8 ways to successfully adopt a multi-sided business model for your startup

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There are many startups who, instead of buying or selling anything, play the role of intermediaries to connect buyers and sellers. This is a multi-sided business model. Some of the successful examples of this model include Facebook, Uber, eBay, and Airbnb.

Building a multi-sided platform for a startup is difficult because a new platform can’t initially attract both buyers and sellers. If there are fewer sellers, buyers will leave, and if there are fewer buyers, sellers won’t sign on.

Here’s a list of ways to overcome that chicken-and-egg problem and successfully develop a multi-sided platform.

1. Start small

By starting small, you can gradually attract users on both sides of the platform. You can focus on a single city, area, or customer segment and prove the model to both buyers and sellers. Once that happens, you can build both sides together. Uber, for example, started its operations with only one city (San Francisco), and once it was met with success there, it expanded its operations.

Technique

To successfully start small, select a niche that has less competition and a huge audience. Initially, don’t hire a big team and try to do most things on your own. This will help you keep tabs on costs. Don’t invest much in the infrastructure and build a website that has a simple UI.

At this stage, hiring the first employee is a crucial decision, as they fully embody what leaders want to see in their team. Airbnb founder and CEO Brian Chesky took a great deal of time in hiring his company’s first employee. He spent five months reviewing thousands of resumes and conducting hundreds of interviews before making the offer to the first engineer.

2. Start with a linear business model and then scale

According to this strategy, you can start with a linear business model, act as a supplier, and develop a user base. After you’ve created a user base, you can attract sellers to join your marketplace.

Zomato, for example, was just a simple information portal on restaurants. It later started offering services like online ordering and table bookings once it succeeded in building a large user base.

Amazon initially also started with fulfilling all the customer orders on its own. Once the company grew, it opened up the Amazon marketplace platform.

Technique

If you want to start a linear business model, you need to offer something unique to your audience first. It’s important that you satisfy your customers in these three aspects: quality, quantity, and speed. These can help you gain loyal customers and build the supply side.

One such example is Fiverr, which started with an entirely new concept: allowing users to buy and sell tasks at US$5. Their business idea was featured on The Wall Street Journal and Yahoo, which helped the platform gain a lot of attention.

3. Make users attract other users

4. Adopt a marquee strategy

5. Target users who can fill both sides

6. Enter with significant pre-investment

7. Leverage another platform

8. Focus on the transaction

Conclusion