Lenny's Podcast: Product | Career | Growth
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.
00:57:51 · Lenny Rachitsky, Casey Winters
[00:57:51] S1: That's amazing. [00:57:52] S0: Yeah. It's growing faster than the rest of the business, which is great. But it probably needs to be closer to, like, 50% to unlock those real cross side network effects. And that would mean that creators start selecting Eventbrite because of all the demand Eventbrite has versus the quality, you know, of the SaaS tools. So that's obviously something we're working on. Faire is a company I advised more recently that I think has, unlocked this model in in, like, the reverse, where Faire is a wholesale marketplace between independent retailers and brands so that you could sell products at these retailers, like a, you know, a boutique, you know, in in your local neighborhood. So Faire built the marketplace first, and then it later built a SaaS tool that allowed the brands to onboard their current, you know, retailers into the platform and get better terms, on payments and and free returns. And it didn't charge anything to use the SaaS tool for any rebookings that happened through that platform. But what that did is it onboarded more independent retailers that they could cross sell to other brands without, you know, needing to use a sales team. And when they cross sold, of course, Faire did, you know, take their percentage on those transactions. So I I think that model has worked out really well, and and Faire has grown quite quickly.