Essay · 20 min read

All Markets Are Not Created Equal: 10 Factors to Consider When Evaluating Digital Marketplaces

Bill Gurley · Above the Crowd Free Advanced

Before you sweat which side to seed, Gurley helps you judge whether your marketplace is even structurally worth building. He lays out ten factors (fragmentation, frequency, payment flow, network effects) that separate marketplaces that snowball from ones that stay empty. It is the investor lens on why some two sided ideas never reach liquidity no matter how hard you push.

  • Great marketplaces enhance a market, they do not just aggregate it
  • High fragmentation on both sides makes a marketplace more defensible
  • Being in the payment flow is far stronger than sitting outside it
Open on abovethecrowd.com ↗

It answers 15 questions

  1. How big does my market need to be for this to be a real business?
  2. What are TAM, SAM, and SOM and how do I actually calculate them?
  3. My market is small right now but growing fast. Is that a problem?
  4. How do I size a market for India specifically when data is messy?
  5. Should I worry that my market is already crowded with competitors?
  6. How do I estimate a market size when the product I'm building doesn't have a category yet?
  7. Investors keep asking for a top-down TAM slide, but I built my number bottoms-up. Which do I show?
  8. How do I evaluate whether an idea is big enough to be worth years of my life?
  9. How much of the market do I realistically need to capture for this to be a real business?
  10. My whole business is built on one platform's trend (like WhatsApp or an app store). How do I ride it without getting wiped out by a policy change?
  11. I'm a solo technical founder. How do I MVP a two-sided marketplace when I need both buyers and sellers before it works at all?
  12. My total market looks small, but each customer is worth a lot. Can a low-count, high-value market still work?

And 3 more across the hub.

Read with it

  1. The single best thing ever written on customer conversations. It teaches you to ask about the customer's life and past... momtestbook.com Book · ~130 pages The Mom Test Rob Fitzpatrick
  2. Video · ~50 min How to Evaluate Startup Ideas Kevin Hale, Y Combinator
  3. The essay that put 'product-market fit' into the startup vocabulary. Read it for the gut-level description of what PMF feels... pmarchive.com Essay · ~15 min read The Only Thing That Matters Marc Andreessen
  4. Most market sizing advice online is generic TAM SAM SOM filler. This one is written by an investor, backed by a survey of 30... Pear VC Essay · ~15 min read Market Sizing Guide Ian Taylor
  5. The definitive essay on where good ideas come from: notice problems you personally have, don't force it. Use it as the lens for... paulgraham.com Essay · ~20 min read How to Get Startup Ideas Paul Graham
  6. When there is no category report to point at, you have to build the number yourself, and this is the essay that teaches you... Andreessen Horowitz Essay · ~20 min read 16 More Startup Metrics Anu Hariharan, Frank Chen, Jeff Jordan
eChai Partner Brands The partnership →