Liquidity Marketplace is a peer-to-peer marketplace where investment grade institutional members invest and borrow with each other without intermediation. Thomas Schickler, Founder and CEO of Liquidity Marketplace, divulges why they chose to use marketplace technology, and some issues about trust in the marketplace. With his experience in creating the marketplace, Thomas also shares some common pitfalls faced and insightful advice to aspiring entrepreneurs.
About Liquidity Marketplace
Liquidity Marketplaces is a platform that allows large institutions and Fortune 1000 companies to make interactions and transactions without any intermediaries such as banks. This is to remove the unnecessary cost which would have gone into paying the intermediaries.
The marketplace model for Liquidity Marketplace vs for the entrepreneur
According to Thomas, the marketplace model suited his purpose extremely well, as it allowed for the direct interaction between clients, with no need for intermediaries. As such, it fits the needs of the company, and helps its clients to save on expenditure. For other users, the ability to remove intermediaries helps to reduce costs on your end as well, so new marketplaces can be started at low cost.
The marketplace model also allows for the company to stay uninvolved in any transaction. No cash ever enters the hands of the company, so all the only risk that the clients have to take is trusting in each another’s ability to perform. Similarly, entrepreneurs aiming to start their own marketplaces will see less liability, if they also implement a payment system that does not involve themselves.
The target clients of Liquidity Marketplace being from large institutions, trust in each other not really a problem. For aspiring entrepreneurs who want to create their own marketplaces, though, the issue of trust is not so easily solved. Try using a rating and review system to allow users to create a trust identity for themselves. This allows users of the marketplace to make informed decisions about who to have a transaction with.
For marketplace systems, creators can introduce and enforce platform rules that govern transaction, so as to resolve disputes easily. Liquidity Marketplaces has done so, and also acts as a disinterested third party to aid in the resolution of more complex issues. Entrepreneurs can do so in their own marketplaces as well.
The greatest thing that large institutions fear in a marketplace platform is the security issues. Liquidity Marketplace solved this issue by hardening the platform to the same standards as banks do. Of course, they had the advantage because of the experience their members had from working for banks.
For other marketplaces, such high level of security may not be needed, but hardening the platform is still advisable for it to become more trusted by users.
Common pitfall marketplaces face
Many new marketplaces have faced the problem of not understanding their users. Thomas stresses that many new products are being created but fail because they do not aim to solve any particular problem, and are also unable to connect with the users. Sometimes, users and buyers are separate from each other, as such, it is important to distinguish who it is that actually interacts with the product, and aim to create a product based on the needs of the user. The failure to do so often leads to a huge loss. This is true for marketplaces as well. If no one is interested in making transactions on the marketplace, there is no way it can be successful.
Reality is different from expectation
Nothing happens as fast as people usually think when they start their own company or business. Thomas warns that not everyone in a company will be as motivated as the founders to work towards its success. He stresses that founders and entrepreneurs have to be resilient and full of perseverance, and be prepared that more capital and time may be needed for their endeavors.
Watch the full Arcadier Inspire Summit by Thomas Schickler here