Entrepreneurship

How to Rapidly Scale Your Marketplace With Bribery and More

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At Gymsurfing, we were huge fans of Paul Graham’s do things that don’t scale” essay. The lesson is, in short: when you are a young startup, you will have to do things that you could not reproduce on a larger level, namely: personally recruiting customers, or building features by request. As we were building a two-sided marketplace that involved small-to-medium-sized businesses (SMBs), we also faced the common challenge of how to scale supply before demand, which should honestly be your primary focus as an early-stage marketplace startup.

I am routinely contacted by fledgling fitness apps who have the same basic question: “How did you grow to 200 gyms in 5 months? Most of them won’t return my calls.” We had this problem, too. We built our product, did a great job, and hit the phones, hard. The cheapest thing was my time, I thought, and my only real limit is how many phone calls I could make in a single day, or how many gyms I could visit. Without other gyms on the platform for social proof, however, nobody wanted to say yes, and managers would also frequently block me from meeting with the owners. We overcame this, though, and here’s how.

Step 1: Bribe The Manager

One of the many jobs of a manager at a gym is to prevent you from pitching the owner on random fitness services and equipment. Fortunately, most of these people do not make much more than the average salesperson at a gym, and would like to eat steak for dinner once in a while. Give them money, straight up. This will get you a meeting with the owner.

There are two ways to couch this: one is a “pre-payment for gym passes.” This is obviously a less shady, more sound way of growing your business and is basically predicated on a bet: the negotiated price will bring benefit to both your company and the gym, and you think you can move X passes. We’d typically buy 100 passes for $5-10, which cost us $500-1000 to get a gym online.

The other way is just handing them an envelope of cash in exchange for signing the contract, aka a “signing bonus” aka a bribe.

You may ask yourself, is this really the smartest way to spend my startup’s scarce cash? The answer in our case was absolutely. For two solid months, I pitched gyms, hard, and got very little out of it. During that time, our cash burn was greater than the cost of bribing 7 gyms. We ultimately chose 7 strategic gyms to be our “first on the platform,” gyms that were well-respected in the local area, and the pitch became dramatically more effective with that social proof.

2. Make a Self-Serve Signup Tool

I can’t count the number of SMB marketplaces that do not have a self-serve signup tool, and basically require the business to be called, or fill out a Docusign, or e-mail the startup if they are interested in joining the marketplace. No. You want your signup process to be as simple as Airbnb: able to filled out by somebody who is not tech-savvy in as few clicks as possible. My cofounder Dustin deserves massive respect for his focus on Apple-like simplicity when he was building this tool, and everything else he does.

3. Scrape Yelp

This next step I outsourced on Upwork, but depending on what you’re doing you might be able to automate it fully. I had an Upworker go on Yelp and find the gyms in the first 10 cities we wanted to be in, put the relevant info in a Google Spreadsheet, and call them to ask how much a 1-day drop-in pass was to the gym. This was a very important data point for our product, which allowed people to buy day passes to gyms. The other thing I would have them do is look for e-mail addresses and manager names on the website, and put this in the spreadsheet as well.

4. Mail Merge

A full Mail Merge Howto is beyond the scope of this blog post, but once you have a spreadsheet with names, e-mails and gym names, you are well-positioned to send a bunch of e-mails to small businesses. The call-to-action is for them to sign up to your marketplace via the self-serve tool, so the link to get there should be obvious. You should also include a phone number, and let them know they can call you with questions.

5. Close

Some businesses cannot be closed this way, but it should be enough to get some desperately-needed social proof to close bigger businesses. The best use of your time is closing deals that will yield multiple locations, but do not waste your time going after fish that are so big that they will be too slow-moving to say yes to you in a short period of time. Good luck out there, and if you are building a fitness day pass, I salute you.

 

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