The Ledger
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Winters: Only four acquisition engines can scale startups to a billion dollars
“There aren't that many that helped you become a billion dollar company. It's basically sales, virality, what I call like content loops, which is we distribute content directly to, you know, Google or to social networks to bring more people in, and then those p…”
Winters: Paid acquisition inevitably degrades and becomes unprofitable over time
“And the challenge with paid is It always looks better yesterday than it does today, unless you have a network effect business where the product quality is getting better, faster than the quality of people you're bringing are getting worse, right? Cause you alw…”
Winters: SaaS networks yield fewer venture wins than demand-owning marketplaces
“It's generally lower take rate. If you have a take rate model, it's gonna be more like five percent versus 15%. And then of course you're paying the payment processing. It's harder to build a massive scale business. So you see fewer venture wins in that catego…”
Winters: SaaS-to-marketplace transitions almost never work as a second phase
“I generally advise founders against marketplaces phase two of the company. So there are a lot, a bunch of people were like, ah, SaaS to marketplace transitions. That's the model. And I'm like, name an example in the last 10 years where that's actually worked. …”
Winters: Marketplace network effects only kick in past 50% demand
“I don't think cross-site network effects really kick in until you're like past 50% of the demand, probably even more than that.”
Winters: Grubhub's only winning move was acquiring DoorDash and appointing Tony Xu
“The only thing they could have done was buy DoorDash as early as possible, and then basically let Tony run the company and build a delivery network.”
Winters: A $100M public company cannot beat rivals with $4B in capital
“I just don't think there's a way that a public company that raised like a hundred million in IPO is going to outcompete. Companies that have raised four billion dollars each, I think, in Uber and DoorDash like to crush you.”
Winters: Marketplaces must immediately copy rivals offering higher frequency or lower cost
“I think one thing marketplace founders need to be Careful about is if you are aggregating supply and demand in the market and someone else is aggregating the same supply and offering it at lower cost or with a higher frequency type of transaction, you need to …”
Winters: TAM is a misleading metric for early-stage marketplaces
“TAM is kind of a misleading metric for marketplaces, because in all the biggest marketplaces like Uber and Airbnb, it looked like there was no TAM.”
Winters: Grubhub data showed resolving bad orders boosted retention over flawless orders
“Early on, we were basically like, look, if there's an issue with the driver, if there's an issue with the order being late, we'll take it on as the marketplace, because we know if we make up for a bad experience by going above and beyond, we'll actually have b…”
Winters: Network effects are the only scalable defense against cohort degradation
“So what needs to happen is that the product needs to get better faster than the users you acquire get worse. And network effects are really the only scalable solution that can make that happen.”
Winters: Discounting does not create product-market fit in marketplaces
“One is discounting to product market fit does not get you to product market fit.
So in a marketplace, you are selling people on the value of the selection, on the value of, you know, the service.
And if you then give a five dollar discount, then you start chan…”
Winters: Startups nearly went bankrupt blindly copying Uber's expensive launcher playbook
“A bunch of people tried to copy Uber's launcher strategy, and then a bunch of people like almost went bankrupt doing it because it's really expensive and they weren't raising billions.
You didn't really understand what your playbook required.
You were just kin…”
Winters: Marketplaces win on liquidity and selection, not software features
“Marketplaces are not really usually winning on the software itself. Only if the software helps you find more selection on the demand side or brings you more money on the supply side.”
Winters: The pandemic permanently fixed DoorDash's unit economics by eliminating latency
“Then the pandemic hits and all the unit economics of DoorDash flipped positive because everyone's all of a sudden ordering online and all the drivers are much more busy, which means all the latency in the model that was creating the losses went away.”
Winters: GOAT will probably stay sneakers-only, limiting its growth
“It probably always will be a sneaker marketplace, and that will limit ultimately how big that company could get.”
Winters: Asset marketplaces win by requiring low initial supplier effort before raising standards
“So then there's the example of, okay, you actually have an asset that can be leveraged for the marketplace. And generally the way those models win, whether it's, you know, Airbnb or like Hipcamp is a company that I spent a lot of time working with. You're aski…”
Winters: Turo outperformed Getaround by prioritizing daily over hourly rentals
“I think Toro has done better than GetAround if I've paid attention correctly. And part of the reason why is GetAround built a bunch of infrastructure to make it easy for hourly rentals. And Toro is, wait a minute, there's no money in that. We should optimize e…”
Winters: Marketplaces must build granular data capabilities faster than other models
“Marketplace businesses need to get sophisticated around data, usually a lot more quickly than other models.
And part of the reason for that is
Once you're doing more than one category or more than one city or neighborhood, the aggregate data doesn't really tel…”
Winters: Owning demand matters most in marketplaces, contrary to Uber's philosophy
“And famously, Uber, like, does not believe this. They believe supply is all that matters, and I fundamentally disagree. Supply is It's a lot of times the tool to get demand, but owning demand is what keeps the supply happy.”
Winters: Low-frequency marketplaces require high AOV or high take rates
“If you're going to be low frequency, then you need to be high AOV. And if you can't be high OEOV, then you need to be high take rate on the low frequency. And if you can't get any of those to work, then chances are that a marketplace is not going to be an opti…”
Winters: Faire's zero-commission brand onboarding created proprietary acquisition loop
“Part of their unique advantage is they were able to build a product where brands can onboard their existing retailers for free and not pay any commission, but they can manage that workflow. And then that allowed FAIR to cross sell those boutiques to other bran…”
Winters: Edges in paid acquisition channels generally get competed away by rivals
“In today's environment where like paid is pretty hard to get an edge on any sort of edge you have will generally get competed away by competitors coming into the market. You're looking to see that someone's not going to rely on paid or sales for everything unl…”
Winters: Viral growth curves asymptote quickly as invited users exhaust interest
“Virality is, you know, mainly how consumer social companies have grown, but you get like a really fast curve, but then it asymptotes generally more quickly because all the people that reject the invites the first few times, they're not gonna necessarily accept…”
Winters: Fermat Commerce scaled B2B sales using central founder network nodes
“Part of how they got traction, mostly selling to direct consumer e-commerce companies. Is they found these nodes in the DTC e-com community that know all the other founders and they convinced those people that it was a great product. And so it's kind of like a…”
Winters: A true marketplace's core value to supply is bringing demand
“The difference between a marketplace and what I would call like a SaaS network is that a marketplace is primary value prop to the supply is that you bring the demand.”
Winters: Restaurant kitchens are underutilized fixed assets constrained only by seating
“For Grubhub, that's basically never true because the kitchen is essentially always an underutilized fixed asset. They can always pump out more food. 99.9% of restaurants can pump out more food. It's the front of the house that gets constrained because they're …”
Winters: Next-gen B2B marketplaces must build workflow software to scale demand
“What you're seeing with a little bit more of the next generation of marketplaces is it requires more products to be in a position to drive demand scalably. Maybe you need to build out some workflow products. Or maybe you need to build out some sort of free man…”
Winters: Ephemeral inventory makes discovery matching very bad initially
“You have kind of ephemeral inventory, generally not a lot of data on the consumer side as to what consumer preferences are, because historically you haven't been collecting it. So then your ability to match And drive true discovery is initially very bad.”
Casey Winters: Uber defeated Lyft by prioritizing low price over friendly branding
“Uber early on was all about legitimacy. These are licensed drivers. It's a black car, all this kind of stuff. And Lyft was like, oh yeah, it's like your neighbor and it's fun and it's friendly and it's safe. And then I think Uber was smart to say actually thei…”
Winters: Rover would have failed if it had not copied Wag
“Rover copied the model and wag ran into some operational execution issues at scale and Rover eventually took the lead on dog walking as well. But if they hadn't, we'd forget they even existed.”
Winters: Most winning marketplaces remain single-category rather than multi-category
“As we look at most of the winners in marketplaces, you know, where I would say small winners from like a hundred million to a billion or bigger winners, which are a billion or more, most of them are single category, but then there's some really big outliers th…”
Winters: Low-frequency marketplaces typically remain fully reliant on Google SEO
“And I think that's normally what a low frequency marketplace looks is you're just grinding on SEO and conversion all day, every day. And there isn't really that opportunity to build that non-transactional product like Zillow has to create engagement. So essent…”
Winters: Raising marketplace standards inevitably squeezes out individual sellers for power sellers
“The flip side of that is it creates a dynamic where only power sellers remain that can do all the standards. So the more, you know, individuals a lot of times can't keep up with the demands of the marketplace. And you certainly eBay is a prominent example of t…”
Winters: Pinterest doubled activation rates in one year by simplifying onboarding
“At Pinterest, we were able to double the activation rates after a year of work, but we had to dramatically simplify onboarding. We had to make sure it worked a lot better in all these international use cases that we weren't that good in. We had to delete a bun…”
Winters: User activation rate is the most important consumer metric
“And I believe in most consumer businesses, that is the most important number, which is how many you activate, meaning, and for those of you who are like, what does that mean? Of the people who sign up and try the product, how many have built a habit where they…”
Winters: Marketplace creator frequency depends on their business model, not software quality
“The frequency maps to their business model, not to how good our software is, right? The music festival person's not going to start putting on music festivals every week. Like, it's just not possible.”
Winters: Eventbrite measured only net dollar retention, not cohort retention, when he joined
“They actually, Eventbrite, when I joined, was not really in the habit of measuring cohort retention. It just measured net dollar retention.”
Winters: Expedia and Booking make most revenue from hotels
“So you see with the Expedia's of the world, the bookings of the world, they actually make most of their money off hotels where there's a lot more variety and a lot more fragmentation.”
Winters: Tony Xu delivered DoorDash orders himself for the first year
“Tony at DoorDash was delivering the meals himself. For like the first year, right? Cause he didn't know how to acquire drivers yet. And he didn't want to work on that until he validated that there was a real product there.”
Winters: Grubhub covered almost all US delivery restaurants under asset-light model
“Grubhub was an asset-like marketplace where the restaurants were in charge of doing their own delivery, and we basically had every restaurant across most of the U.S. That did their own delivery.”
Winters: Grubhub raised only $80M before its IPO
“So you're a company Grubhub that's raised eighty million dollars before you go public.”
Winters: Uber Eats improved driver acquisition efficiency by utilizing unqualified rideshare supply
“And it allowed them to use their supply that, that was signing up for Uber, but maybe didn't have a good enough car, or maybe the person was too young. So it allowed them to get some more efficiency on their supply acquisition as well.”
Winters: Uber Eats protected Uber from pandemic shocks that hit Lyft
“That made them a little bit less fragile to the pandemic because while, you know, rides shrank during the pandemic, food delivery demand went up and Lyft didn't really have that counterbalance only being focused on rides.”
Winters: Whatnot scaled from Funko Pops into multi-billion-dollar livestreaming
“Whatnot is one of the companies I work with as an advisor, and their first category for their live streaming marketplace was Funko Pops, which is an incredibly tiny category, right? It showed that they could make obsessive collector communities hang out and tr…”
Winters: Zillow's Zestimate maintains homeowner engagement despite low real estate frequency
“I think Zillow has always been a really interesting one in that, you know, real estate's incredibly low frequency, but this estimate means everyone feels like they have a relationship with Zillow all the time if you are a homeowner. So it's a way for them to s…”