Marketplace startups are often associated with incredible growth, but how do you know if your company is ready to expand to additional cities?
Chicago-based PartySlate is a new platform that links the best event professionals with individuals who are planning large-scale events. Similar to the home decor site Houzz.com, consumers can browse hundreds of thousands of event photos posted by top tier event professionals and venues. Formed just over a year ago, PartySlate has already raised $3 million in seed funding and is rapidly conquering the U.S. events market.
We spoke to the company’s Co-Founder, Julie Roth Novack, to discuss how and when they expanded beyond Chicago, their launch city and home base.
Not long ago, she tells us, she was debating this very question with her board and Co-Founder, John Haro. “There was a lot of debate on this topic,” Novack promises.
What are product/market fit metrics?
The key to knowing when you have hit that sweet spot and are ready to expand, according to Novack, is in the metrics. “You need to work with your team to set milestones for each city,” the founder explains. “Work with your to team identify the milestones that need to be hit in your launch market before you expand.”
The metrics, of course, vary by industry and business model. In PartySlate’s case, before expanding beyond their first market, the company focused on three main areas.
First, PartySlate needed to see marketplace liquidity on the professional side of their platform; this meant making sure they had at least 30% of the top event professionals uploading event photos to a free profile page. Second, they needed to see a certain level of consumer traffic to ensure that their event professionals were receiving leads. Finally, Novack said they had to test their subscription pricing, a premium feature which enables their professionals to have an elevated presence on the platform.
What are the risks of moving too fast?
According to Novack, the risk of moving too quickly with a free-profile “land-grab” model is that it can be very expensive and leaves you with little data to prove the viability of your business model. This is an issue if you want to draw in Series A investors, “they want to see that your customers will actually pay.”
And what are the benefits of scaling quickly?
Novack explains that there should be some level of balance in the early days of a startup. “You don’t need to have everything figured out before you expand.” The risk of moving too slowly is that if you have a good business model, a competitor can swoop in and lock in your market.
Which markets should you take on next?
PartySlate mentors advised the company not to take on New York or Los Angeles right away. “It was important,” says the founder, “for us to hammer out our city playbook before we expanded to New York and Los Angeles.”
So, instead, the company chose Dallas as its second launch market. It soon learned that the events industry is all about connections and relationships and thus building strong relationships through national conferences and industry associations was the best way to prepare for each city launch.
Novack also warns against biting off more than you can chew. Make sure you have seen success in your launch market first before investing your scarce resources on new markets.
What about making the jump from national to international – do the same principles apply?
“Many companies jump too quickly to the international stage,” says the startup leader. “It is very expensive and complicated navigating language, local culture and government regulations. We are going to wait until we are firing on all cylinders in North America before we expand.”
Of course every startup wants to eventually become recognized globally for its disruptive service or amazing product, but following Novack’s wisdom and success, perhaps it’s better to think long and hard before you decide to take on the world!