Chicken or Egg — A Strategic Take to Founder’s Problem

As a founder, we come across lots of issues starting right from how to structure organization and making it all the way towards what metrics work for us.

At Markoknow we came across a lot of startups in our community that had issues where a particular platform with great value seems almost inoperative. When looking deeply we realized, Its a classic Chicken and Egg Problem.

Let me explain what this startup was facing. The startup was a two sided platform/marketplace-based-startup like Flipkart, E Bay where one side was someone listing a particular good or service and the other side operated like a user. Lets call them seller and buyer.

So generally, trying to onboard both the sides is expensive and difficult. Obviously you understand that startups don’t have a lot of cash in their initial days so they select their battles wisely.

Now this startup which looked quite inoperative actually tried onboarding both the sides together. Result : With little cash, Seller came and remained as dead listings due to no orders coming. Buyers came and went off due to not many options and no good management.

Its like you need to have customers or buyers to convince sellers to provide their services/goods and you need more sellers or diversity in product so customers have a choice and buy products.

Lets look deeper into the issue

Can this be seen as a “positive loop” wherein one promotes other but how to start this loop?

In some way, YES, It can work like a positive loop

The presence of one ensures or promotes the presence of other. So if you have one side, the other side has all the motives to come. That means owning all chicken means you will have all the eggs. Sounds like a Competitive Advantage, Doesn’t It?

But if there is not, then you are stuck in a vicious cycle as there are no customers, thus no sellers or no sellers and therefore no buyers and the marketplace won’t grow if there aren’t sufficient number of both buyers and sellers.

Let’s look at Tinder as an example

Whitney Wolfe, Ex Co-founder of Tinder and current Founder of Bumble, pitched women about the app, showing how easy and cool it is and got them onboarded, then she showed the potential male users how Tinder was already popular amongst women and they definitely should start using it and that’s how they got their first 15,000 users

Definitely, to not lose out on your resources and to not get on a negative vicious cycle of this problem, Founders try to solve this problem Early on.

So what are the potential solutions to solve this problem?

Lets take the case of startup that is a hiring platform and solve it for them

1. Enter with Significant Pre-investment

Pre-investment in this case means pre-work you put in your startup using all the available resources.

Let’s look in the case of hiring platform, as the Founder, you can initially research current job openings and partner with companies to post a significant number of listings so that applicants can feel the platform a go-to place to find opportunities.

2. Act as a Producer

Being a startup yourself, you can start hiring for your internal openings from your platform to increase the opportunities available on the platform and make it appealing for applicants to work for your startup. In this case, you are being a producer of job openings

Something similar was done by popular startups like Instagram, when they launched, they posted large chunks of content and even paid the content creators to post and thus are acting like producers.

C. Tap into an existing network

Rather building everything from scratch, your hiring platform can take the benefit of existing networks. For example, You can run the campaign across existing huge hiring platforms like LinkedIn which already has a vast community and network

D. Create a single-or double-sided Marquee Strategy

Marquee Strategy means providing incentives to attract members of a certain type onto your platform. Now as an early startup, you might not find money as an incentive (Obviously Cash Burn is Unaffordable!)

But you can incentivize in case of hiring platform for “Top Company To Hire” Tag for Startups hiring and opening for 10+ positions or anything that incentivizes either side of the platform to keep using and engaging with the platform

Conclusion

To conclude with, running a platform or marketplace kind of startup needs you two parties. While you are kickstarting with any one or trying to onboard both at the same time, having a understanding about how this cycle will keep on going, will make sure that your platform is active and is able to survive and retain the users that you are getting.

Retention> Acquisition (Obviously!)