From the perspective of a VC, a great marketplace idea means a concept that can reach unicorn status.

Version One Ventures, one of the most experienced marketplace-focused VCs, has a marketplace guide that discusses what Version One looks for in a marketplace. This guide is an excellent read before you start your fundraising process. Another helpful framework comes from Bill Gurley's classic article, 10 factors to consider when evaluating digital marketplaces.

The six main factors Version One uses to evaluate the potential of a marketplace idea are:

  • -High fragmentation in the target market (ideally lots of small sellers)

  • Regular frequency of use/purchase (ideally as regular as possible)

  • Is the buyer likely to use the same seller every time? (ideally not)

  • Total available market (needs to offer a path to become a unicorn)

  • Transactionality (ideally, your marketplace processes the payment between the buyer and the seller)

  • The ability to expand the market (ideally, your marketplace creates business opportunities that weren't there previously)

Your marketplace doesn't need to have all of the six factors. But at least some of them are likely needed for attracting VC funding.


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