How even the best marketplace startups get paralyzed

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Josh Breinlinger Contributor Share on Twitter Josh is a Managing Director at Jackson Square Ventures, an early stage venture capital firm with $245 million under management, where he focuses his investments in early stage marketplaces. More posts by this contributor Marketplaces Are Eating Firms Amazon Vs. Hachette: Fewer Middlemen Equals A Better World

Over the past 15 years, I’ve seen a pernicious disease infect a number of marketplace startups. I call it Marketplace Paralysis. The root cause of the disease is quite innocent and seemingly harmless. Smart people with good intentions fall victim to it all the time. It starts when a platform has sufficient scale — such that there is a good amount of data on things like performance, quality rankings, purchase rates, and fill ratios. What a platform implements as a result of that data, and how it’s received by their user base, is what can lead to marketplace paralysis.

In this post, I will detail what Marketplace Paralysis is and what startups can do to avoid it. Before I get into the nitty-gritty, here’s a snapshot of the lessons you’ll learn by reading this

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