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We're sharing a guest blog post from our community EIR Blake Hirt covering the importance of solving a persistent, painful problem when building a marketplace. This was previously shared as a post in the community here.
Hey EM, I’m expanding on my previous post The anatomy of a successful marketplace.
In this post, I’m going to dive deeper into the first criterion: solves a persistent, painful problem.
This is especially important on the demand side. In most marketplaces, the supply side is simply looking for revenue, and needing more money is clearly a persistent and painful problem. So this post will focus more on the demand side.
Note that this criteria is for founders looking to build a mega-successful marketplace ($10B+ valuation). While it’s possible to build a viable marketplace that doesn’t meet all of the criteria, it’s highly unlikely to reach venture scale.
There are many problems to be solved in the world, but not every problem is persistent. When I say persistent, I essentially mean that the problem keeps coming up over and over again. Ideally it comes up daily, but even if it’s only a couple times a year, as long as it continues to pop up, I consider it persistent.
Think about the most successful marketplaces: Amazon, Uber, Airbnb, Doordash, eBay. Each of these marketplaces do a great job solving their users’ problem, but the problem will continue to occur. In other words, the marketplace doesn’t solve the user’s problem forever. This is vital in order to get users to keep coming back to the marketplace.
Compare that to companies like Opendoor, Thumbtack, Zola, and Cameo. These are well-known and seemingly successful companies, but none is anywhere near a $10B valuation, and the lack of a persistent problem is one of the primary reasons. Even if these marketplaces do an amazing job, users don’t come back consistently. No bueno.
At Uber, we originally thought we should deliver anything and everything to users. If we have the drivers on the platform, why not? Before Uber Eats, we experimented with a number of different products like toiletries, flowers, puppies, electronics, etc. Ultimately, though, we landed on food because it’s a persistent need. People eat 3 times per day, every day. How often do they need anything else on-demand? Much less often, and for many users, the answer is never. Thus, everything else besides food was deprioritized.
Final note here: There’s a reason SaaS companies are so attractive to investors. If a user is willing to sign up for an indefinite subscription, it signals that the product is solving a persistent need.
Problems are everywhere, but the most painful problems float to the top of the priority stack. They are the problems that prompt the most emotion and ultimately the highest willingness to pay.
One key question to ask yourself here is: Are you a vitamin, painkiller, or cure? If you’re a "nice to have" or provide a 10% better outcome for your users, you’re likely a vitamin. If a customer is willing to drop everything, run to your website, and prepay for what you’re offering, you’re likely a painkiller. A cure can be similar to a painkiller and may warrant a higher willingness to pay, but you sacrifice persistence (per above).
Ultimately, you want to find a "hair on fire" problem. When talking to customers, they should be highly exasperated and annoyed by the problem you’re attempting to solve.
Often, founders initially use first-hand experience as a guide. This can be helpful, as you understand the pain yourself, which makes it easier and more rewarding to solve the problem. However, it can often lead you astray, as you may be unique in experiencing the problem or mis-weight how painful it is. We all have our own biases and live in our own bubbles, so the validation process is important to break through these.
The only way to be sure that you’re solving a persistent, painful problem is talking to users. Importantly, they need to be people who are not your family members or friends, who will typically validate your idea to make you feel good. For more on this, check out The Mom Test.
One way is to ask them directly: How often do you face this problem? How painful is this problem, on a scale of 1-10? For the latter question, anything lower than an 8 is likely not worth focusing on.
While talking to potential users, look for spikes of emotion. This could come in the form of frustration, anger, anxiety, or despair. It will flash by (often as a micro expression) so you want to be fully present and pay close attention to their face and body language. These expressions can be very telling, and you can then probe to understand where that emotion is coming from at a deeper level. Continue to ask "why?" until you really get to the root issue.
Another telling sign that you’re solving a painful problem is if a user is willing to pay for it to be solved. Ask if they’ve paid for other solutions, how much they paid, and how much they would be willing to pay for it to be solved. If a user is willing to prepay before you’ve even built your product, that is a great signal.
In order to then further validate, you can create a landing page and launch some ads to see what the click-through rate is. If you want a step-by-step playbook, check out this post.
I’ve talked to many founders who, when I ask what problem they’re solving, immediately leap into their product features or value propositions. Essentially, they go into pitch mode.
But it’s vital to step back and make sure you’re solving a real, persistent, and painful problem for users. Just because your product is cool, uses some new technology, or you simply believe it should exist, doesn’t mean it solves a painful problem for users.
Importantly, you want to do this before you even start building a product. You want to validate the persistence and pain of the problem first, and then later you can determine what to build. A lot of time has been wasted building products that don’t solve a worthy problem.
Are you solving a persistent, painful problem? Don’t make any assumptions. Really take a step back and make sure you are. No matter how good of a product you build and team you assemble, if you aren’t going after the right type of problem, your chances of success are significantly hindered.
Thanks to Lazar Javonic, Danny Martinez, David Lifson, Mike Williams, and other community members for their input and helping contribute to this post.
If anyone else has any thoughts or questions, feel free to reply below or reach out directly.
You can connect with Blake to discuss this post in the Everything Marketplaces community here. A big thanks to Blake for also being an active EIR in the community, where he is often sharing his marketplace experience, insights, and helping early stage founders.
