(Selected) Lessons Learned from a Failed Venue Marketplace
A long time ago, I started an ill-fated startup trying to create a marketplace for venues. We participated in Y Combinator’s Winter 2011 batch (January through March) and I left the company at the end of 2011, primarily because it was clear to me that our market, as we understood it, didn’t exist.
Since then, I’ve received periodic requests for lessons learned about the space by various folks trying to research similar spaces. A few years back, I wrote up a set of notes scribbling down what I’d concluded about the space—or, at least, our attempt to tackle it—and I figured it was about time to make these notes public.
Note that I have no confidence in my ability to actually, accurately assess this market. And I’m looking forward to be proven wrong! But being an engineer coming from a highly analytical background (with no experience in hospitality), it’s fun to walk through the various assumptions I now recognize as flawed.
Overall fallacy: There is a market for self-serve “events.” In fact, most people fall into two categories: A) they have no money, or B) they have money and thus want to specify how it’s spent.
We decided to rule out no-budget meetups and such early on, so from this point forward I’m only talking about users who have some sort of budget for their event.
False Assumption A: Some event organizers have money and are willing to sacrifice control for convenience
We were trying to aim for the set of people who have money and are more blasé about how it’s spent: company meetups and holiday parties and such. what we find, though, is that their bar is accordingly lower when it comes to “finding the right spot” – the bar down the street is usually just fine, and variety isn’t really that important. These people would rather just get it done (picking a place they know) than deal with a new tool and add even more latency to the process.
Irrelevant Assumption B: Some event organizers hold events in areas they’re unfamiliar with
We were hoping that companies that were throwing events outside their city (e.g. international meetups, or WWDC parties) would be a decent market, but the former requires a potential customer who not only fits assumption A, but is now doing it in some international location - taking your customer base and whittling it even smaller, and the latter is, strangely enough, not frequent enough to build an auxiliary business around. Most businesses that have hooks in the conference space rely on being relevant before and after the event (e.g. Lanyrd, conference-attendee-social-networks, conference-app-makers) - not just once around the event.
False Assumption C: Growth will come?
We had to SEO the shit out of things if we wanted high growth. I’m not even sure what we thought we were going to rely on - word of mouth? Anecdotally office managers in Silicon Valley have a tight network, but “word of mouth” really can’t be your growth plan when of however many hundreds of attendees per event, you only have one or two people who know/care about your product. And realistically, during the event, they’re not going to be running around telling their attendees about it. Unlike Eventbrite, who gets direct exposure to attendees via ticketing / admittance, this sort of thing is really only ever exposed to the event planner.
Assumption C, Corollary A: We were reassured that “everyone in the event industry knows each other,” which got us excited about the strength of word of mouth - but then, in the same breath, we were assured that as a result, real event coordinators hoard/nurture their venue contacts and cut each other deals. This leads into…
False Assumption D: There is such a thing as a “price list” for a venue/event.
There isn’t. Not at all. That feeling of “everyone should just have their price lists online”? That’s the classic trap for over-eager engineers and other quantitative types: that there’s a general, practical, precise solution for everything.
The event industry is traditionally very high-touch, and as a result there’s a lot that goes on between the first touch and the handshake. That price list you get handed when you walk into the venue to see? There’s no guarantee that’s the price list everyone else sees. Lots of the venues we talked to admitted to hiking up prices or “service fee”s if the client seemed naive, hard to work with, or deep-pocketed (@fb.com or @google.com email addresses are dead giveaways). Alternatively, discounts are handed out and fees are waived for friends and old customers. This all makes it less appealing to list a price. Business owners also shied away from the suggestion of listing the highest price and giving discounts as needed, because they didn’t want to scare away potential customers before they had a chance to negotiate. There’s a reason venues’ first question is almost always “what’s your budget?”
False Assumption E: Venues value customer convenience over juggling prices and availability
There’s a competitive edge in obscurity. The one thing we thought would be a killer feature: availability! That’s the first thing people usually think about, right? We could be like Airbnb and revolutionize the event booking industry!
Also wrong. While some venues might actually do this, we got pushback from places who didn’t want to be exposed (in the case of bad business and lots of vacancy), no matter what potential business we promise them. There are some places who want to be able to negotiate lots of contracts at once: “this one party is dragging their feet and hasn’t gotten me a deposit yet, I still want to be able to talk to this other group who might be able to get their act together quicker. I don’t want that date to be shown as taken.”
This is sort of the issue OpenTable dealt with: well-to-do restaurants initially felt that they didn’t need help with reservations - the same way 111 Minna probably doesn’t need much help bringing in business. The way OpenTable solved it was by courting the really high-end places - French Laundry, Michelin-starred restaurants - and used their cachet to bring in mid-tier restaurants. The problem is, for venues and events, it’s the high-end places that are the most likely to be high-touch, and require lots of communication back and forth, reducing your value as a middleman / facilitator.
False Assumption F: We can make a profit off commissions or referrals
You’re dealing with an in-person situation. That will be in-person when the final transaction is done. Most of these deals are open bars or per-person charges, where the final bill isn’t settled until the night’s over and the credit card is handed over. You could charge for a booking fee, or reservation fee, or deposit - but everyone’s policies are different and you’ll either have to match the inconsistency or absorb some of the cost.
After scribbling together the notes (but still well before this publishing date), I came across a post that captured one core problem with our train of thought: it’s so easy for engineers to look at a problem in the world and try to find the “best” solution, while forgetting that the best solution might not be a technical one.
Let me know what you think on Twitter.