The best way to solve chicken and egg problems for marketplaces is to prove market need on each side independently first with a low-cost MVP-type test. Once you've proven the market on both sides with metrics it is much easier to leg in supply and demand with a strategic or enough funding to match a market on a local or niche level to ensure liquidity. For a deeper analysis, here is a post on medium that I wrote... http://bit.ly/1k2vYbY Also, feel free to schedule a call with me if you'd like to dig deeper.
I've built two £1m+ businesses (0800handyman and KeepMeBooked) from start-up to sale.
Provide something of value to one side or other of the marketplace first. For example:
- A mileage and revenue tracking tool for taxi drivers (Hailo)
- A place for designers to publish their portfolios (Dribbble)
- A reservation system (HostelWorld)
That way, you can get suppliers on board without them expecting any revenue from you. You are providing them with a useful tool. Once you've got enough suppliers using your tool, you can then go out and generate demand for them and turn your network of tool users into a marketplace.
Ah! the beauty of starting a "two-sided" marketplace. There is no "secret" formula to this and it really depends on the space you are currently at.
My advice would be to start with the side that requires the most amount of 'hand-holding" that is whatever side requires the most amount of human interaction. But ultimately it depends on the type of "marketplace". Uber for a long period of time hired "black cars" to artificially create demand from the users. Once riders reached an inflexition point they doubled down on driver acquisition with huge incentives such as paying guaranteed rates $50/hr, $250 referral fees. Then they circled back to riders by offering 1st ride free, and huge discounts.
Glad to have a call on how other marketplaces have seeded their demand or sufficed to activate one of the sides