Introducing innovative marketplaces often requires changes in behavior of the users. Your good idea is often not understand by the potential buyers and sellers or users. Besides there is the chicken and egg problem. You need sellers to attract buyers and you need buyers to attract sellers. As a result your good idea for a an innovative marketplaces seems to be not such a good idea or probably it needs more time.
Crowdfunding is an excellent way to validate if potential buyers or sellers would like to participate before you setup the marketplace. Most obvious is that your backers are your potential sellers and they use their existing customer base to attract buyers. This way you solve the chicken and egg problem. A benefit is that you will get some money to develop the marketplace.
Now back to introducing an innovative product or service (so also a innovative marketplace), the best practice is to start with Customer Interviews to discover if the problem you expect to solve are the problems your potential clients or users have.
If you validated the problem and you expect you find a niche audience, the next step is building the Minimal Viable Product (MVP) and test the practice. Before or after building the MVP you can start a crowdfunding campaign.
To be clear, it is not based on own experience but is an idea to experiment with if you want to start an innovative marketplace.
It seems that there is not too much experience shared in this topic on the Internet. Maybe a little comparable is crowdfunding software like for example an app.
Last month Smashing Magazine had in interesting article So You Want To Crowdfund Your Startup App?. In the article they answered the question:
Why Do Apps And Software Struggle?
Crowdfunding seems the perfect platform to launch an app or software product. Unfortunately, non-tangible products are poorly received. This stems from the origins of crowdfunding, because crowdfunding was originally conceived as helping creative people create that which could never exist without funding.
If you project this struggle to crowdfunding for innovative marketplaces, probably you will experience the same, non-tangible products are poorly received. A solution maybe to make a visionary and disruptive marketplace. This way you make an offer for the sellers of the marketplace they can’t refuse if they don’t want be out of business within 10 years.
And the other challenge Smashing Magazine mentioned is:
You Can’t Kill Two Birds With One Stone: Focus On Users Or Funding
Software startups have a hard time crowdfunding for all the reasons mentioned. To make it easier and get the most out of your campaign, consider your primary objective: funding or users.
Also for innovative marketplaces this maybe the challenge. Solve the chicken/egg problem or choose for funding. To be honest in this case there is no choice, if you don’t solve the chicken/egg problem you will not get funding anyway. Although…, I think you should try to get serious funding with the big sellers on your marketplace. You can give them equity so they will take long term profit of the disruptive marketplace too.
The most common ways of crowdfunding are based on donations, equity, and rewards-based crowdfunding. Most known platforms like Kickstarter and Indiegogo are rewards-based crowdfunding. Startups presell products to fund product production.
To validate if your idea -and especially the behavior of your potential sellers and buyers- for an innovative marketplace is as great as you expect, equity crowdfunding is probably the best way to start. Especially B2B and B2C marketplaces (for Consumer-to-Consumer marketplaces probably not).
Below a few equity crowdfunding platforms you can choose of:
- angel.co: It is a well-known database for startups with possibility to invest in these startups.
- Circleup: Connecting Investors with Consumer Brands
- Start Engine probably less know but they describe themselves as the Kickstarter with equity instead of donations
- Syndicate Room: Invest with the Angels
- FundedByMe: Europe’s fastest growing crowd investment platform connecting investors and entrepreneurs.
- Companisto: the leading equity-based crowdfunding platforms in Europe with very succesfull projects in their portfolio