Lessons on product and technology, with Aline Pezente

We recently had the pleasure and privilege of receiving a lesson from Aline Pezente, our dear friend and co-founder of Traive, as part of our Marketplaces Journey series. 

In this note I try to give a bullet-point-type summary of the main points of her arguments. 

It’s not easy to give a proper impression of this fascinating and detailed presentation in short form – but let’s boldly go anyway, as if we were Markinho Zuck trying to take his employees from Meta into the arcane spheres of the Metaverse...:

Complexity – inherent to the business:

• Being an entrepreneur is difficult in any business, but in marketplaces the difficulty for founders is increased by the number of different market participants – different ‘sides’ – that have to be treated as direct clients.
• The scale of this increase, frankly, is non-linear – you could say that with each extra ‘side’ that you add, the difficulty doubles.

The solution to the puzzle may be counterintuitive:

• In the quest for liquidity, the founder has to be creative in testing hypotheses – because often solutions are counterintuitive.

Here is an example, from Traive itself: 

The founders deliberately chose the path of associating themselves with existing strategic companies of the sector that were already comfortable with the dynamics of venture capital, in spite of the standard playbook indicating to the contrary (i.e. a potential mismatch of interests).

The reason: Connection with these other operators in the sector was essential for Traive to achieve the volume of data necessary for the platform, as a start-up, to be able to run, and also to achieve validation of it by the industry as a solution – which is important in the agribusiness sector.

• The economics of the multiple sides involved raised the possibility of thinking about ways to capture non-usual, or indirect, value from the clients of the marketplace.
• Differentiation, differentiation, differentiation!

Strategic points to consider about your marketplace:

• The best opportunities in marketplaces are, of course, where there are significant frictions between supply and demand – and preferably in markets that are more fragmented, for a given service and/or product. 
• So the first question to ask yourself is: What are the initial frictions to be resolved?
• Your first key step is the quest for liquidity, as measured by the critical mass of your atomic network. 
• How do we define liquidity?
• The design of the product has to consider all of the ‘sides’. You only need one of these sides to fall out of place for the marketplace not to function. How the participants of the marketplace interact with each other is something that is extremely important to think about, and get right, for reasons of both UX and governance.
• Pricing can even come later, but is important to think about these various options and hypotheses early on.

B2B marketplaces:

Just to add to the complexity, in the case of a B2B marketplace the situation is even more difficult:

– There are more business rules to be complied with.

– Alignment between participants is more difficult.

– The time to market will be longer.

• Here’s a counterintuitive strategy that Traive implemented: insert part of the solution as SaaS.
• There will be many frictions in the back office in the relationship between supply and demand. So, usually, this is an interesting place to test hypotheses:

– Anchor users or heavy users: It makes sense to start with solutions for these clients, who will validate the start-up with the rest of the market. This does not mean that the platform should become a software house for enterprises, but that the user experience can be designed and developed to some extent jointly, in interaction with a player that brings a disproportional perception of value to the participants of your marketplace.

– No-code or low-code: To create a UX for participants that has a satisfactory level of differentiation, the founder will have to test hypotheses. So, to facilitate the various tests of hypotheses in terms of capital efficiency, why not start with no-code or low-code tools?

Common traps of marketplaces:

Some mistakes to avoid:

• Looking for just any client: The quest should be for the right clients – followed by having the courage to focus on them.
• Use of freemium – needs to carefully balanced: To what extent will users complete deals if they have to pay? How would the profile of users change?
• Not setting a standard relationship between participants.
• Not investing in the platform’s search and match: Participants need this facility to understand the value proposal – providing them with quick access to this understanding is the essential hook that attracts and retains.

You can use this link to find out more about Astella’s Marketplaces Journey series of articles, essays and opinions.