Is Your Marketplace Idea Any Good? Find Out With the Network Effects Scorecard
You have an idea for a network effects driven business. But the crucial question remains: Is the idea any good? And if so, how do you improve your business model to attract investors?
Nearly five years ago, we developed a marketplace scorecard to help founders answer these questions. Half a decade later, after having reviewed thousands more marketplace businesses, we’re excited to share our revamped and even more comprehensive version 2.0: the Speedinvest Network Effects Scorecard. You can access it here.
Using a points-based system, filling out the new scorecard will help you determine the strengths and weaknesses of your marketplace startup idea. And in this revamped and adapted update, the scorecard is now applicable to the three most important types of network-effects driven businesses: Networks, Marketplaces, and Data Networks.
How the network effects scorecard works
To understand in detail how the scorecard works, you can find a complementary presentation with explanations on the logic and scoring system of the Typeform here. We recommend reading the presentation after you have filled out the Typeform to avoid any bias when answering the questions.
The Typeform will take four to five minutes to complete, after which you receive a network effects score for your startup. Any score above 150 or even 200 indicates that your startup is in a strong position to attract interest from investors. Of course if you score that high, we'd love to hear from you. Feel free to submit your pitch deck here.
Why we created the new Network Effects Scorecard––and what has changed
The purpose of our scorecard has not changed with version 2.0, but we revamped it to make it applicable to a broader range of founders and startups. Though the original scorecard focused entirely on marketplaces, we have adapted version 2.0 in a way that it is now applicable to the three most important types of network-effects driven businesses:
- Data Networks
A filtering question in the first section of the scorecard determines in which category each startup falls.
Depending on the outcome of the above question, the questions and scoring in the following sections partly differ because some marketplace-relevant criteria are not applicable to data networks and vice versa.
Since Speedinvest invests in founders across Europe at different stages from pre-seed to late seed, we have also made the scorecard more applicable across the stages that Speedinvest invests in. This was primarily achieved by excluding the section on growth from the original version, given that it’s almost impossible to compare startups from different stages on that dimension.
Moreover, we have included a filtering question to differentiate between B2B and B2C startups because this distinction has implications for the scoring of a startup in certain dimensions. For example, one would usually expect faster payback times of customer acquisition costs in B2C startups than in B2B start-ups.
Finally, we have also included the filtering questions below at the beginning of the scorecard to determine whether a start-up is truly a network effects based business or not.
- Does your product primarily enable users to interact with other users (either directly or indirectly)?
- Does your product get better as you add more users?
- How fragmented is the market that your product operates in on a scale from 1 to 10?
If you want to understand the rationale and thinking behind these questions in more detail, check out our presentation with detailed commentary on each question on the scorecard.
Better understanding your business
After filling out your scorecard, we're confident you'll have a stronger understanding of your business idea and the viability of your startup. You'll also pinpoint potential weaknesses that you can address before presenting to potential investors.
We would be thrilled to have you check out the new network effects scorecard and to discuss it in person during our annual Marketplace Conference, taking place this year on the 21st of September in Berlin. Make sure to get some tickets here before they are sold out.