Lenny's Newsletter · Product & Work
TIER 4 2021-06-01
> ## Q: I’m working on a marketplace startup and I’m wondering, how long does it usually take to find Product-Market Fit? It’s often said that marketplaces take a while to get going but that once they’re going, they are hard to stop. I’d argue that both of these statements are not true. To illustrate the second point, take a look at [the a16z Marketplace 100 in 2020](https://a16z.com/2020/02/18/marketplace-100/) vs. [2021](https://a16z.com/marketplace-100/). Notice how many marketplaces have slowed, dropped out, or gone under. Marketplace startups, just like any startup, lose steam and fail. It’s even harder to keep the marketplace flywheel spinning because you constantly have to keep supply and demand balanced (e.g., [Uber and Lyft's recent supply woes](https://www.washingtonpost.com/technology/2021/05/07/uber-lyft-drivers/)). Marketplaces start hard and stay hard. The time it takes for marketplaces to get going and find product-market fit (PMF) also isn’t any different than non-marketplace startups. Marketplaces certainly have huge benefits over non-marketplaces (e.g., cost efficiency, scalability, network effects), but they aren’t magical. **To illustrate the second point, and to answer your question concretely, I reached out to the founders of some of today’s most iconic marketplace companies and asked them how long it took them after launching to get to a place where they felt like they found PMF, i.e. a strong sense that their idea was going to work.** Below are their answers and their stories. #### Takeaways 1. The average time from launch to PMF is around 1.5 years. This doesn’t even include the time it takes to build the v1, which is often another 1+ years of work. So expect to put in at least two years before you get to the feeling of “This is working!” 2. The amount of time it takes for a marketplace to find PMF is no different from the [timelines for non-marketplace startups](https://twitter.com/lennysan/status/1398729270550142977). Except for [the occasional consumer social apps](https://twitter.com/nikitabier/status/1398750269622554625). 3. Just like [in my previous post on PMF](https://www.lennysnewsletter.com/p/what-it-feels-like-when-youve-found), getting to PMF is generally described as (1) a clear and sudden inflection in growth, (2) steady and compounding growth/retention, or (3) hitting an important milestone. For many founders, raising their Series A was the milestone where they finally felt like it was going to work. Validation from smart investors is a powerful thing. 4. Local marketplaces (e.g., Lyft, DoorDash) often got a hint of PMF early but then needed to see if they could replicate it in a second city before feeling confident that they had something durable. 5. Every marketplace started off by concentrating on just a single city or category (except Thumbtack, for better or worse). On to the stories. *Huge thank you to Alyssa Ravasio, Amir Nathoo, David Rosenthal, Devon Townsend, Evan Goldin, Gagan Biyani, Gokul Rajaram, Joe Gebbia, Max Rhodes, Mike Xenakis, Ryan Graves, Sander Daniels, and Tony Xu for sharing their stories with us.*  *Answers to the question “How long did it take you to find PMF—the point at which you felt like it was going to work?”* ### **Lyft: Immediately in SF; months for a second city** > “When we launched in SF, it was obvious on Day 1. Even with the demand limited to employees and 3-5 drivers on the platform, it was clear we had a hit. There, it was honestly a regulatory question of whether we’d actually be allowed to keep doing it. > > What wasn’t obvious was whether this was an SF-only product. When we launched in LA, we had dozens of drivers in the field on launch day. We launched at like 11am in the morning, and despite a ton (for a small startup) of marketing, we didn’t have a single ride request for hours. Finally, around 4pm, one came in … and then canceled. > > We were pretty unsure of whether this would really work outside of SF. It took weeks to months of hard marketplace design work, better marketing, referrals, etc. for it to really start taking off in LA. Once we figured out what made it work there, we replicated it in other cities in much better fashion and raised a ton of cash, which we then deployed to essentially speed everything up.” > > —Evan Goldin, started Lyft’s (then Zimride’s) product team ### **Caviar: 3 months** > “We saw the same group of super-users order over and over again, and retention stayed strong despite not even having an iOS app.” > > —Gokul Rajaram, Caviar Lead ### Outschool: 6-9 months > “We spent two years prototyping and iterating to get to v1 release. It was six months after launch that we knew we had initial PMF based on growth and cohort retention.” > > —Amir Nathoo, co-founder and CEO ### Faire: 9 months > “There were definitely times early on where I felt very strongly based on the evidence that it was going to work, especially when talking with customers and seeing how they were reacting to the product. It took us 9 months of working on it full-time before I was sure it was working based on the numbers.” > > —Max Rhodes, co-founder and CEO ### DoorDash: 9-12 months > “Definitely not immediately. Lots of days of small volumes and slow growth in the beginning. At 6 months, there were finally sufficient volumes where metrics that suggest PMF (retention, order frequency, spend retention) were holding, and we were growing without marketing spend. I felt we had PMF close to 9-12 months in, after we were able to replicate the same or better success in city 2 vs. city 1.” > > —Tony Xu, founder and CEO ### **Rover: 9-12 months** > “At that point, it felt like organic customer and sitter acquisition was taking off on its own in Seattle, and we were able to raise our Series B (which was really an A).” > > —David Rosenthal, board member ### **Uber: ~1 year** > “One year in, we had obvious virality. When you're putting almost no effort into growth but it's clear the product itself is becoming 'word of mouth' viral, you know you have something really special. Then all efforts shift to keeping that magic going as long as possible.” > > —Ryan Graves, CEO ### **Cameo: ~1.5 years** > “It was immediately clear that this product resonated incredibly powerfully with consumers. The first-ever Cameo made the recipient cry. > > But it took a long time to feel confident that we had created a long-lasting brand and business. Each round of funding was a step-function change in our confidence that Cameo would last. Lightspeed’s Series A in Nov. 2018 (1.5 years in) was the point that, OK, this thing is going to be a rocket; but it wasn’t until 2020 (3 years in) that I felt like Cameo would be here to stay. This is partially due to healthy paranoia and partially due to not having been on a rocketship startup before. Until then, it was hard to know what metrics to trust, and how sustainable the growth was.” > > —Devon Townsend, co-founder and CTO ### Airbnb: ~2 years > “When my mom booked her first Airbnb, I said to myself, I think we got something here!” > > —Joe Gebbia, co-founder and CPO ### **OpenTable: 2 years** > “PMF Part I: We had PMF for the restaurant software within a year of rolling it out to customers. PMF in this case meant restaurants valued the solution, utilized it every day, and were willing to pay a $99/mo software license. > > PMF Part II: We really knew we had PMF when we significantly raised the price. The reality is the initial $99/mo included the software, hardware, and their broadband, which we paid for at $99/mo. Suffice it to say, it wasn’t a winning pricing model absent superb booking fees. We raised the price to $199/mo and handed the broadband contract over to the restaurant. Effectively we tripled the price for many restaurants. We did this in year two and successfully navigated the price increase with very little churn. > > PMF Part III: We had a form of PMF for the demand side of the equation the day we launched the website. We knew it was a superior way to make a reservation, and our diner feedback was positive. However, absent enough supply, the actual benefit of our service to diners was limited. We had true PMF by year two when we could observe repeat bookings and an accelerated growth trajectory on bookings.” > > —Mike Xenakis, SVP ### **Udemy: ~2 years** > “Two years in, we went from just $10-20k/course launch to $70k in one day. When you sell $50-75k of courses in one day, you kind of know that you’re on to something. On top of that, we figured out how to scale it—so we not only knew that the product would sell but also had identified our first growth channel.” > > —Gagan Biyani, co-founder and CEO ### **Hipcamp: ~2 years** > “People loved our product pretty quickly, but it took about two years to figure out how to partner with landowners and actually have a revenue model. > > I knew we had something when I went to meet one of our first landowners who immediately handed me a letter from a land development company trying to buy her land. She told she hates these letters, because she’s afraid one day she’ll have to call them. She told me Hipcamp makes this junk mail.” > > —Alyssa Ravasio, founder and CEO ### **Thumbtack: ~5 years** > “It took us five years to get to a place where we felt like we had PMF. We spent the first two years focused on nothing but building supply, then the next two years focused on nothing but building demand, and finally one year building our v1 revenue model. Finally at Year 5 we had supply-demand-revenue all come together, and growth took off. After having gone the first five years raising just a couple million dollars and few people paying attention to us, we then over the next couple years raised hundreds of millions of dollars and were finally being noticed.” > > —Sander Daniels, co-founder If there’s one takeaway from this research, it’s that it takes a lot longer to find PMF than most founders expect. An average over 1.5 years *from launch*. Whether you’re building a marketplace or not. For dozens of more examples, don’t miss this thread: ### 📚 Further study 1. [What it feels like when you've found product-market fit](https://www.lennysnewsletter.com/p/what-it-feels-like-when-youve-found) 2. [How to know if you've got product-market fit](https://www.lennysnewsletter.com/p/how-to-know-if-youve-got-productmarket#:~:text=%E2%80%9CHere's%20my%20simple%20definition%20of,can%20efficiently%20bring%20them%20in%E2%80%9D) 3. [How to Kickstart and Scale a Marketplace Business](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-marketplace) 4. [Why marketplaces fail](https://www.lennysnewsletter.com/p/why-marketplaces-fail) 5. [Evaluating a (marketplace) business idea](https://www.lennysnewsletter.com/p/evaluating-a-marketplace-business) *Have a fulfilling and productive week*🙏 ## **🔥 Featured job opportunities** #### Product Management 1. **Polygence:** [Head of Product](https://pallet.xyz/job/55046525-1bd3-4901-8452-45fc1c643d82) (Palo Alto) 2. **Metafy:** [Principal Product Manager](https://pallet.xyz/job/3bd02acf-9da4-4769-9dd7-fed6a81045c8) (Remote) 3. **Brex:** [Senior Product Manager on Growth](https://pallet.xyz/job/5a8a0c07-552b-49a0-ac12-e588280790c5) (Remote) 4. **LawnStarter:** [Founding Product Manager](https://pallet.xyz/job/e55f36fa-2103-4ebf-bbe4-dbd4fc63fa4a) (Remote) 5. **Immuta:** [Senior Technical Product Manager](https://pallet.xyz/job/7e71effa-1f76-4607-a9de-57ca1b07f261) (Remote) 6. **Wrapbook:** [Senior Technical Product Manager](https://pallet.xyz/job/dea57461-eb0d-4edb-9097-91885482ce19) (Remote) 7. **Overtime:** [Product Manager](https://pallet.xyz/job/4296af21-ada7-47c8-bc19-9041724f3098) (NYC) 8. **6ix:** [Project Manager](https://pallet.xyz/job/5322e118-bba3-4a9f-ac38-da61d5b4cab8) (Remote/Toronto) #### Growth 1. **Brex:** [Senior Product Manager on Growth](https://pallet.xyz/job/5a8a0c07-552b-49a0-ac12-e588280790c5) (Remote) 2. **Free Agency:** [Community Manager](https://pallet.xyz/job/3445e94f-d760-4b3b-9c47-393a6f4702e8) (NYC) 3. **Brex:** [Growth Marketing Manager, Search (SEM+SEO)](https://pallet.xyz/job/1811f9d7-21c7-4cd0-8b81-050242749825) (Remote) 4. **OpenPhone**: [Head of Marketing](https://pallet.xyz/job/102a757f-cbea-4113-9588-cf1fc98a8d7a) (Remote) 5. **neo.tax:** [Head of Growth](https://pallet.xyz/job/2fd84c85-b209-47d0-9213-671e0342cff3) (Mountain View/Remote) 6. **Coda:** [Growth Associate Program](https://pallet.xyz/job/bba22fae-9ec5-47a2-b6dd-157f498b1fba) (SF) #### Engineering 1. **Cable:** [Backend Engineer](https://pallet.xyz/job/8f3f617d-07ba-412f-87f5-6a8ad1d0fe35) (Remote) 2. **Eppo:**[Data Infrastructure Engineer](https://pallet.xyz/job/fa7f68a5-8153-4928-8aff-20a87e3c6d84) (SF/Remote) 3. **Transform:**[Data Engineer](https://pallet.xyz/job/bb8679fc-e2cb-4a83-a9d6-b71795c096e5) (Remote) #### Design 1. **ClassDojo:** [Design Leader](https://pallet.xyz/job/d249ecad-d380-416f-a773-4650e28585cc) (SF/Remote) 2. **Cardless**: [Product Designer](https://pallet.xyz/job/4befe144-b63d-4a5c-9626-11a533a8fdd3) (SF) 3. **Karat**: [First Designer](https://pallet.xyz/job/29a7b24a-2ba0-489e-8222-d5d2b0b68e43) (LA/Remote) #### Other 1. **Panther:** [Director of Operations](https://pallet.xyz/job/fb5d0f95-eadf-44b2-8968-d2ad35ed5ab9) (Remote) 2. **Maven:** [Course Strategy and Operations Lead](https://pallet.xyz/job/24216c2e-e429-456c-add2-0ac0662e04b7) (Remote) 3. **Maven:** [White-Glove Course Lead](https://pallet.xyz/job/b333db7b-c2f2-4f87-b82e-a8970ba14193) (Remote) 4. **Maven:** [Instructor Sales & Partnership Lead](https://pallet.xyz/job/9dc74ed0-b098-4313-8be3-050bf057c4bd) (Remote) 5. **Free Agency:** [Community Manager](https://pallet.xyz/job/3445e94f-d760-4b3b-9c47-393a6f4702e8) (NYC) *Browse all open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* ## **🧠 Inspiration for the week ahead** 1. **Watch:** [1000 Musicians Play Rock Songs From Nirvana, Queen, etc.](https://kottke.org/21/05/1000-musicians-play-rock-songs-from-nirvana-queen-etc) [Watch on YouTube](https://www.youtube.com/watch?v=JozAmXo2bDE) 2. **Read**: [The Anxiety of Influencers](https://harpers.org/archive/2021/06/tiktok-house-collab-house-the-anxiety-of-influencers/) by Barrett Swanson 3. **Listen**: [Modern Finance](https://www.modern.finance/) by Kevin Rose #### **How would you rate this week's newsletter? 🤔** [Great](https://t.sidekickopen82.com/s1t/c/5/f18dQhb0S7kF8cV_VXW1CdjwB59hl3kW7_k2847sD3qkVNxJHk1CX2ZcW2bzNJl8lkfc1101?te=W3R5hFj4cm2zwW4cQKtC3KcLnYW4hLZp03ZVbTxW1JB0ML1--tKxW20ZTw51-YpBFW1W_jBk1ZmvHBW21j9tt1-_j_TW1Vnkcj1V3fMvw1V21pC4Hp2&si=7000000001348012&pi=6174bab6-7009-4402-a497-3d6f867fbea1) • [Good](https://t.sidekickopen82.com/s1t/c/5/f18dQhb0S7kF8cV_VXW1CdjwB59hl3kW7_k2847sD3qkVNxJHk1CX2ZcW2bzNJl8lkfc1101?te=W3R5hFj4cm2zwW4cQKtC3KcLnYW4hLZp03ZVbTxW1JB0ML1--tKxW20ZTw51-YpBFW1W_jBk1ZmvHBW21j9tt1-_j_TW1Vnkcj1V3fMvw1V21pC4vX2&si=7000000001348012&pi=6174bab6-7009-4402-a497-3d6f867fbea1) • [Meh](https://t.sidekickopen82.com/s1t/c/5/f18dQhb0S7kF8cV_VXW1CdjwB59hl3kW7_k2847sD3qkVNxJHk1CX2ZcW2bzNJl8lkfc1101?te=W3R5hFj4cm2zwW4cQKtC3KcLnYW4hLZp03ZVbTxW1JB0ML1--tKxW20ZTw51-YpBFW1W_jBk1ZmvHBW21j9tt1-_j_TW1Vnkcj1V3fMvw1V21pC4kr2&si=7000000001348012&pi=6174bab6-7009-4402-a497-3d6f867fbea1) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋