, if not killing, your chances of success. And failure in this context is particularly tragic as it will leave you with no funds and very vulnerable to someone else coming in and learning from your mistakes and building a better mousetrap—ouch.
Putting together a good team for any business is a challenge but it is a particularly so when dealing with developers—especially good ones.
Good programmers are at no loss for work—good work. So in order to get a programmer to commit to pouring his/her talent and time into one project it needs to be super interesting and/or have amazing benefits. RSU/stocks, great medical plan, significant paid vacation—sign up bonuses and then, of course there’s the usual overhead of offices, equipment, software and taxes.
If you’re a startup, every dollar counts so you can’t afford to have substandard work done as time and resources are not on your side. You can’t go back and redo work if it is not done well. So you need to secure top talent but that costs big bucks.
Once you’ve hired an in-house team, you are paying salaries and it is time to start figuring out what exactly will be built. The clock is ticking as you are paying the team and they start getting up to speed, get the systems in place, etc. So far, you’ve built nothing but have already laid out and committed to a significant amount of cash.
A year you say? These are talented developers. They can do it in less. And no doubt they would agree in all earnest. The concept of a marketplace is as old as mankind. You have something to sell and you find a buyer. How complicated could it be? The answer is: Very. Every marketplace has its unique complexities in addition to the complexities of marketplaces in general. Basically, if you are not experienced in specifically building marketplaces, then you don’t know what you don’t know.
It’s natural that as the developers run up against these unexpected issues, such as planning for how people will attempt to scam your marketplace, or how to handle currency exchanges to avoid market fluctuations, they will need to figure it out. That takes time and thus money. So there is a learning curve specific to marketplaces that you will be funding. Tick, tock.
You built it! Done. Well… not really. Obviously, you will need to iterate on the marketplace but with hardly any users at launch, do you really need the same size team to “iterate and maintain” your marketplace as you did to build it? (If you do, then you may have other problems.) No, you don’t. But, the issue is that you hired salaried employees and you can’t just let them go because hopefully in a year you will need them again. But from having gone through the hiring process you realize how expensive it is to find and retain good talent so you need to keep them on.
The result? A high post-build burn rate that, rather than decreasing now that you have the build in place, is actually increasing as you add marketing and advertising to the mix. Further putting pressure on you to deliver quickly for investors.
Can’t I find talented developers who are experts in marketplaces, won’t have a big lead time to get up to speed, work well together, and won’t cost me a fortune? I want to be able to access them when I need them but not pay salaries out when I don’t. Is that so much to ask? Maybe not. See Working with a specialized development team.
If you have $5M–$10M in funding to start to put towards development, an in-house team makes sense.
If you don’t consider going with a specialized specifically in marketplace development. Let them be your SWAT team. They significantly lower your risk, lower your burn rate and get you to market much much faster. And if they are good, they will offer to either stay on as your team as you iterate going forward or they will get your new post-build team up to speed so they can take over. They may even help you vet your new team to make sure they are the right fit for you and your marketplace to be successful and make your investors very happy.
An often overlooked option is to find a team that very specifically specializes in exactly what you need to build. Most often this option is overlooked because such teams are hard to find. Such teams need to have 2 key attributes—a targeted focus in marketplace development and real world experience in it. These teams, when they exist, are often booked long in advance and don’t typically advertise on a big scale.
But if you are lucky enough to find a good, vetted team that specializes in just what you do, you can be certain you will realize benefits you’re unlikely to find in other structures such as agencies, off-the-shelf or offshore.
They already have vetted code. Even the most custom build will leverage significant amounts of vetted code. You want this because the vetted code has be tried and tested and this exponentially speeds up both development and QA. Which means you get to market faster and start making money rather than just spending it.
Having a specialized team with well-rounded diverse backgrounds means that you have a SWAT team of sorts. Everyone jumps in and leverages his/her expertise and because they are focused and experienced, they keep up with the latest best practices for their part of the build. And because they have already established and polished their processes and have worked with each other before they are very efficient.
Overhead is low for specialized teams. In stark contrast with startups that go the in-house team route for example who have to find, pay and keep top-notch programmers which is a very expensive endeavor. If you don’t have sign-on bonuses, big salaries, long vacations, medical, bonuses, and fußball tables to support, you can save a lot on overhead. Additionally, agencies have to support managers, sales, advertising, office overhead as well as developer salaries.
So with all those perks, why would top-notch developers opt out and work on a specialized team? It’s a lifestyle choice. They can do great, meaningful work, be based in Brooklyn but work for a couple of the winter months in Bali for example. Sweet.
A great advantage of a specialized team is that because they focus on one kind of build, they can develop and hone good processes. This results in more efficient builds, which saves time and money but perhaps most importantly, it makes giving a fixed price and timeline truly possible. If you’ve ever done development before you’ll know how rare that is and for a lot of good reasons. Teams who don’t specialize, by definition, don’t know what they don’t know. They find out and unfortunately they find out on your dime. Knowing exactly what your marketplace will cost and when it will launch (without budget and time creep) is a luxury a specialized team can provide you.
Marketplaces are simplistic in their concept and very complex in their execution. An excellent marketplace user experience is about distillation.
The devil is in the details. Marketplace development, like any other industry, has a plethora of niche details which take time to learn and get right. Specialized teams have already invested that time and you benefit from that. They already know how to convert currencies and all issues that arise with it; how to handle returns and refunds; how to secure the marketplace from fraud; how you maximize user experience without clutter, etc. All of this (and much more) is solved by leveraging experience.
Many founders will be pleasantly surprised to find that your specialized development team is anticipating problems and coming with solutions for issues that never occurred to you. A simple example would be the creative ways people have come up with to game a marketplace. A good specialized team has “heard it all” and already have safeguards in place as part of the initial build. Besides the obvious, this also saves you with users. One really bad experience can be a big blow to your reputation and thus ability to drive traffic to your marketplace. No users, no business. You want a team that will cross all the t’s and dot all the i’s for you.
While it is true that you are essentially “renting” the talent of these experts to build your marketplace, as opposed to “owning” them in the way you would an in-house team, if money and time are issues (and when are they not?), then any implied disadvantage of not having these experts on as full-time staff are far outweighed by the advantages. Simply put, a specialized development team can get you to market faster and less expensively than an agency or in-house team and in the beginning of your business, when every dollar is precious, this matters.
Agencies have some nice advantages especially if you have no experience working directly with programmers. They typically have a project manager who will interface with you, established processes, and existing relationships with multiple vendors (developers, designers, marketers). You’ll have access to a CTO, architect, designers. They can easily scale up or down without going through a lengthy painful talent search. This allows you to stall in the middle of the project if need be and pick up again afterwards. As soon as you pay, they can start.
Unlike an in-house team, they can be held accountable on a different level and if they are not delivering on time, you can put pressure on them to onboard more resources. They also will have a track record that you can look and see their work.
This convenience for you comes at a cost, both in dollars and quality.
Agencies typically need to markup of their services 2–3 times in order to cover overhead. Because of the need to keep the talent they have in place in a hot market, the agency needs to take the work that comes. This means they very rarely specialize, least of all in marketplace development. They may be developing a marketing kit for Coca-Cola today and tomorrow a fitness-tracker and the following week a movie ticket website. No specialization = no domain knowledge.
Good developers are motivated by bringing their best game to the table and seeing a project come to fruition. Working in an environment where they are expected to switch between technologies, development approaches and differing goals is a compromise for them. They value focus.
Because agencies don’t truly specialize, working on a fixed price is risky for them and thus they bill hourly. When they take on a project they cannot guarantee a fixed price because there is a good chance between starts and stops, developers working on multiple projects and projects with multiple developers working on the same section the final product will be buggy and require a significant QA process. That less than stellar code will continue to be problematic.
And if they do agree to work for a fixed price it’s usually a sign of an immature team. Something will give, either you will start sacrificing features to stay on budget, go past the agreed deadline, the price creeps up or all of the above. It has nothing to do with mal intent but rather software development is very unpredictable process and unless you have build very similar system and have a lot of codebase already in place having thus removed all the major risks - it is very hard to give precise estimate and the budget can easily go up to 2-3 times.
Because agencies operate on a high rate in-and-out model, developers on a project come and go. Therefore, the quality of the build is usually poor. The result is higher maintenance cost, more bugs and harder to grow after. Code for software companies their second largest asset, after the users.
If you are very well funded and more of a hands-off type, an Agency can be a good option. Fast to start and if you can afford to keep them post launch as your development team going forward, any of those quality problems will land at their feet. You can also let them know from the outset that consistency in the team is important to you and try and get some guarantees that they keep a consistent team for you. With a clear goal what you want them to accomplish for you, with a full team they should be able to handle it so that you can focus on how you will be getting those users.