We had a town hall with Sarah Tavel to discuss her three-part series on the Hierarchy of Marketplaces. "The training of thinking about marketplaces applies to everything," she said, whether a social product, open-source project, SaaS products, or more.

I: The Writing Process

Sarah started writing the Hierarchy of Marketplaces series as an extension of her engagement hierarchy. At times, it felt so complex that she didn't know if she'd ever ship it. "For [pieces] like that, you learn the most, but you put so much energy into them that you never know if you're going to get there. This is a living, breathing, document which will look different a few years from now," she said.

"For my best writing, I have an insight, I sit down, and thirty minutes later I'm ready to press publish. Those are the posts that I feel most strike a chord. But we've all had the experience of writing something in a process of discovery, where we're figuring out what the insight is."

II: The Rebirth of Consumer  

Why now? Firstly, there are more minutes in our day up for grabs. We can't participate in time-consuming offline activities like going to movies, restaurants, vacation, sports, etc. "Many social experiences that already exist are having record engagement. This also means that new experiences like Clubhouse and others have an opportunity to grab minutes that were never before [free]," Sarah said.

Secondly, people are tiring of "lean-back" incumbent social experiences, where they scroll through feeds of other people's content. "The stuff that I think is the future of social will look more like a game and be more participatory...That's what makes people feel better about themselves."  

Are we unbundling or rebundling? The answer depends on the experience you're looking at. Twitter is being partly unbundled on Substack—though some people, like Nathan Baschez with his Everything newsletter, are rebundling. Outside of consumer social, Kyle Harrison commented on Roam as a "bundler" for several of his productivity apps. Sarah also noted the opportunity to unbundle LinkedIn, which enjoys a strong network but remains suboptimal across many different verticals (e.g., real estate brokers or software engineers for remote work).

III:  Starting with a thimble

Nail a constrained problem before expanding, but pick your thimble carefully—not all markets are susceptible to tipping. Consider factors in Sarah's framework, like a market's competitive landscape, fragmentation, homogeneity of buyer need, and more.

Start exclusive to get inclusive: "Another way of saying exclusive is a constrained market," Sarah noted. "That's a thimble." Many people have criticized Clubhouse for being for techies, and some companies are launching more broadly in an effort to beat that. "The challenge there is that you'll have a matching problem," Sarah said. "That's the equivalent of chasing GMV. You're thinking you're going to go big and make it good for everyone—but...you have to start very exclusively—even more so to get a synchronous live experience to work. The only way to get to inclusive is to start with exclusive." Roam's thimble, for example, was working with Stanford AI academic research groups—now it is a knowledge management system loved by all sorts of users.

Expand carefully beyond your initial demographic: Pinterest started as a product used mostly by female DIY/lifestyle bloggers in the Midwest, but struggled to expand because of a flawed discovery system based on Facebook's social graph. New users followed their Facebook friends by default, so males saw only the boards and feeds of their female friends.

"We didn't do a good job matching men with the content that was relevant to them, creating a mental model that Pinterest was for women," Sarah said. "It was really easy to teach [users] someone something new, but really hard to get them to re-learn something."

Build community to build trust: "If the product is equal, the community will drive the ultimate outcome," said Boris Wertz, investor at VersionOne VC.  Community is often associated with trust. "When you're building a marketplace, you're constantly removing friction—and a lack of trust creates friction."

"No one has really figured out community in marketplaces—some social shopping marketplaces have come out in Asia, but in North America the two notions are more separate."

IV: A Question for Us

"I think the future of work and remote work is the only thing that I, as an investor, should be spending time on," Sarah said. "We used to work either in person or away, but we're going to have increasingly hybrid experiences, with many people who'll need retraining. Verticals that have been slow tech adopters are also realizing that it's time to adopt productivity tools and new technologies. I'm fascinated by those categories." How will this play out?

RSVP for future town halls at www.highlighter.com/discover!