Developing a growth model + marketplace growth strategy

Dan Hockenmaier, who has worked on many marketplace startups including Thumbtack, runs strategy and analytics at Faire and previously ran a consulting firm advising growth-stage marketplaces. The conversation covers how to build a growth model for a business, how to think about retention and marketplace liquidity, and strategies for expanding marketplaces and deciding between vertical and horizontal plays.

01Key learnings

• A growth model is a spreadsheet formula for how your business grows; roughly half its value comes from the act of building it, forcing teams to understand the business.
• Start with three core building blocks for a SaaS growth model: acquisition channels, retention, and monetization; marketplaces add supply-side dynamics and transaction-level unit economics.
• Retention is often the most sensitive lever in a growth model, so small retention gains can be worth more than larger gains elsewhere; focus early on the first-user experience.
• Track marketplace health with GMV, unit economics, liquidity (a customer-relevant measure like fill rate or wait time), and share of wallet, which signals depth of relationship.
• Acquire supply only as far as it improves demand-side experience; build dual-sided ROI equations that include the cost of acquiring both sides and push to a comfortable payback period.
• Treat marketplaces like gardening rather than construction: make small, careful changes to incentives because effects can appear far later and be hard to trace.
• Prioritize marketplace expansion by adjacency and by how much the new vertical strengthens existing network effects, rather than by raw market size.
• Keep product and go-to-market in lockstep when expanding; deliver a great end-to-end experience for a few customers before scaling acquisition.

02Frameworks mentioned

Summary and takeaways written by PM Atlas; quotes are short excerpts. © the original author.