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Launching business beyond borders: Understanding Trends in Online Marketplaces [Julian Wright]

E-commerce  (short for Electronic Commerce) is redefining commercial activities around the world today. The e-commerce market is anticipating a 276.9% increase in eCommerce sales globally. In this blogpost, we have Julian with us, who will be sharing about the trends in online marketplaces.

Julian has done a great deal of research on marketplaces, digital platforms and data-enabled businesses. He is also actively investing in startups emerging from these industries.

1) Hi Julian, can you start off by sharing more about yourself and how did you get into the research focusing on marketplace businesses? 

I'm a professor in economics at NUS, and I've been researching on marketplaces before they became really hot, before people were talking about Facebook, Google, Amazon marketplaces and so on. Initially I was working on payment platforms like Visa and Mastercard which have very similar business models to the ones we see now, and as these marketplaces took off, my research extended to these new ones. 

My research consists of policy work, which has not in the past been so relevant for investing, but is becoming more relevant now, as policymakers are cracking down on some of the big marketplaces. I also do research on strategy-strategy meaning how do these marketplaces set fees, how do they design their entry for participants, how do they solve the chicken and egg problem, and various market design problems. Of course, those are all relevant for companies in this space as they face all these problems.

I got into angel investing through a couple of ways- I do a lot of research with my co-author, who's at Boston University business school, and he introduced me to some venture capitalists who are focused on marketplaces. Another way was via an ex-NUS student, who set up the P2P lending platform Funding Societies. He approached me to give advice from a very early stage. After a while, I saw their success and how they'd done very well and grew very quickly- which peaked my interest in angel investing, and how quickly some of these companies can grow in the marketplace space. For the last couple of years I’ve then been investing in various companies in the space, mostly through the US, but some of it being local. 

2) You've done a great deal of research in platform businesses. What are the trends in such platform businesses as of now, and how have these trends been changing along the years?

In the early days, it was really a grab for consumer marketplaces, such as in Singapore (peer-to-peer trade) Carousell or Lazada and Shopee (e-Commerce), just to name a couple of examples. Those are fairly broad marketplaces, and they cover a huge number of sellers across many different sectors. Ebay was the poster child in that space, but I think more recently there has been a lot more development of much more specialised verticals for specific goods (like sneakers or jewelery). 

The second important development is the huge rise in business to business marketplaces; these are the ones you won't hear much about because they're more relevant for business customers.

Thirdly, online marketplaces have become more managed: if you think about Ebay, it’s pretty hands off, you have a transaction with the seller and they help you find the seller and find the payment. However, now there's a lot of marketplaces particularly for services where the platform is helping manage the transaction between the two parties much more. An example would be Papa in the US, for elderly care. They help university students come into rest homes and give companionship for the elderly, or do tasks for them. They're managed in the sense that they're more involved, allowing the elderly user to track and manage their experience, and even allowing for a virtual visit if necessary. There has been a big shift towards more managed marketplaces rather than just creating a space where everyone can transact and leaving users to themselves.  

I would say that not many people realise how many of these companies are being created every day. You see it in China and the US first, thousands and thousands of these startups, then you see a lot of these ideas spill out into Asia and Europe. It’s a very active space.

3) Correct me if I am wrong. From what I understand, to start platform businesses, there isn't much capital involved. As long as a startup founder have a business model with some kind of traction on the platform, I think that's a good starting point? 

Yes and no. “Yes” capital wise, since you don't need to build a product and sell it, you don't need a lot of capital to build it. But “no” in the sense of the chicken and egg problem; to get users on board you need to have users, but how do you get users if you have nothing to offer them. Think for example of Grab and GoJek. It's pretty hard to get the riders without the drivers, and the drivers without the riders. But if you have a whole war chest of capital like Grab and Gojek did, then you can come in and offer subsidised rides initially that would get people using it, that would then attract drivers. Some of these marketplaces require quite a bit of capital to get started, especially if you're not the first entrant and you don't have a clever way to get users on board organically.

4) Startups usually start with no or little capital. To attract investors, they often have to have gained some traction, build some credibility, and have the prototype to get potential users interested. How would you suggest a go-to market strategy in such a scenario, and what would you recommend startups to focus on in the initial phase?

They can keep their focus very narrow initially. If you think about marketplaces, they tend to try to attract sellers across a broad range of categories, and you just need too much capital to do that. But if they just target a very narrow segment and a particular user type, then they've made the initial problem much more manageable, and they won't need a whole lot of users on each side to provide this narrow service. Narrowing down the problem initially to a smaller one (i.e. a beachhead market) is one way to reduce the capital requirements.

Another way if you're not going to be able to raise funds to get going is to rely on capital from friends and family- or even NUS, because often you won’t be able to attract outside investors to come in until you got some proof of concept. But that can also be a good thing: it forces you to have commitment and conviction about what you're doing- are you willing to put your own, your friends and family’s money into the business before you get 'outside' money. That's just a reality for some of these businesses- it's not necessarily a bad thing.

5) This startup scene is becoming something that everyone in it wants to be their own boss, so how do you think startups can measure differentiation among their competitors?

The startup should be looking at some unique way in which they are approaching the problem because maybe someone else is already solving this problem. It also has to be a real user problem: you need to have a fresh way of solving it, focus on a different customer group, using a different customer technology or data to solve the same problem, maybe you're even using a different business model.

For instance, your online marketplace could in fact be the different business model. It has to be something different from what other people are doing and hopefully better, that remains to be worked out. If you’re doing the same things as everyone else without having a fresh way of looking at the problem, well I would tend to stay away from investing in such businesses: I’m looking for something different and unique from something that currently exists.

7) What are the 3 most important factors that you look out for in startups to invest your current effort in?

a.The market- they must be tackling a big problem essentially. They could be

tackling a small problem, which is fine if they can create a business out of it, but it’s

probably not going to be a venture type of business. So there must be a big potential

market, but that doesn’t have to mean the market is currently very big. If you look at

Uber or Airbnb, when people looked at those, most venture capitalists passed because

they didn’t think about the underlying problem they were solving and so to them, the

market didn’t look very big. For Airbnb, when you’re traveling, finding affordable

accommodation that is suitable for families or for longer stays was actually a big

problem. Hence, they created their own big market. 

b. The second factor would be the team: is this the right team for the problem, do they have the right and complementary skills to tackle the problem?

c. Third factor: if they succeed, will they have built a moat around the business?

Or if they succeed will there be everyone be copying them and offering the same

thing? The nice thing about marketplaces is that while they can be very hard to

start and even harder to do well in, if you do succeed, and provided the

marketplace has the right characteristics (not all marketplaces have these types

of characteristics), then the winner takes all, or most. The firm that does succeed

will have a very strong moat, and will be protected against competition.

8) You mentioned a lot about Airbnb and Ebay, I understand that the challenge for a startup to get users isn’t the hardest thing, and it’s probably the retention period for them to stay on the platform- from the companies you mentioned, they were able to scale by finding the right market. I would say that getting a company to scale is also another challenge. To you, what are the top three factors of a startup being able to scale?

I would say for marketplaces, they do have one nice feature that helps the scaling part. Once they find product market fit, i.e. they provide the service that users actually want, then scaling can actually be quite exponential and this comes from the network effects. As they get more sellers and buyers, more of these on each side, it actually attracts more from the other side, i.e. more buyers attracts more sellers, which attracts more buyers etc. So the scalability of these businesses is actually one of their attractions, as they tend to be highly scalable without bottlenecks or constraints. They don’t have to add new infrastructure or build a new product to deal with scalability. 

I feel the advice for marketplaces may therefore be a bit different from say, a product company or a deep tech company for scalability. Having said that, a lot of these companies lose money for a long time, as is well known, and hence I have some theories as to which marketplaces are more profitable and which ones will continue to lose money. For instance, for ride hailing or food delivery platforms, because the network effects are not very compelling and they are anyway offset by the fact users tend to adopt multiple competing platforms, scalability comes down to how much funding they can generate to continue to subsidise the business until they get to a big enough scale - at which point they hope competition dies down a little bit and they can start making profits. Hence for such companies, the key factor is actually continuing to attract enough capital by convincing investors that one day they will get it all back. 

The most important and difficult factor for scalability for most businesses is actually scaling inside the business; the internal dynamics of the team and going from having a small team to having an enterprise- to bring in the right people and to trust the right people, which is another whole set of problems that everyone will face when scaling.

8) Lastly, what interested you to come aboard NUS Angel Ventures?

I wanted to learn more about the local ecosystem, as I’m very much tied up in the US angel investing and startup scene. So when I was approached by NUS Angel Ventures to participate, it was perfect timing as I already wanted to get more involved and help share some of my experience and knowledge into the local scene. 

Things are slightly different here in comparison to Silicon Valley, where things are quite mature and valuations are very high, but I think we’re catching up fast and there are more and more interesting opportunities.


Thank you Julian for taking time off to have this interview with us!

We are grateful to have you as an investor of NUS Angel Ventures. If anyone has any more follow up questions, feel free to connect with Julian on LinkedIn and reach out to him! 

If you have any other follow up questions, do email your questions to

Watch the full video interview HERE !

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*Disclaimer: All the information on this website are for general information purpose only. This blogpost does not make any warranties about the completeness, accuracy and reliability of this information. 

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