Planning on building a peer-to-peer marketplace? An interview with Juho Makkonen

Creating a peer-to-peer marketplace is one of today’s most popular startup ideas. The success of platforms like Airbnb, Etsy and Fiverr have proven that the online marketplace model is very scalable, and can be applied to pretty much any area of business. We are just at the beginning of the platform era and will see tremendous innovation in the field of building and running marketplaces.

JuhoJuho Makkonen is one of the pioneers and thought leaders in the field of peer-to-peer marketplaces. He is the co-founder and CEO of Sharetribe, a platform that lets anyone easily build their own peer-to-peer marketplace with no technical skills. Today he is going to share his experiences and vision with us.

Q: When did you become interested in building marketplaces?

Me and my co-founder Antti Virolainen started building our first online marketplace back in 2008. Our initiative was part of a research project, and it was a simple site that let students of a university campus do things like borrow tools from each other, sell their old course books or ask for moving help. At that point nobody was talking about the sharing economy.

The site became pretty popular on campus. We realized the power that online marketplaces could have in bringing people together and utilizing their existing assets more efficiently by reusing or co-using them. We decided this is what we want to do.

Q: How was Sharetribe born?

We started the company in October 2011 as a spin-off from the research project. Our first idea was to continue what we had already worked on in our university: to create a network of local private marketplace communities for every university campus, neighborhood, and company. The initial business model was that universities, cities and companies would pay us for running these sites.

We managed to convince some universities, companies and cities to try our platform. However, we soon hit two problems. First, it took a lot of time to negotiate with these organizations, and they were not ready to pay a lot of money for our solution. Second, while we were able to successfully kickstart our university campus community—being part of it ourselves—the new sites struggled in getting critical mass because they were lacking a dedicated community manager. We were able to do that work for a few communities, but that work didn’t scale. We tried lots of different things, but eventually we realized our model was broken.

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Meanwhile, the sharing economy had gotten traction, and lots of aspiring entrepreneurs had gotten the idea to build their own online marketplace business. Many of them started reaching out to us to ask if they could take advantage of our platform. Eventually, it dawned on us that this was the real problem we should be solving: to make it easier for non-technical entrepreneurs to get started with their marketplace idea.

To use a startup cliché, we pivoted in 2013. We made our platform customizable, letting our users realize their marketplace idea—whether it be “Airbnb for surfboards” or “Etsy for home-cooked meals”. It turned out to be a great move: today, our platform is powering hundreds of entrepreneurs’ marketplaces all over the world. Our team is 13 people now, and we’re well on our way to profitability.

Q: What are the key lessons you’ve learned along those years?

The most important lesson I’ve learned is that it’s not enough that everyone says they love your idea. Sharing economy entrepreneurs in particular get that all the time. People really want to live in a world where we share more things, and that’s why they root for your success. But that doesn’t mean they will actually use your site themselves. You need to provide them enough value, and solve a real problem for them—and that’s quite hard.

With marketplaces, the particular challenge is getting them off the ground. You need to solve the “chicken and egg” dilemma of building both the supply and the demand sides of the marketplace. That’s a lot of work. Having a great platform with beautiful design and lots of features is not enough. You need to work hard on the community-building part.

Q: What is the best startup advice you’ve received?

The best advice is that you should listen to all the advice you can get, but not blindly follow any of it. Instead, you should understand that every company and entrepreneur is different, and no advice applies to everyone. You need to learn to trust your gut and apply all the advice you get to your specific situation and personality. You will need to find your own path and follow it. This advice also applies to all the advice I’m giving in this article.

Q: What advice you would give to an aspiring marketplace entrepreneur?

Over the years we’ve seen many entrepreneurs spend lots of time and money into building their own marketplace platform. Very often they think that if only their initial feature set and design is good enough, growth will come naturally. This is almost always a mistake. You can never know whether your idea is good enough before putting it to a real test: by launching something to your actual users. Only then does the real learning begin. After you get your first users, you should start talking to them and tracking how they use your marketplace. This helps you discover their real needs and problems.

My advice to all entrepreneurs is to get to this point as soon as possible, while spending as little money as possible. Most of the time and money spent before the launch will likely go to waste.

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This is why I think Sharetribe brings so much value to entrepreneurs. You can literally create, configure and launch your site in one day.  Here’s an excellent story of a customer of ours who did exactly that. Today, they are one of our most successful customers. With this approach, there’s very little little waste, and learning starts immediately.

Q: How is Sharetribe helping entrepreneurs build their business?

So far, we’ve mostly focused on building the technology that our customers need for their platforms. However, we’ve realized that the platform is not enough. We also need to help them build their communities and grow their sites so they can become financially sustainable. Most of our customers are new to marketplaces, and there are lots of things for them to learn. So far, most entrepreneurs have had to learn all of this the hard way, but we want to change that. We are building an online education program for all marketplace entrepreneurs out there.

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We are in a really unique position to do this. Not only do we have years of experience with building marketplaces ourselves, but we also have data from the hundreds of marketplaces that our customers are building—and we’re getting a lot more every day. We’re able to see first-hand what things make marketplaces succeed or fail. Our plan is to analyze this information and make our findings freely available for everyone at the Marketplace Academy that we’re going to launch very soon.

Q: What does the future hold for Sharetribe? What’s your big vision?

We want to do the same for the collaborative economy as what WordPress did for publishing. We want to democratize it by making it accessible and affordable for anyone around the world to start and run their own online marketplace business.

Our platform is already open source, just like WordPress. The next step is to build an architecture that will make it possible for our customers to customize the platform as they wish while still taking advantage of our effortless setup and hosting. We want to allow third-party developers to build extensions on top of our platform and sell them to our customers. Right now, Sharetribe is great for entrepreneurs who want to get their Minimum Viable Product quickly off the ground, but we also want to offer better services for really successful marketplaces that have reached massive scale. In order to do that, our platform needs to be really flexible and customizable.

We don’t want a future where we only have a few really big marketplaces, whose owners are reaping all the global profits while providers are suffering. Instead, we hope to see a future where local marketplaces—perhaps some of them run by provider-owned co-ops—will thrive and invest the profits into the local communities. We believe this to be a more equal way to distribute the amazing value created by the collaborative economy, and we are focused on making that future possible.

 

Fast Facts:

Q: What are the 3 most typical marketplace concepts built with Sharetribe?
Most common ideas are peer-to-peer rentals, selling used goods, and peer-to-peer services.
Q: How many marketplaces have been started with Sharetribe?
We have close to 500 paying customers in more than 40 countries who are running their marketplaces in our hosting. On top of that,  there are lots of open source installations out there – our software is being downloaded 50+ times each week.

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