a16z Podcast | What’s Next for Marketplace Startups (Hint: Services) | Summary and Q&A

TL;DR

Building successful marketplace startups for services has been challenging due to complexity, lack of standardization, and difficulty in capturing relevant information. However, the future lies in unlocking supply in regulated service industries, improving access and quality for consumers.

Key Insights

• 🖤 Marketplace startups for services have struggled due to complexity, lack of standardization, and capturing relevant information.
• 🙈 Evolution of marketplace startups has seen eras of basic listings, unbundled Craigslist, on-demand models, and managed marketplaces.
• 👏 Managed marketplaces have potential in regulated service industries to improve access, raise standards, expand supply pools, and use automation.
• 🤩 Unlocking supply in regulated services is a key opportunity for marketplace startups to address unmet demand and provide value to consumers.
• 💅 Mental health, wellness, beauty, and other regulated industries offer potential for marketplace startups to democratize services and enhance consumer experience.
• 🖤 Many regulated service categories still lack marketplace startups, presenting opportunities for entrepreneurs to build innovative solutions.

Transcript

hi everyone welcome today 6mz podcast today's episode was originally recorded as a video which you can find in our youtube channel at youtube.com slash a 1600 e cell conversation between deal and research team operating partner Frank Chen and Li Jin who covers our consumer vertical and co-wrote with general partner Andrew Chen a post on the topic o... Read More

Questions & Answers

Q: Why have there not been a hundred at-scale marketplaces for buying services?

There are several reasons for this, including the complexity and heterogeneity of services, the lack of a clear metric for quality, resource limitations for small businesses, and the difficulty in extracting value chain stages that can be brought online.

Q: What are managed marketplaces and how do they address complex services?

Managed marketplaces go beyond previous eras by providing additional value and functionality. They may hire and manage service providers, set higher standards, expand supply pools, or use AI automation to improve access, quality, and consumer experience.

Q: How can marketplace startups unlock supply in regulated service industries?

Strategies include making discovery easier for licensed providers, hiring and managing providers as employees, expanding the supply pool beyond licensed professionals, and using AI automation to replace basic tasks or augment existing providers.

Q: What are some potential categories for marketplace startups in regulated services?

Mental health and wellness, luxury beauty services, and other regulated industries with limited access and high demand are promising areas for marketplace startups to improve access, lower prices, and enhance consumer experience.

Summary

In this video podcast episode, Frank Chen and Li Jin discuss the past and future of marketplace startups and why there aren't more at scale marketplaces for buying services. They explore various eras of marketplaces, including the listings era, the unbundled Craigslist era, the on-demand era, and the managed marketplace era. They also highlight the potential of regulated service marketplaces and the opportunities for startups in this space.

Questions & Answers

Q: Why aren't there a hundred at scale marketplaces for buying services?

There are a few reasons for this. Firstly, services are complex and have many attributes, making it difficult to capture the relevant information in a marketplace. Secondly, there is no clear metric of success or quality for services, as experiences may vary from one consumer to another. Thirdly, many services are provided by small business owners who lack the resources to go online and list their services. Finally, services involve synchronous creation and receiving of value, making it challenging to break up the value chain into a marketplace.

Q: What were the different eras of marketplaces discussed in the video?

The video discusses four major eras of marketplaces. The first era was the listings era, which involved digitized versions of yellow pages where consumers had to do the legwork to find and contact service providers. The second era was the unbundled Craigslist era, where marketplaces specialized in specific service categories and offered better features and filtering technology. The third era was the on-demand era, characterized by the rise of on-demand marketplaces like Uber and Lyft, made possible by the advent of mobile technology. The fourth era is the managed marketplace era, where marketplaces provide additional value by managing the entire service delivery process, tackling complex services and offering higher quality and accessibility.

Q: How have marketplaces in the managed marketplace era added value and improved consumer experiences?

Managed marketplaces go beyond previous eras by providing additional value to consumers and service providers. They may manage the supply side themselves, ensuring higher quality and standards among providers. They may also simplify the discovery process by offering better search and filtering features. Some managed marketplaces even expand the supply pool by including unlicensed providers who can meet latent demand. Lastly, some marketplaces use automation, like AI, to streamline service delivery and improve access.

Q: What are some examples of regulated services that could benefit from marketplaces?

Examples of regulated services that could benefit from marketplaces include law, accounting, medicine, healthcare, floristry, and interior design. In these industries, regulation creates an artificial constraint on supply, making it difficult for consumers to access services or find quality providers. Marketplaces could address these challenges by improving discovery, managing and vetting providers, expanding the supply pool, or using AI automation.

Q: How can regulated service marketplaces improve access and experiences for consumers?

Regulated service marketplaces can improve access and experiences by providing easier discovery of licensed providers, managing the supply themselves to ensure higher quality, expanding the supply pool beyond licensed professionals, and using AI automation to streamline processes. By doing so, these marketplaces can increase efficiency, reduce waiting times, lower prices, and improve the overall consumer experience.

Q: What are some categories that the speaker is personally excited about in the regulated services space?

The speaker is particularly excited about mental health and wellness, as therapy is currently a luxury product that many people cannot access. They believe that a marketplace could improve access to mental health services, potentially by leveraging unlicensed but trained individuals to provide conversation-based therapy. Another category of interest is the beauty space, where makeup artists are currently licensed professionals and their services are considered a luxury. A marketplace could democratize access to personal makeup artists, allowing more people to experience personalized makeup services on a daily basis.

Q: What are some challenges that startups in the regulated services space may face?

Startups in the regulated services space may face challenges in unlocking the supply side, especially when it comes to ensuring quality and trust. They may also need to navigate regulations and licensing requirements specific to each industry. Additionally, startups may have to address concerns about unlicensed providers and find ways to ensure consumer safety and satisfaction.

Q: What strategies can startups use to unlock supply in regulated service marketplaces?

Startups can use various strategies to unlock supply in regulated service marketplaces. They can focus on improving discovery by providing better search and filtering features for licensed providers. They can also adopt a managed marketplace model where they directly hire and manage providers to raise the level of service and quality. Another strategy is to augment or expand the licensed supply pool by including unlicensed individuals who go through alternative vetting or training processes. Lastly, startups can leverage AI automation to address supply constraints, such as using self-driving trucks or AI-led diagnosis in dermatology.

Q: What advice does the speaker have for entrepreneurs starting companies in regulated service marketplaces?

The speaker advises entrepreneurs to seize the numerous opportunities in regulated service marketplaces. Many service categories are still untapped, and there is a huge potential for growth in this space. Entrepreneurs should focus on identifying categories where there is high demand but limited supply, and aim to provide solutions that ultimately improve access, lower prices, and enhance the overall consumer experience.

Q: What are some favorite categories mentioned by the speaker in the regulated services space?

The speaker mentions mental health and wellness as a favorite category, as well as beauty and makeup services. They particularly highlight therapy and makeup artistry as areas where regulated service marketplaces could have a significant impact by improving access and affordability.

Takeaways

Regulated service marketplaces present a compelling opportunity for startups to improve access, affordability, and overall experiences in industries that have historically been constrained by licensing and regulations. By unlocking the supply side, leveraging technology, and addressing the pain points of consumers, these marketplaces can tap into latent demand and provide valuable solutions. Entrepreneurs looking to build in this space should focus on identifying categories where demand is unfulfilled and seek to provide innovative and efficient solutions to improve the lives of consumers.

Summary & Key Takeaways

• Only 7% of services purchased are mediated by the internet, despite services representing two-thirds of consumer spend.

• Reasons for slow adoption of online services include complexity, lack of standardized attributes, difficulty in capturing information, and limited resources for small businesses.

• The evolution of marketplace startups has seen different eras, from basic listings to unbundled Craigslist, on-demand models, and now managed marketplaces.

• Managed marketplaces have shown promise in regulated service industries by improving access, raising service standards, expanding supply pools, and using automation.