Lenny's Podcast: Product | Career | Growth
00:51:47 · Lenny Rachitsky, Casey Winters
[00:51:47] S1: The takeaway there that you've learned is don't underestimate someone that's trying to do something that's gonna eat your lunch eventually even though it feels like a terrible business model. [00:51:59] S0: Right. Like, if the market's rewarding it, the market will probably find a way to make it profitable. And, you know, it's... Essentially, when everyone's find, like, a more efficient network effect for demand on the on the on the marketplace side, you probably need to copy that, like, as soon as possible. And if you can't copy it, own it. Right? Like, buy it. And And I think we've seen this a few times. Like, Rover and Wag was another interesting example of this, where they found a more frequent use case that fit the same supply and demand. And, you know, Rover just copied it as soon as as soon as possible. And that ended up, you know, working out for them in a way that, you know, it didn't as much for Grubhub. [00:52:37] S1: I just did a talk recently on Marketplace, growth strategy, and someone asked me a really interesting question. If you were trying to go up up against the DoorDash or an Uber today, what would you do? And my answer is just like money was so freely available at that point that they were able to... Like, a lot of this was spent. They had so much money raised. You said they're raising a $100,000,000 every six months. Like, is it even possible in today's climate where you can't actually raise that much money to have any sort of chance to beat a DoorDash or an Uber?
00:53:05 · Casey Winters, Lenny Rachitsky
[00:53:05] S0: Yeah. I mean, clearly, took advantage of the zero interest rate environments that we talked about earlier. That is not a replicable strategy in 2023. Yeah. So any approach to compete with them has to be competing on a very different angle, because, yeah, they can spend you into the dust. So, you know, we'll see if anyone's able to build a way that creates new supply in market. I think you and I have seen a couple of earlier stage examples of that. We'll see if any of them scale. Or something that feels cheaper or more fun on the demand side, that would be, like, another way to potentially disrupt things. I think another thing that was working pretty well to... Before the pandemic in building disruptors was focusing on the pickup use case, which, you know, DoorDash cannot do as easily. Like, they've tried. Right? But, like, their whole value prop is the delivery network, which you don't need for pickup. But, of course, the pandemic put a lot of those startups grinding to a halt as well. So, you know, there's always angles, but you're gonna need to be incredibly clever because just attacking with a war chest is not really gonna work. [00:54:09] S1: Yeah. I noticed a lot of startups launching that are trying to do white label delivery for restaurants so they don't have to really rely on DoorDash. But that may be... Maybe that's a wedge to get in, and eventually they do Yeah. DoorDash sort
00:54:09 · Lenny Rachitsky, Casey Winters
[00:54:09] S1: Yeah. I noticed a lot of startups launching that are trying to do white label delivery for restaurants so they don't have to really rely on DoorDash. But that may be... Maybe that's a wedge to get in, and eventually they do Yeah. DoorDash sort [00:54:20] S0: of thing. And I would say I'm pretty skeptical of those because they're just not really building the network effects on the demand side. They're just more like SaaS businesses, and I think they'll struggle to be, you know, multi $100,000,000 in revenue businesses because the take rate is typically, like, you know, a third or a fourth of what, you know, a DoorDash can charge. [00:54:39] S1: Perfect segue to my next question. I only have a couple more. There's this concept and, I think, pull from Marketplace founders to add a SaaS tool eventually Mhmm. And have both business models. And then there's often the reverse where a SaaS company wants to add a marketplace. And I know this question is something you get a lot. And so just a question for you. Does this work? Are there examples where they've added this additional way of making money? And which direction do you find is most often successful and not successful?
00:54:39 · Lenny Rachitsky, Casey Winters
[00:54:39] S1: Perfect segue to my next question. I only have a couple more. There's this concept and, I think, pull from Marketplace founders to add a SaaS tool eventually Mhmm. And have both business models. And then there's often the reverse where a SaaS company wants to add a marketplace. And I know this question is something you get a lot. And so just a question for you. Does this work? Are there examples where they've added this additional way of making money? And which direction do you find is most often successful and not successful? [00:55:11] S0: You know, the canonical example that a lot of these founders use is is OpenTable. And that always felt really unfulfilling to me because it's very old at this point. Probably the younger people listening to the podcast are like, what's OpenTable? And I think, you know, that business has incredibly underperformed the market it operated in. So it it had a good exit. It sold for $2,600,000,000, I think, to booking.com. But Booking subsequently wrote that value down, like, below 1,000,000,000. So, you know, that's not really the outcome, I think, we're looking for traditionally in marketplaces. [00:55:43] S1: And maybe explain, like, what it was initially the SaaS tool versus the
00:55:43 · Lenny Rachitsky, Casey Winters
[00:55:43] S1: And maybe explain, like, what it was initially the SaaS tool versus the [00:55:46] S0: Oh, sure. So so OpenTable promised both a SaaS tool that would help you understand, like, what tables are open and where to seat people. So for, like, the host at the... In the front of the house in a restaurant, but also bring in additional reservations to fill up your restaurant. Right? Because I think what people misunderstand about restaurants is they're like, oh, these restaurants are these incredibly low margin businesses. And it's like, yeah, they are because they're paying the rent no matter what happens. So once you're already paying the rent no matter what happens, you're incentivized to pump as much food out the kitchen and to get as many people seated in house as possible. So people would say like, oh, Grubhub and DoorDash, you're charging too much. And it's like, no. Like, delivery orders and catering orders are basically pure margin to restaurants. The chefs are already there. The, you know, the rent is already being paid. The more things we pump out of the kitchen, the more money we make, which is why, you know, restaurants are willing to pay higher fees. Like, these restaurants are not stupid. They're not being, like, misinformed. Right? So OpenTable, well before there were any delivery startups, was like, we're gonna fill up your tables, we're gonna give you the software that helps you manage your tables most effectively to to make the most profit. [00:57:00] S1: Got it. Okay. Great. So keep going.
00:57:00 · Lenny Rachitsky, Casey Winters
[00:57:00] S1: Got it. Okay. Great. So keep going. [00:57:03] S0: So that's OpenTable. So look. This is definitely the strategy we are working on with Eventbrite, where we started with something that was more SaaS like, you know, enabling, easy payments and, you know, certain tools to make event creators' business more efficient. And we're layering in more of the traditional Marketplace value prop of demand, you know, driving more ticket sales for these event creators. And, you know, I would say it's got a ways to go to be working really well. And what does working really well look like? It's when the Marketplace model unlocks those cross site network effects that make it easier to grow. So, you know, event creators, when Eventbrite started, they would just go do their own marketing to bring people to Eventbrite to transact on their events that they had listed there. And now Eventbrite drives, you know, 25% of the ticket sales itself. And, you know, that percentage is growing faster. [00:57:51] S1: That's amazing.