Analysis, Cool companies, Ooga Labs

Networks and Marketplaces

Marketplace image

Over the last 13 years, Stan and I have found ourselves drawn to focus on businesses that have network effects.  It started intuitively, then became explicit in 2003. Since then, we’ve started or advised over 25 companies whose core business was either 1) building a network of people who wanted to communicate, or 2) a network of buyers and sellers who wanted to transact.  Some of these companies have both.

There are others who have admitted a similar affection for these businesses, including David Sze and Reid Hoffman of Greylock, Fred Wilson of Union Square, Bill Gurley and Matt Cohler of Benchmark, Jeremy Levine of Bessemer.  And no wonder.  If you look at the biggest tech returns of the last 15 years, many of them were either marketplaces or networks, and if you consider companies that became worth more than $10B, nearly all of them fall in this category.  We’ve done a detailed analysis of this ourselves, and recently, James Slavet, also of Greylock, published similar findings.

So why isn’t everyone focused on these?  Increasingly, they are, of course.  But the fact remains, they’re f**king hard to pull off.  There’s a lot of art/luck in them, and that’s hard to predict and thus hard to invest in.  Over the years, we’ve watched/stumbled into/invented many tactics to manufacture a two sided network, to A/B test your way to virility, to foster liquidity and tipping points, to buy your network inexpensively, to iterate until you find the right subject matter or value proposition, build the right retention and feedback loops, etc.  These lessons can be applied today to increase the chance of successfully creating a functioning marketplace or network, or both.

The first step is even realizing you are attempting to develop a business that fits in this cohort of companies, and that there are now lessons to learn from prior successes.


Compstak — Marketplace for Commercial Real Estate Information

Compstak logo

I met Michael Mandel at 500 Startups in February.  He’s a former commercial real estate broker in Manhattan.  Been iterating away with his co-founder CTO Vadim Belobrovka and his  Chief Product Officer Jeff Domke for a couple years, refining a information marketplace to serve that market.  Compstak.

I love that market.  “When it comes to wealth creation, there’s real estate, and then there’s everything else.”  And the Commercial real estate side is even more underserved by the tech community that Residential real estate.  I think because fewer technical people have direct experience in commercial.

They have line of sight to liquidity in their marketplace, a great team, and a viable path and the vision to being ginormous.  It’s our only the second time in 10 years we’ve gotten involved in a company in NYC, and the distance certainly presents some challenges, which is why we don’t make it a habit. But these guys are the exception.

Cool companies

Scripted — The Writing Marketplace

Scripted Logo

The Ooga portfolio grew this week.  Scripted, a mediated marketplace for writing and photos, helping companies produce and publish digital content to support their content marketing efforts.

Sunil Rajaraman and Ryan Buckley are the Co-Founders.  We were introduced to them by two different friends in the same week, and when we met them, we fell for them.  Great guys, working on a shoestring budget, real clients, a growing market.   I see lots of fun ahead.