Article · Long read (about 20 minutes)

How to Kickstart and Scale a Marketplace Business, Part 2: Cracking the Chicken-and-Egg Problem (Supply vs. Demand)

Lenny Rachitsky · Lenny's Newsletter Free Intermediate

This is the most concrete answer to which of your two customers to define first, built from interviews with 17 major marketplaces (Airbnb, Uber, Etsy, DoorDash and more) rather than one founder's opinion. The finding is blunt: about 80 percent of successful marketplaces poured their early effort into the constrained side, usually supply, and built liquidity in one narrow niche before expanding. It is a practical playbook you can map onto your own marketplace this week.

  • Most successful marketplaces defined and won the constrained side first (usually supply), then let demand follow, so start by naming your ideal customer on that side.
  • Early liquidity comes from going deliberately narrow (one city, one category) and getting it genuinely working before you widen the definition of who you serve.
  • The number of levers the biggest marketplaces used to grow that first side was small (a median of two), so focus beats spreading effort across both sides at once.
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It answers 2 questions

  1. How do I define an ideal customer for a two-sided marketplace where I have to pick two of them?
  2. I run a two-sided marketplace. Do I get my first customers by starting with supply or demand, and how do I avoid the empty-restaurant problem?

Read with it

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