We're sharing a guest blog post from our community EIR Danny Martinez that's part of a series of posts on marketplace expansion. This was previously shared as a deep dive post in the community here.
This is the third and final post in a series I’ve shared covering marketplace expansion into new markets or geos. Part 1 and Part 2 focused on marketing and sales considerations. In this post, we’ll focus on a few remaining functions, specifically product, support and legal; using insights provided by members of the community that have worked at marketplaces such as Turo, Uber, and Booking.com, as well as a startup lawyer that is also the founder of Marketplace Risk.
When it comes to thinking about expansion, it’s tempting to spend the majority of your time and effort on short term sales & marketing initiatives. But doing so exclusively, results in neglecting really important parts of the equation: how you’ll best serve the customers you successfully onboard and how you stay on the right side of the regulatory environment (product and support for the former, legal for the latter).
Before we get into the meat of this post, I’d like to share what I believe is a really important point when it comes to expanding into new geos: you need to be comfortable with risk.
One of the main advantages an early stage startup has is its ability to move quickly, take risks and (occasionally) feel comfortable with not being fully compliant with all rules. I’ll expand on the latter point: with this I’m not saying you should completely disregard all regulations and chase growth for the sake of it. What I am saying is that you should make a balanced decision which considers whether the benefit outweighs the risk.
It’s also important to recognise that as a startup matures, it needs to evolve its approach. At Airbnb, years after being present in London, in 2016 the company enforced a 90 day limit on short term lets (consistent with local regulations). After getting to 90 nights the product would block hosts from hosting any further guests. It was the only player in this space to do so, and even though in the short term it had a negative impact on growth, in the longer term it gave the company a legitimacy that until then it had been lacking in London (subsequent meetings with regulators were much smoother after this point, as it was clear that Airbnb wanted to be seen as a serious player and wanted to abide with regulations).
For this post, however, I’ll focus on the more nascent stages of a startup’s expansion efforts. When it comes to marketplaces that are often enabling real life transactions (connecting people, moving resources across geographies etc.) the minimum viable product (MVP) concept is an interesting one to keep in mind, not just for product, but also for support and legal (for the latter 2, what’s the minimum viable solution you can put in place that gives you the feeling of "good enough for now"?). I’ll go into the details of what this looks like for product, support and legal below, with some specific examples from members of the community.
As previously mentioned, understanding and adapting to the local nuances of a new geo is critical when thinking about expansion, and that’s especially true for the product. A central concept to bear in mind is that of the Minimum Bookable Product (MBP), which means ensuring that the core functionalities are appropriately localised and operational from the outset (whilst remembering the M in MBP!)
"In Japan, there's no notion of a background check...you need to go to a Japanese court and ask the judge to write you a letter. Some onboarding steps just didn't make sense when expanding into new geographies." -Rob Chan (prev. Uber, Turo)
"Understand what customers are currently doing without your product and what they wish they could do is key. This also gives you insights into competition, their pain points, and what they're paying for. To get started, you simply want to make sure that both sides of the marketplace can start using the product and transactions can happen." -Sarah Louragh (prev. Airbnb, Booking.com)
You could argue that this support is as important (depending on the situation, it could be even more important!) than the product. Considerations like time zones, the nature of issues (time-sensitive, regulatory), and the importance of language are all crucial. Initially, it's often beneficial to start with an internal (local) team, aligning with the concept of what “good enough” is for a launch, and then considering the offshoring/outsourcing path for scale.
"When expanding to a new country, we always hired locally. As processes matured, we then offshored to drive scale, focusing on time zones and potentially critical issues." -Rob Chan (prev. Uber, Turo)
Your approach to legal matters should vary significantly, depending on the industry you’re in. If you’re venturing into an unregulated industry, the approach might be to launch first and address regulatory concerns as they arise. However, for regulated industries (e.g. home sharing or car sharing), a more cautious approach is warranted due to potential future licensing implications.
“If you're not in a regulated industry (eg, services for pets, homes, etc.) then you can break into the market and ask questions later in large part because you're not likely on anyone's radar and don't have to worry about regulators. You may have competitors that try to sink you early, but the regulators should be your bigger concern. If you are in a regulated space (eg, home sharing, car sharing, alcohol, marijuana, etc.), I do not recommend doing this because if the marketplace is regulated and you get busted, it could impact any future licences or permissions that you need." -Jeremy Gottschalk (startup lawyer, founder of Marketplace Risk)
As we wrap up our deep dive series on marketplace expansion, it's crucial to remember the pivotal role that product, support, and legal play in maximising your chances of launching and succeeding in a new geo. Here's a few key takeaways from this last post and tips to keep in mind:
It’s key to remember that there isn’t a single right way of setting these functions up for expansion. Which industry you are in, the maturity of your marketplaces, and what resources you have are all factors that will impact which approach you should take. Spending time and resources setting up the right foundations (whilst accepting not everything will be perfect from the get-go), and refining your approach as your marketplace grows into a new geography is a balance you’ll want to keep in mind.
Please let me know if you have any specific questions on this in the comments below, your own experience, or if you’d like to chat through this more below.
You can connect with Danny to discuss this post in the Everything Marketplaces community here. A big thanks to Danny for also being an active EIR in the community, where he is often sharing his marketplace experience, insights, and helping early stage founders.