Sjoerd Handgraaf: [00:00:23] Hello and welcome to two-sided. I am Sjoerd CMO at Sharetribe, and I'm your host. And this episode I talked to Lenny Rachitsky. He first founded his own marketplace company, then sold it to Airbnb, worked there for seven years until last year. Since then he has been writing fantastic content about marketplaces, which you can find at lennysnewsletter.com.

I talked to him about his time at Airbnb about his framework for evaluating which marketplace to invest in, why Shopify still has a lot of work to do with their new shop app. Why Neighbor the Airbnb for storage might just work, but most importantly, we talked about how to kickstart and scale a marketplace business.

I really enjoyed talking to Lenny and I hope you will as well.

Hi Lenny, welcome to the podcast. 

Lenny Rachitsky: [00:01:17] Thanks for having me. 

Sjoerd Handgraaf: [00:01:18] Like I already mentioned in the introduction, so you worked a long time at Airbnb. Nowadays, you read a lot about marketplaces. I'm curious what got you first into online marketplaces. I dug a little bit into your history and I saw that Localmind was maybe the first one.

Can you tell us a little bit about that? 

Lenny Rachitsky: [00:01:35] Yeah, you bet. So Localmind was a company that I started in 2010. I was working as an engineer before that for about 10 years, engineering dream manager. And I always had this goal of starting a company and it was randomly in Montreal visiting a friend at a conference, and we were talking in this idea for what Localmind turned into kind of spring out of that.

And so I moved to Montreal to start this company and stayed there actually for eight months and then moved to the Bay area. And with the company was all about, was. It was around the time Foursquare was really popular and everyone was going to check it in. And there's all this data around location and where your friends are at and where you're spending time.

And so we had this idea, what if, what if we could connect people that are at any place in the world with people that want to know what's happening there because everyone's got this phone in their pocket. There's a way to reach them. Now there's all this data about where people are and if they opt into, but if we could connect people at a place where people want to know what's going on at that place, and that's what Localmind was.

You open up the app, you choose a place that you're thinking about going to, and then you ask questions and we route it to somebody there. Right now that's check in on Foursquare, Google or Facebook or someone that knows a lot about the place and that's what it did. 

Sjoerd Handgraaf: [00:02:43] And then questions like, you know, who's deejaying or like what's on the menu?

Or like those kinds of things. 

Lenny Rachitsky: [00:02:50] Yeah. The most popular was like, how long has the line at this club? Is it busy at this restaurant? Or like, yeah, that kind of thing. And in the end we found it wasn't a big enough problem for people, so it wouldn't last as a standalone business. And that's how we ended up selling therapy and B.

But it was fun and it might be possible now. It might be worth trying to have some time. 

Sjoerd Handgraaf: [00:03:10] Yeah. What's your, something with Localmind, because it is a kind of marketplace, but was there something that you learned there that you still feel like, Oh yeah, that is a huge lesson that I learned there. 

Lenny Rachitsky: [00:03:18] I rarely look back at local.

Mine is kind of building a marketplace, but it definitely was, and we should probably spend more time on this, but I'd say the main takeaway is a marketplace, maybe like 90 I don't know, maybe 99% of the success of a marketplace is the same as the success of any business, which is just, does anybody even want this thing?

Is this actually solving a problem for anybody? And so with Localmind, we basically eventually realized this is not a big enough problem. People wanting to go out and really needing to know what was happening at a place. So most of the learning there is just how could we have earlier knowing that this is not a frequent enough problem for enough people and maybe just a course or not.

Sjoerd Handgraaf: [00:03:58] Yeah, because now while you were saying this, my question that was straight coming to am I like, okay, is there any other way you could have validated this without actually building a whole product? 

Lenny Rachitsky: [00:04:07] Yeah, maybe like we could have had text messages or something initially. But you know, it wasn't years of work and we built it pretty quick.

Maybe the other lesson that's interesting is one of the more common ways to build a marketplace and to bootstrap a marketplace is to piggyback off of an existing network. Like the way Airbnb allegedly is, Craigslist and Uber, and a lot of other companies use Craigslist. So what we did is we bootstrapped off of Foursquare's data.

We basically let you connect your four square account, and then we knew about every check in that you made, and as soon as you checked it on Foursquare, we had you. At that location in our app, and that made it a lot easier to scale. And with the work that I've been doing recently, looking into how the marketplace has worked, that's one of the more common strategies that worked back then and still works.

Sjoerd Handgraaf: [00:04:50] And then, so Airbnb bought Localmind Was it like an acquihire? Did you then straight move into Airbnb? 

Lenny Rachitsky: [00:04:57] It was not technically an acquire. They acquired the whole company. All of us went over except for one person who decided to do some different, and they bought us as a team and they wanted us to. Work on a specific need that they had at that time, which was based on, so at that point, the kind of the strategy of the company was focused around what was called snow white snow white frames, which there's some articles about this.

And the way that worked is Brian, the CEO over the holidays, red. Walt Disney's biography, and he learned as he was reading that, that the movie, snow white, was the first animated feature film. And to make that possible, they have to use storyboards in order to kind of map out the story. And when you make a storyboard, you basically map out the key frames of a story to understand where it goes and how it all fits together.

And what Brian kind of realized while he was reading it as a trip on Airbnb is just like a story that unfolds. There's a beginning, there's a middle, there's an end. And what he ended up doing is hiring a storyboard artist from Pixar to come work at everybody full time and to map out the story of an Airbnb guest and an Airbnb host.

And so if you go to the office at Airbnb on CDs frames on the wall, and it's something that folks look to when they're thinking about what to focus on, how to think about the user. And so this happened right around the time they acquired us. And the reason they wanted us to work at Airbnb is they wanted us to nail the, I'm out and about in a city.

What should I do? How do we make that experience amazing? And they wanted to make every one of those key frames amazing. At week. And so they acquired us, focused on that problem, and we ended up building something that ended up not launching later. But that's its own story. 

Sjoerd Handgraaf: [00:06:33] Yeah. So what's your journey within every MBA?

So you started with that then for you moves into growth. 

Lenny Rachitsky: [00:06:40] Yeah. So first we built that, then we moved into building a community platform for the host community. To help them connect with each othe...