Ask an Expert: How do I solve the “Chicken or the Egg” problem?

Aug 30, 2016

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What came first, the chicken or the egg?

As old as this question may be, this classic conundrum has a lot of weight in the startup community today; primarily with companies that linger in the space of double sided marketplaces.

Unlike traditional businesses, a double-sided marketplace interacts with two types of customers; one with a demand and the other with a supply. Their business creates a platform which allows the two sides to exchange services.

Each type of customer is vital for the prosperity of this business model. I.e.  With too much demand & no supply, the customer(s) would gain no value from being a part of the marketplace and would go elsewhere to fill their need (and vice versa.) Challenges aside, a double-sided marketplace has an uncanny ability to grow; as the more people that use their platform, the more valuable it becomes.

eStaffMatch does this by connecting event staff with event organizers. They completely bypass the need to hire a staffing agency to oversee the hiring of temporary staff; so without that key middle-man, workers can earn higher wages and events can save money.

Founder and CEO, Eropa Stein says “We’ve been having trouble recruiting talented staff as well as the event organizers at the same speed. It has been nearly impossible to do simultaneously. Do you have any advice on how to proceed?”

Ask a Biz Expert:

Stephen Beamish: President & Founder of Black Tusk Business Solutions & Invest Ottawa EIR

Stephen Beamish

Stephen Beamish

This is a common challenge and unfortunately, most startups respond by investing more time and money to build both at the same time. This proves to be challenging for many reasons: you require twice the resources, it can end up being twice as costly, and even at your best, these two elements rarely grow at the same pace.

So to solve your problem, I would do 3 things:

First, I would look at where your revenue is coming from. This obviously is where you derive your value, and to engage that flow of cash, you need to provide the optimal support to that area. *In your case I would assume that the bulk would come from the event organizers or at least the hiring of your on-demand staff.

Secondly, I would look to see which of your customers would be easier to draw. Since this group will require less time and resources to recruit, they will be less of a risk to your business. *This should be your staff. As you have a wider pool to draw from and this ends up being the “supply” side of the equation.

Finally, I would look at what the needs of your demand side are and what value you can bring to them. *I think that the best scenario you would be able to provide: a) quantity to choose from and b) because of the quantity, a better rate of talent and choice.

So all in all, I would engage in driving a pool of staffing resources first so you can minimize your cost exposure and deliver a wider variety of talent to your event organizers. This would be of great value to your ‘demand’ customers and in turn will hopefully turn them into making a “go” decision a lot faster.

Michelle Van Tol: Chair at TEC Canada & Invest Ottawa EIR

Michelle Van Tol

Michelle Van Tol

Running a startup is hard work (with what seems to be never enough resources). That’s why I try not to reinvent the wheel whenever possible. I always look to see who else may have walked this path before me and I try to learn from their experiences. Experience costs time and money; seek to benefit from others’ investments.

In your situation, there are a number of companies who have built successful double-sided marketplaces already, such as Uber and Airbnb. Do some research on how they approached building both sides of their marketplace in parallel and how they scaled. Then decide on the suite of ideas that you think would work best for your business.

Your problem is another variation of the resource allocation problem startups face. Since you need both sides of the marketplace, you will need to be constantly re-balancing your allocation of resources to the side of the marketplace that most needs the focus at that time.

Sam Khan: VP Operations and Business Development of iStorm & Invest Ottawa EIR

Sam Khan

Sam Khan, EIR

You’re right about the fact that it’s nearly impossible to grow both sides at the same time. As a startup, there are only so many resources that you have at your disposal and those need to be put to good use. That’s why I find it a good practice to laser focus on one specific area rather than the targeting the whole picture.

I would consider a tactical sales strategy. You should concentrate on a specific vertical of event organizers and expand the number of clusters you cover as you go. Of course, you will need an already established well of event staff before you attempt this (& if you don’t already, I would suggest re-focusing on engaging with this talent.) But targeting these niche customer groups will help you gain traction, popularity, and praises from customers (who may go on to recommending you to others.)

An example of a vertical you could target is the tradeshows industry. There are many associations such as the Trade show association of Canada, the International Associations of Exhibitions and Events, etc. that will list different events. In the most case, these all require heavy staffing which event organizers will have to either a) hire a staffing agency to fill or b) cover costs for travel and board. Either way, your platform can help save money and make their job easier.

So in Short…

Make the “Go” Decision Simple

Find as much value as possible for the customer that will result in your profit. If the appropriate structure is in place for your customer to make the “Go” decision, it will be easier to recruit.

Learn from History

You are not the first startup to build a marketplace. Successful companies such as Uber and AirBnB have done it before you and have done it well. Do your due diligence by researching how some of the ‘greats’ may have pathed the path and don’t be afraid to take a tip or two from their experience.

Zero In On Your Customer                                                                   

Focusing on a niche customer will help in developing traction within the industry. As you build popularity, you can expand into the other verticals and eventually the growth will

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