By Lenny Rachitsky · lennysnewsletter.com · @lennysan on X · YouTube · LinkedIn
This third installment of a marketplace growth series examines how leading marketplaces bootstrapped their initial supply, which is the side that most marketplaces remain constrained on. Drawing on interviews with founders and early employees at 17 companies, the author finds that direct sales was the most common lever, followed by referrals, piggy-backing on existing networks, and word of mouth. Other tactics included subsidizing supply, using employees as early supply, single-player tools, performance marketing, viral loops, events, SEO, and community building. A key meta-finding is that most companies relied on only about two levers early on, so teams should focus on a few and double down. The piece matters because it gives product leaders a concrete playbook for solving the chicken-and-egg problem on the supply side.
01Key takeaways
- Focus on two or three supply levers early rather than spreading effort across many tactics.
- Direct, in-person sales is often the most effective way to recruit the first suppliers in a new market.
- Remove every excuse a supplier has for not joining, so that signing up carries little or no downside.
- Ask your earliest suppliers to refer peers, and reward the referrers with tiered, meaningful incentives.
- Offer a standalone tool that suppliers find valuable even before demand arrives, to earn their initial adoption.
- Subsidize the side you choose to prioritize with guaranteed income or useful resources, and taper off as the market matures.
02Key sections
- Why supply stays constrained
- Marketplaces tend to be supply-constrained because strong product-market fit creates demand that outpaces available supply. The author notes this pattern persists for most marketplaces over their history.
- Direct sales as the dominant lever
- About 60% of companies relied on one-on-one sales, from door-to-door restaurant pitches to phone outreach to limo companies. Sales was twice as common as the next lever.
- Referrals, networks and word of mouth
- Referral programs, piggy-backing on Craigslist, and organic word of mouth all brought in significant early supply, often with the highest-quality providers. Industry closeness and creator peer networks amplified this.
- Subsidies, employees and single-player tools
- Companies paid supply through guarantees, subsidies, or in-house gigs, and some had employees act as the first providers. Others offered standalone software so suppliers had a reason to join before demand existed.
- Loops, events, content and community
- Viral loops, city meetups, SEO content, and community-driven evangelism such as Etsy street teams also drove supply, though performance marketing was rarely a major early lever.
03From the post
““Supply growth was all sales - door to door, walking into restaurants during their downtime, talking to owners. It was very sales driven. What we did was take every excuse they had for not using GrubHub, and removed it as an obstacle. Fast forward to a couple of years later — you only pay when you receive orders, there are no hidden fees, you can cancel any time. We got to a place where there was zero downside to sign up and to give it a try.” — Casey Winters (ex-growth at GrubHub, CPO Eventbrite) Welcome to the third post of our limited series on marketplace growth, where I share learnings and insights from founders and early employees at today’s most successful marketplace businesses. I’ll be releasing four more parts over the next two weeks, and then I’ll return to my regular cadence of once-a-week. 🤙 I continue to be blown away by the response to this project. Thank you so much to everyone who has sent me kind words, helpful feedback, or shared these posts with others. I started…”
04Frameworks mentioned
Summary and takeaways written by PM Atlas; quotes are short excerpts. © the original author.