This episode is hosted by Boundaryless Conversation Podcast host Simone Cicero with co-host Stina Heikkila.

The following is a semi-automatically generated transcript that has not been thoroughly revised by the podcast host or by the guest. Please check with us before using any quotations from this transcript. Thank you.

Simone Cicero:
Hello, everyone here. Simone here, your host of the Boundaryless Conversations Podcast. And I’m here today with my usual co-host is Stina Heikkila.

Stina Heikkila:
Hello, hello.

Simone Cicero:
And today, we have with us, I would say — I don’t want to say a legend of marketplaces, but that’s pretty much the thing. At least the company that Juho Makkonen created a few years ago now, Sharetribe as being in the radar of most, I think many, for sure, many of the entrepreneurs that have been venturing into marketplaces so far. So, Juho, thanks for being with us today.

Juho Makkonen:
Thanks for having me.

Simone Cicero:
So, as I said Sharetribe, it’s the company you founded now, how many years ago? It was 2012, maybe something like that.

Juho Makkonen:
The company was founded already in 2011. So, it’s been a while.

Simone Cicero:
Wow. So, almost a decade. So, in this decade, we moved from the early stage of the sharing economy and marketplaces into, I would say a word that is diving deep into this idea of marketplaces. And for those of you, the listeners, that have been downloading our recent white paper, the New Foundations of Platforms Ecosystem Thinking, you will have seen that marketplace pervasivity — So, the idea that marketplaces are going everywhere — it’s really, really one of the foundational hypothesis, the foundational thesis of our research. So, Juho, maybe you can give a quick — you can resonate a bit with this idea of privacy marketplaces and explaining us, where is today, Sharetribe? So, where are you? What are you seeing? And essentially, how do you see yourself playing a role as an initial, at least point of view? How do you see your role in this industry unfolding?

Juho Makkonen:
Yeah, great question. So, if I first talk a bit about the history of Sharetribe, and how we came to be, as you can maybe already deduct from our name of our company, our roots are heavily in the so-called sharing economy. And our first concept was indeed for make it very easy for somebody to build their own sharing economy platform. And that is still an important part of what we do. So, you can create a so-called Airbnb for X. So, like a peer-to-peer rental or service platform for renting various things from other consumers. However, after we started that, that was purely our focus at the time, the sharing economy. And since then, we saw that, yes, this is really a part of a way bigger phenomenon.

Maybe you call it the platform economy, or the marketplace economy, which basically just sees this whole dynamic playing again and again. But you have certain industries where there’s a fragmented market of lots of small suppliers, and you create tremendous efficiencies by creating one channel through which the customers can access this pool, and through a unified user experience purchase services from them. And this is something that we just see happening in pretty much any industry now, especially. And I’m sure we’re going to go deeper into what are all the different industries where we are seeing this happening, what does this mean. But it’s really happening from, maybe to name some examples that we’ve been working recently are Airplane Mechanics, there has been Information Security specialists, there has been accountants. So, it’s really like probably any industry today in the world, you can see this dynamic playing around one way or another.

Simone Cicero:
Right. And I mean, this is our assumption, or that this transaction cost to go down, this model is going to be pervasive, to some extent to become, I don’t want to say competitive, but I would say, describe a new wave of organizations that tend to organize markets these ways. So, first reflection that maybe we can also use to explain a little bit more what Sharetribe wants to make available to these entrepreneurs is that you have already evolved from a simple I would say, no-code approach to marketplaces into something that is a bit more complex with Flex, the more recent incarnation of your product evolution towards marketplace landscape where marketplaces become a bit more nuanced than different. And also, so maybe you can say a word about why and how you evolved from the original vision of making it easy for people to create renting or sharing marketplaces into something more complex that Sharetribe is trying to empower with this more recent and powerful product offering, Flex.

Juho Makkonen:
Sure. I think indeed that when we started, partly the reason for this approach that we took, in the beginning, was also that we were more narrowly focused on the so-called sharing economy. But I think that we were also like a bit naive and new to the industry and we felt that yes, of course, it’s possible for us to build this tool that will allow anybody to, without writing a single line of code, to build, like a fully complex marketplace, to any industry. And then naturally, when we started this endeavor, and then we started talking to people, when our business plan met the first customers, we realized that, actually, that was not the case. It was like every customer that we encountered had some unique capabilities, every platform out there, like they are targeting a very specific group of users. And there are certain unique dimensions that no other platform has. And this trend has even grown more in the recent years when we’ve seen that more and more of these marketplaces that they are — they might start from their simple matchmaking, but they gradually will grow to be much more than that. They really go deeper into specific niches. And that then also means that they will start offering more value throughout the entire value chain for that niche.

So, basically, that means that they become even like kinds of like software or service products for one or both sides of the equation. So, that means building really complex workflows, very specific to the audience that they’re looking after. And for that, we needed to build a very different type of tool that basically provides the 80 to 90% out-of-the-box, which is the core of these platforms that all the platforms do the same way. But really, makes it as easy as possible for you to customize it the way you want to add the necessary workflows and integrations to build the components that are unique for you, on top of that, and that’s then what we built with Flex, our second product, which we started building in 2016 and released in 2018.

Simone Cicero:
So, when you think about the evolution of the work that you have been doing to empower these, this new, I would say, wave of organizations and brands that are trying to build marketplaces, can you give us a little bit of a more specific description of what are the components that you see as emerging? And maybe you can start from the ones that were there when you started in the empowering of this sharing economy wave. For example, I can enumerate something like transaction management engines or payments or escrow, or storefront management and something like that, or calendar into what you have now. So, without the new elements, the new components and modules that you see emerging, the new needs that are emerging from a maturing industry that is, is becoming much more pervasive in the market.

Juho Makkonen:
So, indeed, if I start from the functionality that we started building first, so what the expected every marketplace to need. Then we started by modeling it after some popular marketplaces like eBay and Airbnb. So, you would basically have a search engine to discover the different products from different sellers. You’d have a payment system to buy those products and split the payment between the marketplace and there. And the seller, you would have an availability calendar for rental products, you would have a messaging system so the users could be in touch with each other, you would have review system and reputation system to see which sellers and buyers are the most reliable, and so on. So, these were really the basic components. But indeed, when we have started building Flex, what we saw, one key example here is that we realized that when you think about the transaction flow of a marketplace, every marketplace usually has a bit unique one.

So, especially if you think about many service industries, it’s not a straightforward thing that you just find an item you added to shopping cart and you pay. That’s just not how it works. If you need a plumber, if you need a programmer, if you need an accountant, if you need some of these more complex services. So, typically, there are certain things that can often be even industry-specific. So, maybe you need to first do some kind of like a user verification where you check that the customer might need to have certain identity verified, that service provider might need to have their background checked, and maybe you need to check that they have a specific license that they are actually allowed to operate in the marketplace. Then the process of like, placing an order can be very complex. So, as an example, maybe the customer first starts by describing the requirements and then to which the service provider replies by explaining, like how that work can be conducted, there’s maybe some price negotiation, there’s some add-ons added, maybe some files are being sent, finally, digital signature might be formed. And finally, there’s a purchase, maybe an invoice has been sent and a wire transfer. So, these are just some examples. And at all steps, you really need to have integrations to all kinds of like third party systems, whether it’s for taxes, accounting, currency conversion.

So, the key components that we have been building deflects are around these topics. So, we have a, what we call a composable transaction engine, that basically allows you to almost draw your own flowchart like you would draw on a whiteboard, which basically describes all the different steps your users are taking. And then you can give that to our back end. And it just models you that and gives back an API that delivers exactly that. And then an integration API that allows you to integrate any third-party software out there, whether it’s for identity verification, whether it’s for accounting or taxes, whether it’s for insurance, whether it’s for video capabilities, which are very common need these days, and many of the other dozens of use cases. So, these are really the key things that become important.

Simone Cicero:
Right. The question that I have is with regards to this clear evolution of the industry. So, how do you manage to become both, to some extent, to generate both of these dynamics, the standardization dynamic, so that it’s more efficient to create, to prototype, and it’s even maybe supporting the scalability, so you don’t really need to consider all these options, these marketplace engine, just as something that you use for a prototype, but also something that can help you to grow your business not, so to use it as an infrastructure, I would say. So, the dynamic of standardizing these infrastructures on one hand, and on the other hand, the dynamic of opening yourself and supporting these clear nichification, I would say, of the industry. These clear trends of verticalization. And even towards managed services, where actually the marketplace shaper, does a much broader job. And also it’s oversees much more of the interaction and the transactions. So, how do you manage to position yourself in between these two trends? The driver towards standardization for efficiency and cost and performance and scalability. And on the other side, the need for verticalization niche and specific solution for a specific space trying to remain first class option and not just something that you use for a prototype?

Juho Makkonen:
Yeah, definitely, I think it comes down to first really understanding like, well, what are the core components and the core interactions that still every platform has, and especially every marketplace has. And I think that there are these certain key elements still. So, you have the process of building the supply, adding all the variety of the products and services to the marketplace and all different functionality related to that. And there is making the match, which can take many forms. But they are still, it’s a certain of limited amount of options through which a match can be made. And then the third is to actually transact things or completing a transaction successfully. And to us, it’s still like we are really narrowing down on those three things. And then just like building functionality that makes those things easy. I still think that we have had to focus ourselves a lot.

So, we didn’t start from the outset that yes, right away, we are a great solution for all types of marketplaces. As our first focus on Flex, we took services and rent out. So, we didn’t add all focus on the more traditional ecommerce marketplaces like Amazon or Alibaba. And so we said that okay, these require a bit different functionality. We don’t build as many modules for them yet, as well. But we see so as the more important focus was the old types of like a complex services and then that allowed us to also now narrow down our product development a bit. But so I think it’s a combination of understanding that the points that are still common for everybody and where you can provide value. But then also realizing that we are just one part of the ecosystem.

So, instead of trying to do everything ourselves, what we do is there’s two things. First, we want to create, like a first quality developer experience. So, Flex is really a product built for developers first. So, the idea is that it’s a development platform. A developer comes in and they enjoy working with that, just like in the worlds of payments, Stripe built their business around that. So, we’ve been doing the same for marketplaces. So, for any developer who enjoys, like building high quality products, this is an environment where they like to work in. And then we make it easy to do this integration. So, whenever a customer needs the feature, we say that, okay, we know that there are these third party tools that you can utilize, to achieve the thing that you need. And sometimes they might be using 10 or 20 of such integrations. And that is the power that we don’t need to build everything ourselves. We just need to make it easy for the developers to build what they want and then like connect this ecosystem. So, in a way we are becoming a marketplace ourselves. We are connecting our customers who are the people and organizations creating these marketplaces, to developers who can help them with that and the SAS products, who they need in addition to our services.

Simone Cicero:
Am I wrong if I can say it resembles a bit the vision that Shopify has in the industry, right, that kind of positioning, right, to focus around the development ecosystem?

Juho Makkonen:
Yes, I would say so. Also, Shopify very early on, they made this decision that we are going to provide 80% of what people need. And then the rest, they can provide themselves by tapping into APIs, tapping into the plugin architecture, tapping into their developer network. And we have very much draw, though there are differences in our architecture. And there are some things that we are doing a bit different than Shopify, due to the nature, and what separates traditional ecommerce platforms from marketplaces. But really, there are many similarities in that way of thinking, where we just don’t try to provide everything, but instead, we just create the basic building blocks, and then allow an ecosystem to form on top of that.

Simone Cicero:
Right. I know that Stina has a couple of questions coming up, but I’m at a bit into this rabbit hole about technology licenses, and so on. So, I wanted to close this little initial segment of the conversation by asking you, then, in this vision that you just more or less highlighted, but not just the vision, also the development, what is the role of the source that we had in the past? You know, I know that Sharetribe started as an open-source product. And now it’s transitioned into what you call source-available. So, I’m curious to know your feelings in terms of why you choose to do that? And what are the implications in terms of lock-in, for example, for adopters of this technology, especially as you position this technology as something that can help organization for the long term, not just for the short term of providing an MVP? So, I think it would be great for you to share a little bit of thoughts on this because many also many startups that may be creating products and may encounter the same problems or philosophical conversations and questions that you have been dealing with in terms of the availability of your source it will be really beneficial to the others.

Juho Makkonen:
I think, really, the change in our approach was that originally we saw ourselves more as — the point of comparison was WordPress. And we saw that, okay, what WordPress is doing for blogs and online stores, we are doing for marketplaces. So, you take this entire code base, and you can install that on your own server, and then run it there. And then I think, really the transition bit away from that model. So, that is the model that we used for our Sharetribe Go product, which was our first product. And then Meanwhile, the Sharetribe Flex has a different architecture. So, in flex, how it actually works today is that they are open source templates that are example front end applications, marketplace applications built with Flex, but then there’s a closed source proprietary back end that is being hosted by us. And that is a single back end that powers all the different Flex marketplaces in one installation.

And the realization, I think came from when we understood the type of architecture that we felt that would be the best to serve this type of audience, we basically saw that okay, the WordPress approach doesn’t necessarily work that well, because that basically means that then you need a certain way to provide centralized services to all of these people at the same time. And if all of them have their own self-hosted infrastructure that is very, very difficult to build and maintain. I think most of the successful open-source projects built this way like WordPress, initiated when we were not yet in the API economy. But today, we have to think of ourselves a bit more as Stripe for this industry than WordPress, in the sense that we provide a certain piece a certain set of useful services that you tap into by connecting your APIs, and then you integrate many other components on that. And to me, that is how most modern software ecosystems today are being formed. Just like Shopify, just like Stripe, just like, in some ways, Slack. And also like many of kind of like the applications in the no-code ecosystem, they also like are somehow like built-in this backbone. And I think the key here is that then it makes it a lot easier to build this type of architectures where you can really easily connect multiple of these APIs together.

But the task, if you would put on the task of running and hosting an API, to each customer who needs to install their own, or who’s running their own marketplace, that would be a bit too tough task. So, that’s just not something that you want to do. And I think that this is one big reason why we are moving now into this type of architecture and why the modern software ecosystems are now being formed in this way.

So, today, the Sharetribe Go license, if I talk a bit about that. So, today, that is a license that basically is quite close to open source. But technically, it’s not because it prevents you from you offering it as a SaaS service. So, that’s a right, that we have reserved exclusively for ourselves. And that’s more related to the business model that we have for Sharetribe Go, which is the offering, the SaaS offering. And we had some challenges with that because of which we need to change. But I really think that the even bigger fundamental change was the approach from Go to Flex, where we moved from this model where you either use full SaaS or full self-hosted and then into this what they call a headless model where basically, we are hosting a set of APIs. But on top of that, our customers are building their own code on top of open-source templates, which is a really different type of approach.

Simone Cicero:
That was an amazing overview. So, thanks for that. I will leave the technical space for a moment, leave it to Stina to explore some other aspects. And then I have a couple more questions to resonate later on.

Stina Heikkila:
Yeah. I think I just wanted to zoom out also to get an understanding of the ecosystem that we were looking at with Sharetribe. So, maybe for both of these lines, basically two things: one aspect that I would be interested in is a bit of the geographical cover. And if you have seen any differentiation between, different geographical regions, let’s say in terms of the marketplace trends, and so on. And the second one is maybe if you want to say something around existing corporates or startups and if you’ve seen any evolution in these groups.

Juho Makkonen:
Yeah, two really good questions. If I start from the geographies. So, today, we are serving more than 1,000 marketplaces that are today paying us for maintaining their marketplaces, and they come from 70 countries around the world. So, we have quite a lot of experience on the country differences here. I think that then, definitely, there are big differences between countries. If you go back into the roots of the more traditional sharing economy, I guess, at this point, it’s, we can say that a sharing economy is something that is traditional. So, I still think that these are concepts that are, I would say more popular in the so-called Western world, whereas in some other parks in Africa, South America, I think that there are still a lot more trust challenges. So, that’s still something that we are seeing there.

On the other hand, one big infrastructure-related thing when it comes to online is that, or maybe even two things. So, one thing is about payments. So, we are like in Europe, US, you have like you’re expecting a certain infrastructure where people have a credit card and they make payments and then things work in a certain way. And then when you go into African countries in Southeast Asia, in India, then expectations are it’s very different type of situation. So, you people might not necessarily have bank accounts in the way we expect them, people don’t necessarily have credit cards. So, the entire payment landscape is constantly changing and that’s one really big challenge for us. That’s also one reason why we don’t have a, there are some markets that we are not able to serve today, as well, as we haven’t really been able to fully craft the type of payment solutions that the marketplace is in those countries need.

The other aspect is naturally then the desktop versus mobile. So, especially in, again, if you think about Africa, or Southeast Asia really like these marketplaces need to work mostly in mobile devices. And the user interface is that people are expecting are quite different. So, that’s definitely something that’s an interesting challenge for user interface designers. And one reminder, why you just cannot build this one size fits all tool that would just work same way everywhere in the world. So, that was about the geographies.

So, then if I think about startups and bigger companies, one thing that I’ve noticed is that big companies have very much adopted this idea of that hey, “platforms are eating the world” and “marketplaces are eating the world”. So, that is an observation we are making. We are more and more getting requests from companies who haven’t traditionally been in any way in a platform business. And now they are transitioning into becoming a platform. Well, I guess that’s pretty much the folks that you are working with also at Boundaryless. So, you will, I’m sure that you can find that trend as well.

The other thing that we’ve noticed is that there’s this concept of a minimum viable product or minimum viable platform that used to be adopted mainly by startups. And today, that is the language that almost all the enterprise customers that we talked to are talking about. So, they are very excited about, like experimentation, like trying things out fast and iteration. And these things that I think that still five or at least 10 years ago, that really wasn’t the case. And I think that because of these two things, I do expect that we are more and more seeing online marketplaces created by existing big organizations that haven’t traditionally been in platform businesses, but then just have some kind of unique value proposition that they can offer over the startups that are being built purely on the platform model.

Stina Heikkila:
Right. Really interesting on the geographical differences. And I can imagine those challenges in the back end to try to work with mobile desktop and the payments.

Simone Cicero:
Super, I mean, I was thinking too, a quick follow up question on these — I was chatting about this with Stina, about the tendency that we see more in Asia with regards to dynamics, pointing towards Super Apps. So, have you seen also these in your users-base? So, basically, the tendency that seems to be a bit at odds with the verticalization tendency that we see more generally, in the West with apps trying to become more like, play on many fronts like with the super apps that are so popular in China, for example. Are you seeing that also in your adopters from Asia?

Juho Makkonen:
We are not seeing that much. But it might also be that we are maybe not the right observer to see that. So, usually, the way you build a super app is that you first become really good at one thing, and then you start expanding after that. So, then naturally, Facebook is in some way becoming that and they are many, many of these super apps in China and other Asian countries which are now basically, you’re able to do any kinds of transactions through these apps. But most of them started doing like one thing really well and became really good at that. So, we definitely sometimes have customers who want to become super apps, but that’s usually not a very healthy way to start a startup. So, you need to — because sometimes these customers fail to understand the importance of the MVP and starting from a really, really specific focus and meanwhile I think that then the already existing huge apps that are considering like moving into these fronts and adding these new functionalities. I think that still, we get to talk to them less often. I think that they still are usually pursuing like other endeavors. So, so far, we haven’t seen it that much. But I do agree with you that this is definitely the trend that is probably happening in the world.

Simone Cicero:
Right. So, another topic that we were really interested in picking your thoughts about. So, it’s related to your deep and long term involvement in the conversation around the platform cooperatives, and in general all this movement around the democratization of platforms, and ending the dynamics of dependencies from big players. So, I know that you have been involved in this movement for a while. And that much of your vision also deals with this idea of empowering the next generation of much more democratic, small scale, and self-managed, self-governed, self-owned platforms. So, I’m interested in getting more, generally, your views on that, and also peeking into what would it mean in terms of what kind of components and technologies and solutions you may have to build, complementing the more transactional ones? And also, for example, have you ever been pushed in this conversation into building tools for governance or for decision making or for something like that? So, anything that you want to mention about this, that would be great.

Juho Makkonen:
Yeah, these are definitely interesting conversations that I’ve been engaged in for many years now. I still definitely think that this is a future that I would very much like to see, I have to say that during the past five years, five years has passed since I first, like visited the first-ever platform cooperativism conference in New York. And since then, I think that we haven’t seen quite as much development on this front as a whole as I would have hoped. And I think it’s still a long way to go. It has some potential but I also do think that it has some challenges. I think that from our standpoint, I would say that this is not like a, necessarily like a big technical challenge. They are, to me, it’s relatively easy still to kind of like, separate the part about the governance and the part about how the platform operates.

And to me, this would be a good example of like, if I think about our flex architecture today that you will do with an integration. So, there are lots of great companies out there today focused fully on building tools for decentralized governance. And if they have great APIs, and we have great APIs, then it’s not really a very complex thing to integrate these into something that works well as like a full solution for a cooperative. I think that if I look at the state of the platform cooperatives movement, today, I think that they are two parties there. So, on one hand, we have the platforms that are being started where the founders are cooperative-minded, so they want to do things a different way.

So, far still, I think that many of these have struggled to take off. I think there are many reasons may be, one thing might be that still, they are — I think that they’re many of those people who could still take a break, take some lessons from the startup world in terms of like how to do MVPs and how to make trade-offs in things that are, are kind of like less important for the very next step. So, sometimes I feel that if they start a bit more with a really big vision in mind, but don’t fully understand all the small steps there. So, this can — and naturally, then this combined with the more ambition also in addition to the business, also more ambition in terms of the governance and innovation there, that can be a challenging proposition. So, maybe that’s at least like one factor that has prevented these platforms from becoming bigger. But I think that things are changing. It takes some time. But there are some promising signs there also.

Then, on the other hand, we have the existing big cooperatives who are thinking about becoming platforms. For them again, I think it’s even like a bit slower ship even than what it would be for traditional corporations. I just mentioned that in the enterprise. The concept of MVP and iteration is already understood really well. But in the traditional cooperative world, maybe not as much, they haven’t yet read the lean startup necessarily. So, then it’s, I think that they have the resources. And for them, there’s so much potential there if they just want to take that leap, they very well could. And there could be so many successful platforms if they wanted. But I think that there, it’s more of a mindset and cultural shift that needs to happen first. And again, we’re seeing some signs. We’re having some interesting conversations with some cooperatives that seem to be more pioneering this movement, but I think it’s still early days. And it might take another five to 10 years before we really see this development play out.

Simone Cicero:
That’s very interesting. I think Stina has a very interesting question on organizations that may fit with the cooperative that you’re also talking about. But first of all, I would like to ask you a quick reflection in terms of why do you think that these cooperative models have failed so far, to really grow as expected or as wished? I’m always a bit concerned about the entrepreneurial aspect, or the mindset aspect, or the cultural aspect that you may be very familiar with because you have been dealing with so many entrepreneurs.

So, is that maybe a cultural issue, or it’s maybe an issue related to the lacking incentive structure that normally you have, even if not in the very form of cooperatives versus corporates, but in general, I think in the mindset, maybe of the people that start platform cooperative initiatives they’re maybe not very much profit focused or exit focused, I would say, and these ends up in watering their capability to really execute fast and prototype and validating and grow these marketplaces. Because, again, growth is not an option for platforms. So, any reflection that you have on these cultural, these difference of tone, let’s say, between what you need as an entrepreneur to really get to these platforms off the ground, so growth folk use, entrepreneurial mindset. And on the other hand, the mindset that normally pushes and empowers this cooperative entrepreneur.

Juho Makkonen:
Yeah, I think you’re hitting a nail in the head in many ways there. I think that’s also — in my previous answer, I was somehow referring to that specific point a bit too when I was talking about this that the platform, cooperative founders should maybe take a page from the traditional startup playbook and better understand this mindset that is needed and understanding that building a platform business is very, very hard already, even if you have all the traditional tools and traditional elements of funding, and you don’t need to kind of like care about this additional, like an innovative component of building the structure and governance in a very specific way. So, I think that that is part of that. I do think that also just the part of the ecosystem not being there in terms of funding and peers, and all that, I think that that has played a part. So, there are really many, many reasons there. I also do think that for like a — one simple observation is that if I look at our data today, they are maybe around 2,000 marketplaces, so if you count all the free trials created on our software that are created each month. So, that’s more than 20,000 each year. So, there are lots and lots of these founders out there.

And if I think about, okay, how many of these, like founders are then thinking about platform cooperatives, that’s maybe Max 50, or like, not necessarily even that, maybe 100. But, so anyway, like, it’s really small. And we also see that in our customer base, unfortunately, most of these businesses will fail. Because, again, building a marketplace business, a successful one is hard. And that also means that, let’s say that if 20 people start and only one succeeds, then that means that also that the same might apply to platform cooperatives. So, you need 20 people to start this with the same idea in order for one of them to succeed. But the problem is that we don’t yet have as many, as many excited founders there. So, that aspect, then the infrastructure aspect, especially in terms of the funding and the different models there. And I do think that also this mindset, where people are a bit more oriented towards some really high vision for the society and a bit less oriented towards, okay, let’s make an MVP, and let’s make some big trade-offs and all these things.

So, when I talk to platform cooperative founders, really, it’s quite common that in the end, like they feel that okay, they don’t want to use our services. Because, for instance, we are using Amazon for our cloud hosting, and they don’t want to use that, or we have some components that are not open source. And for them, it’s mandatory that everything is open source, or there are some other factors. And I think this quite often also the sense of some sort of purity and demand for some, some purity, that also means that they have a way higher mountain to climb in order to really reach there. And I think that that also then means that many people don’t end up making it all the way to the top.

Simone Cicero:
Good point. So, borderline ideological I would say.

Juho Makkonen:
Yeah, these are the general trends. I still do think that there are success stories there also and there are people also in that ecosystem who are very much getting that. And in addition, one final important point that is important to keep in mind about platform cooperatives is that they don’t always also need to become huge. So, it might also be that a cooperative for cleaners that has, let’s say, 100 or 200 cleaners in it who are getting their bookings through the platform, they might be happy with that. They might not need to grow because they have like a nice business there and they have a certain existing client base, and they just don’t need to make a big exit. And they don’t need to ever become this next unicorn. So, it’s also important to ask like, what is a success story? Like to them, what they have already is a success story, even though media might never hear from them.

Stina Heikkila:
Yeah. I wanted to — let’s see if I can get this across in the right way. So, we were talking about mindset in relation to platform cooperative. And you were also mentioning before that you were working with corporates that kind of want to jump on the platform wave, or they feel like they need to use a platform business model to some extent. And what we are very much going into in the white paper is around what impact this has on the organization itself, or the corporate itself. So, I’m curious to know if you have thoughts around that. To what extent do you need to become a different kind of business, if you start to build a marketplace, and you want to make that an integral part of your business? So, we’re talking a lot about this sort of outside in perspective, right. So, you need to resonate with the ecosystem, and you need to some extent, let go a little bit of centralized control. Have you seen things like this happening in working with your users?

Juho Makkonen:
I think that so far if I think about our customers, I don’t think that there has been major organizational transformations coming out of this. And I think that that’s something that is more towards like later in the pipeline. So, if I think about this, again, these organizations are smart in realizing that if they would need to right away, like even for their very first Minimum Viable Platform, they would need to already transform their organization before they can try something like this out, that would be like a really major challenge that would take easily years for them. And that will really slow down their ability to actually try this thing out. So, what we are seeing is that instead, what they do is that they form these, they hire these entrepreneurs who form like startups inside the organization, who then usually start running these concepts independently. And so basically, they don’t transform their core business, they say that, okay, we have this new division that does this thing.

And then after that, like if they validate and realize that that works, then as the next step, it might be then to see that, okay, should we actually start transforming our entire organization to work this way. But at least to me, this is a way more common approach than then going all in right away on the organizational transformation. And I think it’s also like a healthy way of doing that. So, I think that there’s nothing wrong with that. That being said, I think that there can also be some dangers, like if you’re trying to do this, but you have like a more traditional organizational mindset. But I think that, to me, so far, that the issues I’ve seen are more related to the fact that they really understand like, who is the owner of this concept and how does them building the supply and demand work. So, they are more like a — maybe that they might not grasp all the marketplace basics, but also not all the startups also grasp them.

And meanwhile, then we are also seeing some startups inside big organizations that we are working with, who are really grasping these things. So, for instance, we have been working with Decathlon, which is a big European chain for like selling sports equipment and things like that. And they are running various different initiatives on our technology. And these are run by teams of entrepreneurs that operate really independently. And I don’t really think that it has transformed their entire organization, but at the same time they are able to run many of these experiments, and bit by bit, probably they end up being transformed in many ways. So, I don’t have like this big worries there about the organization, somehow like “missing that”.

Simone Cicero:
So, very quickly before — in the last part of this conversation, I would like to approach with you a little bit of exploration of what are your considerations with regards to defensibility, for example. I’m thinking about a company that is doing similar work to Sharetribe, for example, which is Mirakl, this French company that we’re going to have on a podcast quite soon so our listeners can also expect some further conversation on this point. And they’ve chosen to move into this marketplace, Mirakl Connect that is a way for them to generate some kind of network effects. And also, to some extent, Mirakl Connect connects the suppliers, Mirakl is more into the e-commerce space. So, maybe it’s much easier to create these kinds of a set of suppliers that will be available to all their customers to some extent to reduce these plug-in time to the supply side of the spectrum. So, I was thinking about you, and the fact that Sharetribe moves more into a more diverse space. So, what will be your vision, in terms of how do you move into a space like that without just becoming an infrastructure? How do you build the defensibility and how do you build the network effects in the space that you guys are trying to empower?

Juho Makkonen:
That’s a really great question. And indeed, I would say that both our strategy and Mirakl strategy both rely when it comes to defensibility, our both strategies rely on network effects, but in a really different way. So, if you look at Mirakl, they really target a different type of audience than we are. So, they are offering their solution to really big retailers who want to turn their existing e-commerce solutions into marketplaces and bring lots of additional smaller suppliers there to sell their products there. So, more like the traditional e-commerce, which, like I mentioned, hasn’t really been in our focus. We are focusing a bit more on the more complex transactions in various different fields like I mentioned. But in their case, it makes total sense that you basically build this workflow through which the same sellers can sell in many of these marketplaces quite easily. And that’s where the network effect comes from.

Meanwhile, for us, really, we’re coming a bit more from the grassroots. So, for our story, what we really want to enable is this democratization of the platform economy. And the approach for us to reaching that is that we make it as easy as possible for somebody. So, they shouldn’t need to be a big organization, they can be a small startup, they can be a social enterprise, they can be a small cooperative, they can be a nonprofit, do build this type of platform and make it success in the way they define success, which sometimes can be growing quite big, sometimes just operating a small scale business. But being able to do that without having to raise venture capital, for instance. And basically, that means that our approach for doing that, well, sure we provide software of our own that reduces their costs. But what I think it will be even more important is building this network, which I described earlier. So, building our own marketplace, which basically connects these people who are building their marketplace businesses, to vendors, who are offering them services, whether that’s a marketing specialist, or a developer who knows our APIs really well and can do really quickly and cheaply the work that they want, or a SaaS vendor that has an insurance solution that they need out of the box.

And to me, this is the type of network effect that we are creating that once we have a large pool of customers, that is very attractive to these suppliers. So, they want to come to our ecosystem, maybe build existing integrations to our APIs to sell them as plugins, or developers. They take the time to actually learn our APIs because there’s potential clients there. And then meanwhile, for the customers, when there are lots of vendors who already know how our APIs work, there are lots of existing SaaS integrations, then suddenly, it becomes a lot cheaper and more attractive for them to use our products. So, this is kind of where our defensibility comes from, this idea that we can create this ecosystem that is the most powerful ecosystem for somebody building their own marketplace business.

Simone Cicero:
That’s great. I see this, again, this resonance with let’s say the Shopify model if you want to that I think many product companies can be inspired by this idea to create the ecosystem around to the professional that will support each other in building these new value propositions, these new strategies. Maybe a last question that I have for you today is, I know that you are also very much concerned with sustainability and climate change, for example. And I was curious to see if you have ideas in terms of how do you see these marketplaces being more and more integrated in the local sphere? So, how do you empower marketplaces that are focused on the localities and on creating businesses that deal with local development, local trade? And maybe if you have been thinking about the dynamics that can connect them with each other? So, through this multi-scale and scaling across more than the scaling up like the complexity experts would say. So, have you had some thoughts around this topic?

Juho Makkonen:
Yeah, definitely, many of our customers would fall into this segment. I think it’s also the nature of our positioning. So, we have really created an offering that is available budget-wise also for these type of organizations, which don’t have the capital necessary for some other alternatives. And that’s always been really important for us. So, for us, the key is just really to automate all the possible steps there so that building like a platform like this is very easy. So, I think that that’s one bit there. The other bit naturally, can then be, it’s more about awareness, and for instance, working with these movements like platform cooperativism, and others. So, I think that there’s lots of potential there, I see that they are main bottlenecks are really not that technological, but just for the fact the people who are building this realized that, hey, this possibilities exists, it would be possible to build this type of platform, and also that there’s a solution like ours that could actually help them.

Because really, often they end up thinking that no, this is too expensive, we just cannot go into this endeavor. And they don’t realize that actually, that won’t be — will be possible. But yeah, I do think that also, one important aspect of what I mentioned about the community, and what we also want to be building more and more in the coming years is really to bring in these people together. So, in addition to creating this marketplace of supply and demand, we also want to build a peer community of these people so that they can learn from each other, and learn the best practices. And like I think that that will be very powerful. And I think that we are also in an interesting and unique position to do so. So, that is probably the third thing that we can do to help this particular dynamic.

Simone Cicero:
Which is, by the way, I think the place where you really democratize organizing. Because if we are talking about marketplaces, as an evolution of organizing, and we’ve been talking about those opportunities, for example, local constituents to organize and to some extent, extract from the market, and that’s essentially where, for example, platform coop would really have a very much of meaning. So, I think this may really be the sweet spot for your company. And also knowing that your mission is so concerned about the environmental crisis and inequality. And also, as you said, once at the loss of meaning that I think it could be really the place where you regain this meaning when you empower these small-scale organizing through these technologically mediated things.

Juho Makkonen:
One thing that I also hope us to be able to do more is then to go the other way around, which is that there are lots of people who come to us, and they share the same philosophy about really wanting to do something that is good for the world, and for the sustainability, and so on. But they are also, they are a bit confused about their organizational structure and how to really structure it in a way that it doesn’t end up into this, another kind of like a machine that ends up raising lots of VC capital and then transforming into something that is no longer their control. And I think that we can also maybe play a part there in showing that they are like alternative paths for organizing and like setting up the governance structure of your marketplace when your founding. I think that that’s one aspect that I definitely hope that we can do a bit more. Just maybe trailblazing here a bit.

Simone Cicero:
Right. And before I let you go, it’s really a last minute. I forgot that I wanted to ask you about your experience in embracing a different model of ownership for your company and the steward ownership model that you embrace now, I think three years ago, if I’m not wrong, something like that. And I would really love you to share a couple of words on these, and not just in terms of your experience directly, but also how you see that fit in with empowering this new generation of marketplaces and marketplace-based organizations.

Juho Makkonen:
Sure. Indeed. Like two and a half years ago, roughly, we transitioned into our current government ownership model, which is called Steward Ownership. And this transition really started from our mission of democratizing the sharing, or platform economy, which that was born first. But when we would go around in the events in the world, and we would be talking about this mission, people would also point out to us that, hey many of these platforms are actually extracting quite a lot of value. And they’re becoming these monopolies that are also creating lots of trouble in the society. And their concern was that we are, hey, you guys are also a startup, and you’re a VC funded a traditional organization. So, what prevents you from essentially becoming one of them? And like, how can they really trust that we are like a responsible steward, and who are really going to put our mission first, even in a situation where there will be an opportunity to capitalize on that community in ways that would be extractive. And that’s a really good question.

And naturally, we heard that, hey, we are good guys and girls, we would never do that. But that wasn’t a very convincing answer. And then we realized that ultimately, there was something flawed, we felt there in the way that this, our model was working. And we also did realize that wait, we are not really interested in some of the traditional like end paths that many startup founders are. So, we are not really interested in doing an IPO or selling the company or having an exit. We’re just only interested in having this impact. And if we raise even more VC money, and we become like, kind of like lose the control of the company, then that could be very detrimental to this mission. And the mission is the reason we started the company for. And then we really started thinking about this. And we ended up making a very drastic change, which basically changed our structure in a way that now the voting power of our company is fully enhanced of activity members. And that means active.

So, if I leave the company, at some point, I need to give up my voting shares. That basically means that no investor or third-party can ever buy the company, so they assume control. So, the control will always remain within the active team members. So, in that sense, quite a lot of similarity from the cooperative. But at the same time, it doesn’t have some of the same restrictions of the cooperative. So, we get some of the benefits from the regular, limited company, in a way we can operate and fundraise and so on. But this is a permanent structure and it’s guarded by a foundation set up that we’ve given some shares to a foundation that basically has a veto power, and by its rules is bound to veto any change back. And we also have a clause there that for our investors, they will get returns from their investment, but there will be a cap to those returns. And after that, the investors and other shareholders including us founders, won’t get any further returns in terms of dividends or anything like that.

So, basically, the company will then be spending 100% of its money to advance its mission in the ways that its people see best fit. And I think that this, in general, when we learned about this new structure, it’s not a structure invented by us. It’s a structure that has existed in various ways for more than 100 years but was brought to our attention by this group of people based in Germany who are researching this and who have given it the name Steward Ownership. We realized that this is something that would allow us to kind of like continue operating the way we operate towards this mission, but would really, basically be something that we can also offer as approved for all the different stakeholders, that this is a binding promise. We won’t sell out. We won’t turn evil, there’s no longer any incentive for us to do so and it ensures that our incentives are always at the right place. And it’s always in the best interest of everybody working at our company to just do the thing that is most beneficial for our mission.

And I think that this has worked really well for us. I’ve definitely been a lot happier personally, like after this transition. And this is the same message that I’ve been hearing also from our team members that I think coming back to what you mentioned, and what I’ve been writing earlier about this loss of meaning. And that is clearly a big problem in our society, I think that these types of structures that can really help people feel that, okay, they are really working towards something that has like an — that is really doing good for the world. And really like in that way also get a better connection to the meaningfulness of their work. And that has definitely been the case for us, and for me personally. So, I think it’s been a very, I’m very happy for this transition. And I do hope that more organizations in the future will take paths like this because I see that that would lead to many good things happening in the world.

Simone Cicero:
Right. It certainly gives more space to the mission of the organization. And I must say that I’m really, really proud for having had the chance to have this conversation with you. And really looking forward to this company that is trying to make a new vision for pervasive marketplaces that are empowering, that are democratic, that are small scale, that are even bigger, scale — larger scale sometimes, but that don’t make a point of being. So, when, if they call base everywhere and all the time, it’s really, really great. So, I really looking forward to, again, explore with you your progress in a few months on. And at the moment, I want to really thank you for the inspiration that you gave to our listeners, and I’m sure that they will follow up. So, the question is, where do they find you? Where do they find Sharetribe? How can they get more information and prototype and explore with you their future marketplaces?

Juho Makkonen:
Yeah. So, that’s quite easy. So, go to our website, www.Sharetribe.com. And from there, you can essentially click Get Started Building or Free. And in a couple of minutes, you have a marketplace of your own up and running, which you can then configure. And with our Go tool, you can basically launch your first Minimum Viable Platform without writing a single line of code, even in the same day, when you created it. And naturally, then for those who are looking to build something more advanced, we have infinite extensibility possibilities through Sharetribe Flex on our APIs there. And that’s also something that is free for developers to explore and develop. So, this is very, very accessible to anybody who wants to learn more.

We also finally, I’ve also been, I co-authored a book called The Lean Marketplace, which I think is a great read for somebody who is new to the concept of marketplaces, and is thinking of starting a business like this on their own, whether they’re an entrepreneur or intrapreneur. I definitely can recommend it as a practical guidebook for somebody to understand the basic concepts of what it takes to build a successful marketplace business. We also write about the same topics at our Marketplace Academy at Sharetribe.com/Academy. So, I think that’s worth a visit too.

Simone Cicero:
Right. Right. And you also don’t want to miss the second season that you told me is coming up hopefully, of your two-sided podcast. That was one of our dearest shows the last season, I would say.

Juho Makkonen:
Yes, definitely. And so keep, do subscribe to our newsletter. Indeed, we have a podcast for marketplace about marketplaces too, and indeed there’s a plan for a second season for next year. So, stay tuned for that too.

Simone Cicero:
I can’t wait. So, thank you, Stina for the co-hosting.

Stina Heikkila:
Thanks.

Simone Cicero:
And thanks to you all for your time, really appreciate it.

Juho Makkonen:
Thanks for having me. It’s been a blast.

Simone Cicero:
Thanks very much. And for our listeners, stay tuned for new adventures, and catch up soon.