Why it’s not all about growth

Mathew Prior at Trusted Housesitters argues that growth at all costs is the wrong playbook for marketplaces

 

Something curious is happening in marketplace funding. While global venture capital is flowing again, hitting $91 billion in Q2 2025, marketplace founders are discovering that the rules of the game have quietly changed. The revenue threshold that investors expect before writing a Series A cheque has jumped 75%, from £1.4 million to £2.5 million. Thousands of marketplaces now find themselves stranded in what investors call "Series A No Man’s Land"—too big for seed funding, too small for the new Series A reality.

 

The issue isn’t just higher bars; it’s that investors have fundamentally soured on the marketplace model that dominated the last decade. While AI startups attract nearly 30% of all venture capital in 2025, traditional two-sided platforms face tougher questions about unit economics and path to profitability. The transaction-fee model that once seemed like a guaranteed path to scale now looks increasingly fragile to investors who’ve watched too many platforms burn cash, subsidising both sides of their markets.

 

What we’re witnessing goes far beyond a typical market correction. Venture capital is fundamentally reassessing how it approaches marketplace investing. For years, the playbook seemed logical: scale fast, grab market share, let network effects sort out profitability later. But this growth-at-all-costs mentality has left many promising platforms struggling, which should give founders pause.

 

The problem starts with how transaction-based marketplaces are structured. When your revenue depends on skimming percentages from every exchange, you’re essentially positioning yourself as a middleman. That works temporarily, especially when you’re subsidising both sides of the market with investor cash. But once the subsidies end, the fundamental tension becomes clear: your success often comes at the expense of your users.

 

Consider what happened to Deliveroo. The platform spent years burning investor money to keep restaurants and customers happy, building impressive transaction volumes that looked great in pitch decks. But when the IPO arrived and those subsidies had to end, the market saw through the facade. Restaurants resented commission fees that squeezed already-thin margins. Customers begrudged delivery charges they’d been shielded from. Both sides started looking for alternatives.

 

This dynamic isn’t unique to food delivery. Transaction-based platforms like travel face the same challenge: they need to extract enough value to satisfy investors while keeping users engaged. It’s a precarious balance that often tips toward extraction over value creation.

 

The alternative approach requires more patience but often proves more durable. Instead of charging transaction fees, some platforms have built sustainable businesses around membership models. When TrustedHousesitters members pay a small fee, both pet owners and sitters commit upfront to making the platform work. There’s no sense of exploitation because value flows both ways from day one.

 

But membership models demand something transaction platforms can often avoid: delivering genuine ongoing value. You can’t hide poor service behind growth metrics or subsidised pricing. Users who pay upfront expect the platform to work for them, not just facilitate exchanges they could arrange elsewhere.

 

The current funding climate is exposing these differences more starkly. With interest rates higher and investor patience shorter, the cheap money that fuelled growth-at-all-costs strategies has largely dried up. Suddenly, unit economics matter. Customer acquisition costs are scrutinised. The quality of user relationships, not just their quantity, determines whether companies can raise their next round.

 

This shift reveals which marketplaces built genuine value versus those that simply intermediated transactions. Platforms with strong organic growth and retention rates are still attracting capital, while those dependent on paid acquisition face funding freezes.

 

The lesson isn’t that all transaction-based models are doomed; Amazon’s marketplace thrives on transaction fees, after all. But the winners tend to provide genuine value beyond mere facilitation. They offer comprehensive logistics, sophisticated tools, or marketplace features that users couldn’t easily replicate independently. Maison Sport for example is likely to be one of those winners. They enable skiers to find exactly the right instructors for their level and desired learning, dramatically improving the experience of sourcing an important part of the holiday for many skiers.

 

For founders building marketplaces today, this means questioning some fundamental assumptions about growth. Rather than optimising for gross merchandise volume, focus on repeat usage rates. Instead of maximising transaction frequency, prioritise transaction quality. Rather than extracting maximum value from each exchange, invest in making exchanges more valuable for participants.

 

The metrics that matter aren’t always the ones that impress investors initially. Customer lifetime value beats customer acquisition rate in the long run. Net promoter scores often predict sustainability better than monthly active users. Word-of-mouth growth, while slower than paid acquisition, typically signals genuine product-market fit rather than manufactured demand.

 

Research from Harvard Business School suggests that marketplaces with "embedded value"—where platforms provide tools, insights, or services beyond basic matching—achieve significantly higher retention rates than pure transaction facilitators. In downturns, this difference often determines which companies survive.

 

The marketplace graveyard is littered with platforms that achieved impressive scale but failed to build lasting relationships with their users. The survivors share common traits: they aligned their success with user success, invested in trust before chasing transactions, and resisted the temptation to extract maximum short-term value from each exchange.

 

We’re entering an era where capital is scarcer and patience shorter. The growth-at-all-costs playbook looks increasingly obsolete when investors are asking harder questions about paths to profitability. The marketplaces that thrive will be those that remember a simple truth: sustainable businesses are built on sustainable relationships, not spectacular growth curves. 

 

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Mathew Prior is CEO of Trusted Housesitters

 

Main image courtesy of iStockPhoto.com and mustafaU