Alex Cook and his brother Andy had a big vision: create an online marketplace for just about anything you might want to rent, from scissor lifts to nail guns to dance floors. They called their site Rentabilities, and raised about $650,000.
“We rented like 3,000 bouncy castles over a two-year period,” Cook says.
But that wasn’t enough to help Rentabilities achieve escape velocity.
Today, when you ask Cook what is challenging about launching a successful marketplace business — eBay, Uber, and Etsy are examples — his off-the-cuff reply is, “Everything.” He and his brother decided to call it quits last fall, and took jobs with a bigger company.
A marketplace business is one that needs to bring together a community of buyers and sellers to succeed: Uber, for instance, needs drivers and passengers. “The reality is that marketplaces are genuinely hard to build, and expensive to scale, because it takes time and care to grow demand and supply in unison,” says Fred Destin, an investor at Atlas Venture in Cambridge.
But a high degree of difficulty doesn’t dissuade entrepreneurs — or investors — and a new wave of local startups are creating marketplaces to connect bands with music venues, snowplow drivers with homeowners, diners with high-end restaurants, and private coaches with aspiring athletes.
The most successful locally built marketplace of recent vintage is Care.com, which was founded in 2006 and went public in January. It matches families with baby-sitters, pet sitters, and eldercare providers. The Waltham company had revenues of $82 million last year, and expects that number to grow by one-third in 2014.
CustomMade of Cambridge has attracted the most money of the still-private set: about $25 million, from investors including Atlas and Google Ventures. It links consumers with about 13,000 craftspeople willing to produce jewelry, furniture, and other items based on buyer specifications. The company takes a 10 percent fee from the final item price.
One key to success, says chief executive Seth Rosen, is generating repeat business. “If you bought custom barstools for your man cave,” he says, “we also need to make sure you know we can make custom beer tap handles and shelving units.”
CoachUp has raised nearly $10 million to help private coaches connect with students and amateur athletes. Among its investors are former Red Sox outfielder Gabe Kapler and Boston Bruins president Cam Neely. “For us, the challenge has not been to get coaches,” says founder Jordan Fliegel. “Most of our effort is spent spreading awareness of what private coaching is, and the benefits, to kids who play sports and their parents.”
Launching this week is SoonSpoon, a marketplace for restaurants to fight the scourge of canceled reservations. The site will try to find diners to fill tables at popular eateries that might otherwise go empty. It will charge restaurants a fee based on average check size.
Lowell-based ArtistBomb charges music venues $30 a month to help them book performers, and has developed a tool to estimate performers’ ability to draw a crowd based on their social media following.
Some marketplaces try to funnel money to charities. Boston-based Canary (formerly Cbay) helps individuals offload unwanted furniture, electronics, and housewares. The seller gets 60 percent, 12 percent goes to one of Canary’s partner nonprofits, and the site pockets the remaining 28 percent. Chief marketing officer Mark Lindquist says the company initially focused on the South Shore, but is expanding to Boston’s western suburbs.
The slogan for Boston-based Fashion Project is “fashion as a force for good.” The company helps nonprofits that accept clothing donations or run thrift stores to get higher prices for designer apparel and accessories by selling them online. Individuals can also donate products directly to Fashion Project and designate a charity that will benefit.
“It’s not a typical e-commerce model,” says chief executive Anna Palmer. “Our biggest challenge early on was learning how to engage customers in the story, and create a shopping experience that made our customers feel like a hero with every purchase.”
Yeh Diab, founder of Boston-based ServiceRoute, says it can be incredibly labor intensive to get a marketplace off the ground. His startup connects homeowners and snowplow drivers, and will soon do the same for lawn care crews in the summer. He has cold-called drivers to get them to participate, and placed Google ads to recruit customers.
Diab says his long-term objective is to help all kinds of contractors to get more customers in neighborhoods they already serve, and make it easy for customers to find contractors who will actually show up. The startup has raised about $45,000, but hopes to bring in more funding this year.
Once a marketplace achieves liquidity — lots of transactions at fair prices — it can be hard for others to compete. That’s why eBay is worth $75 billion today and it’s tough to name another online auction site.
Some entrepreneurs decide that the quest for liquidity is too difficult — or requires too much capital. In 2012, Shawn Harris started a site called Nyopoly that invited consumers to name a price they were willing to pay for products, and allowed the seller to accept or reject it, similar to the way Priceline works.
Attracting shoppers to the Nyopoly site proved to be “a hard nut,” Harris says. “Rising above the noise in e-commerce today isn’t trivial.” He’s now trying to pitch similar technology directly to retailers for use in a mobile app.
And Cook, the cofounder of Rentabilities, must surely have been frightened away from the marketplace business for good.
Actually, no. “I would do it again, if someone wanted to fund it,” he says. “Even though it didn’t work and we didn’t survive, I just find it really interesting. There’s so much opportunity in connecting two parties together using the Internet.”