If you’re a first-time founder in the idea stage of a marketplace, please accept my deepest sympathies. You’re in for a rude awakening. I’m about to explain all of that, from my perspective (take this with a grain of salt). Here is my story about how I am trying to survive making a marketplace come to fruition.
But first, the BLUF
TLDR; I’m splitting the marketplace model and creating a self-sustaining platform model to build the marketplace supply side, create brand awareness, and user trust, and generate growth metrics that persuade firms with a pedigree to invest at the seed.
paypixl, is Shopify + Dropbox for drone pilots.
The Problem /Solution Summary
Why does the world need paypixl? Because drone pilots have a really hard time sending their files to customers with the existing tools that are out there, none of which are built for drone pilots. They end up using an average of 6 apps to fulfill customer orders. The 74,000 commercial drone pilots in the US fulfill about $2.1Bn of imagery orders each year, so this happens A LOT. Why do I know about this? I owned my own aerial imagery company. I’ve spent the last ten years trying to understand and attack this problem.
Let’s get to MY PROBLEM. When I started the company in 2018, I didn’t know I was visualizing a marketplace. I conceptualized a place where customers could find a pilot in an established network of pilots, place an order, make a payment, and get the imagery they needed quickly. In 2018, there weren’t many models like this out there so I jumped in. All in. I cashed out my 401K and left a super safe job as a satellite analyst. I miss the days when I didn’t feel guilty about buying little things…. I digress.
Competition and the Marketplace Dilemma
Fast forward to 2021, there are over a dozen companies with this model. Investors see this and balk. “The market is saturated with the competition!” they often protest. But things aren’t what they appear at the surface. The churn is high in these networks. Pilots don’t like them. These companies generally charge the pilot for their services, and sometimes pay too little and take credit for the imagery. So these companies have professional-looking pages, but most of them are props, hiding a major supply/demand problem behind the curtain. My biggest competitor (who shall not be named) took a down round last July after raising a total of $32M; their supply/demand problem came to light. They pivoted in their Series C.
Marketplaces can be lucrative. But they’re so hard to make work. It takes a special investor to invest at the early stages of a marketplace. Most marketplaces don’t work because most founders can’t figure out the supply/demand problem. I personally know 5 early-stage founders in marketplaces, and we’re all fighting for air. When you go to raise, investors want to see proof of life before they cough up capital. Chances are that your marketplace is pre-revenue or has flat-ish traction.
>>>>This is the zone of despair that most of us die out in. It sucks.<<<<
The Original paypixl Marketplace Model
Adapt or die. As I write this, I am in the adapt stage. So what am I doing to save my team from finding other jobs? Here goes. I present to you, the paypixl Marketplace Model — the un-fundable Spaghetti Monster:
There’s a lot going on here. A lot of dynamics. That directly translates into a lot of risk for the guys that could fund you. You’ll hear some investors/ founders ambiguously suggest you “prime the flywheel” of your marketplace. That just means splitting it in half and focusing on either the supply OR the demand side. You’ll find yourself bouncing back and forth rapidly between either side as you launch. This is neither energy-efficient nor cost-effective, and it can burn out your tech team. Be warned.
For me, I looked at the supply side; the drone pilots. I asked what they needed that they didn’t currently have. Why? Good question; I wanted to find a way to provide them with a novel utility that would help them grow their business. That’s wholesome, right? Drone pilots are inundated with schemes and sleazy business models that feel predatory, and the negative sentiment is easy to see on public social forums. So we needed to approach this in a way that was genuine and not skeezy. What is their pain point? They use Google, DropBox, SD Cards, and USBs to deliver images, and then one of the 4 big name payment companies (PayPal, CashApp, Venmo, Zelle) to accept payment from their customers. There’s a laundry list of issues with this workflow. It’s just not simple.
The new paypixl Platform Model
We needed to go to market with a MUCH SIMPLER model if we were to survive and get funded (maybe not in that order). So we centered around the problem and minimized what we needed to build in order to start building up our supply. Our answer: a platform business model. This:
This is the way. It’s cleaner and easier to explain. Instead of running into a situation where customers had orders where there weren’t pilots, or pilots in areas where there weren’t orders and facing the repercussion of high churn, we provided drone pilots with a great utility that they could use to share files with their existing customers. They hunt for us. There is a 1–1 transaction occurring and we don’t need to worry about supply/demand. We just give the hunters the tools they need to bring home meat.
What’s Next for paypixl?
We just started reaching out to investors for our pre-seed. We are raising $650K to finish development, hire on a couple of full-time employees, and increase our marketing budget slightly. This is to get us through to the seed, where our traction will justify raising at less cost to the company.
June 2021 was our first month experimenting with paid advertising. We spent $890 and acquired 150 new users. Projected, that equates to $1 spent in ads to generate $14 in revenue.
I’m more confident than ever that we will survive. What’s my secret? Talking to early users. Hearing pilots explain the same pain points over and over (and over) again puts my mind at ease when an investor, who’s dipped their toe in my space for maybe 5 minutes, tells me that our competitive market is too dense.
I default to the logical question: if our competition is killing it, then why are drone pilots still feeling the pain, and why is there still so much friction in the ordering process? The truth is that our competition hasn’t figured it out yet, and I will continue to obsess until we do.
-Investors can reach out to me at Bobby (at) paypixl (dot io), or reach out via DM on Twitter or LinkedIn.