Niklas: Hi and a huge welcome to you, my lovely listeners. So glad you're here. Today you are joining me for a chat with Colin. Colin is the founder of Yonder VC, a VC firm focused on marketplaces. Colin, it's a great to have you.

Colin Gardiner: Well, thanks for having me. I'm excited to talk shop.

Niklas: It's awesome that you come from the operator side. think I've always liked that in venture capital, people have really built something, especially if they are investing early stage. And I'm really curious to hear your story from the start. I think you started in macroeconomics, then were in growth at startups and then moved over to being a venture capitalist. How did you end up in that place?

Colin Gardiner: ⁓ man, ⁓ where do I start? The dawn of time. Yeah, so well, out of college, I got the immense privilege to work for Jenny Yellen, who ended up running the Federal Reserve ⁓ and then the Treasury. But my main job was ⁓ studying the US labor market in the middle of the Great Recession. So I got to figure out why none of my friends had a job. ⁓ But what was I doing? was studying the largest marketplace, or not the largest, but one of the largest marketplaces in the world, the US labor market. ⁓ And so there's always been this through line through my career of marketplaces, whether I knew it or not, I just kind of fell into them. But yeah, so basically I was supposed to go get my PhD in economics, met my wife, decided that I didn't want to be a poor PhD student for a long period of time. So I ended up thinking I'd get a job in San Francisco where I was working in the Federal Reserve. And first week I ended up getting a bunch of interviews for like a data scientist position. It was a good time to be like an analytics person. And I ended up at a marketplace called Just Answer, which was like the, one of the original Q and A marketplaces. You could ask a doctor, a lawyer, a vet, you could do confession, you could do anything. And so that's where I cut my teeth in tech. And from there went on to ancestry.com, which most people don't think it was a marketplace, but it's really a marketplace for connecting live people and dead people through data records and just the UI is the family tree. From there went to Trippin.com, which is a vacation rental aggregator, just like Kayak, but really focused on the vacation rental segment sold to a competitor in Europe, Home2Go, which I think is now public. And then from there went to OutdoorZ, which is like Airbnb of RVs. I joined there very early on, 10th, 15th employee, chief product officer, eventually took over as chief revenue officer there as well. And really, you know, got to build an amazing business that does some billions in rentals. for RVs. And after I left there, I wasn't 100 % sure I was gonna do next. I kind of fell into advising consulting marketplaces. I worked with probably 100 plus marketplaces at this point from like idea stage all the way to publicly traded companies. So really huge network on that know, and I've seen pretty much every flavor of marketplace that I could think of at this point and try to, you know, do my best to know everyone in the space, but also try to write content, which I do at my newsletter, take rate and try to just put what you know, like, content by operators for operators out there, because there's just so much content about marketplaces from VCs, but there's not a lot of content from operators. And so that was kind of as I left being an operator, I was like, man, I really want to put that back out there and just help you build better. ⁓ And then in that process, I just met a bunch of great companies ⁓ and just started investing more frequently than the angel checks I'd done before, did some SPVs. ⁓ through that process, met some of my future LPs that were amazing and really encouraged me to do a venture fund. That's kind of how I fell into it, honestly. It wasn't some grand design of, I want to do this thing. But I started the fund in 2024. And, you know, really, you know, it was like beginning of 2024. And then I started deploying by, you know, kind of April and then had hit kind of five or six companies that I invested in by October. And I kind of woke up one day and I was like, man, I love doing this. This is the thing I want to do for the next 30, 40 years that people have me. And so, yeah, so I've been building Yonder, ⁓ which is a first check pre-seed fund at the core, ⁓ investing early into founders building marketplaces, network effect businesses, and that's all we do. That's I try being an expert in that. And hopefully everyone walks away thinking marketplaces equals Colin and just focus on that.

Niklas: I think it's really interesting because the thing I know about marketplaces is you always have the cold start problem. And I would be really curious in how you solve these when you were an operator. And also they are, I would say one of the most venture typical business in a sense that you have a very high failure rate and the, they're in exchange, you have a lot of real outliers if it works, but you have a lot of where you don't solve the cold start problem and the problem still has too much friction. What did you learn during your time as an operator regarding this?

Colin Gardiner: ⁓ I've learned so many things, so many hard lessons that I've, ⁓ I've gone through. ⁓ I think that like the, the, the paradigm of how I think about like starting a marketplace is cold start problem is, ⁓ you know, you, you, you want to do everything you can to hold one side constant. Right. And so I think as you think about like supply side, and really just like generally before we even go to supply side is like, there's kind of two phases that are like a macro level for marketplaces. there's aggregating unique and valuable supply at the beginning that people hopefully can't find anywhere else. And once you do that and you can start to put demand into it, then your job becomes, do I acquire demand at scale for the rest of my life? Because demand-side aggregation essentially becomes like the main goal ⁓ over time. And so if you break down those two phases of the chicken and the egg thing, it's like, you got to go out and get like really valuable supply to start. Like that is like the number one thing you got to do. I think one of the hardest parts there is like, I go get this, but there's crickets. There's like literally no one, you know, booking, renting, whatever it might be. And so a lot of like what I've pattern matched on is that people that get this right either have some unfair distribution advantage. They've already built in kind of like community content, something that they have some way to drive demand. ⁓ or they figured out like what I would call something more of the like, ⁓ like a SaaS enabled marketplace or something like this where they actually build tooling or some embedding for the supply side so that they can easily bootstrap the supply without guaranteeing them the demand. Their value prop isn't demand from day one. ⁓ And so those are kind of like general buckets that I think about it is like someone like some founders can show up on the demand because they have some unfair advantage there. They've been in the space, they know something. And so then it's just about the supply side aggregation and getting that up and running. Whereas others may just have to start with supply bootstrapping. And if your value prop is getting them demand upfront, that can be very difficult. And that's where the chicken or the egg, you play on hard mode in that one. But if you can build them tooling or something where they can embed deeply and they get value out of it without the demand, that's generally a much easier path. And so when I look for investing in companies, I'm like, I want to see founders that understand those two things. Like, and they fall into one of those buckets. So yeah.

Niklas: Yeah, it's really interesting. If you look at it, and I think you have seen a number of marketplaces, what are common pitfalls that founders should avoid? Where should they de-risk? What do you see where people kind of stumble into big problems or trouble over time?

Colin Gardiner: Yeah, I mean, there's a lot. mean, and they can run the whole gamut, but I'm trying to, you know, maybe some marketplace specific ones. I think people end up overpaying for demand. This is like probably the number one thing. It's becoming less common. I think people have seen it out there, ⁓ but really paying for ads, things like that. Like they have a place in all of this, but they can actually kind of give you a false positive on product market fit. ⁓ And so. What I really like to see for early stage marketplaces is that you actually have some real market pull, right? Like you're putting supply out there that like the market is hungry for and will pull you along. And if you don't have that and you go like, you know, do advertising or things and try to pull the demand in and try and fit it to what you have, you can actually kind of like force product market fit that actually may not be that sticky and have high retention. ⁓ And so, one of the common pitfalls that I see is that people start with some supply set and they're like, we just need to drive demand against it. And it turns out it's like, if you can't aggregate something that people really want or have been looking for, then you're gonna really struggle. So that's a common pitfall that I see. And so that's really about your starting wedge and picking the spot where there is maximum pain for the market and trying to focus in on that supply set to start.

Niklas: You already mentioned the idea of starting with a SaaS and then turning it into a marketplace. How often have you seen it work and what are good examples where it really worked well?

Colin Gardiner: ⁓ I mean, there's a litany. ⁓ Outdoorsy, good example. ⁓ SaaS enabled Marketplace, we had a product called Wheelbase. ⁓ Originally started just on the peer-to-peer side, but it was so hard getting one RV on at a time. It was like, hey, what if we build the software for these people to run fleets of RVs and get those people on? And that was really effective. But other classic ones, Open Table is a good example. Reservation management software, and then booking Marketplace. But I think you also think more broadly, about this marketplace plus model as I call it. Google fits in this bucket. What does Google at the end of the day run? It runs an ad marketplace and they produce a lot of tooling against it. Search, Gmail, like all these things are just embedding into either side of the marketplace to essentially get system of record so that they can run a more liquid ad marketplace. Facebook, same thing. The people think of the... the product being a social media element to it. But at the end of the day, what are they really running? What are their biggest business? Ad marketplace, classified marketplace. ⁓ Those are like really core components of the businesses and they really get driven by these other products that embed deeply into one side of the marketplace, the other to essentially create system of record around data, ⁓ content, whatever it is so that the marketplace can be really liquid.

Niklas: Yeah, very interesting. I think especially for Google, I've never thought about it that way, but it's very clear because that's the money printer for Google is the ad marketplace. Interesting. did Facebook, absolutely. A lot of the very profitable business models kind of seem to play on, you have to kind of auction off the supply to a very good demand on the

Colin Gardiner: Yeah, Facebook, right?

Niklas: on the advertiser side and that space. Yeah, very interesting. ⁓ How did you translate that to Yonder? When you start, I start, ⁓ how did that translate into your fund and how did you translate that into the focus you have?

Colin Gardiner: Yeah, I mean, look, I think I ended up doing the fund around something that I had an edge in. I think in life, you really don't want to go do things where you don't have or it feels easy one and where you don't have an edge. Like, and so I always try to lean in and more of the idea of like lean into your strengths and maximize those than try to fix your weaknesses. ⁓ And so I just, it felt easy for me to focus on marketplaces, right? I think it felt niche at first, but then I realized like how massive and big it is. and how even today I still meet people that do a marketplace I never even heard of. So ⁓ I just love that piece of it. But I think some of the core proponent, like the core components of the fund is I think about maybe like deal underwriting is that, you know, there's pretty two distinct kind of paths into the market. One I would consider it's market taking, like going into an existing market and trying to offer like ⁓ a better experience or something new there. or there's market making. And when you think about venture scale businesses, they really fall into the bucket of market making. Yes, there are some market taking, but they're much less frequent. I think maybe the canonical example here would be ⁓ Flexport, ⁓ Convoy, but even those really struggled. And it's because that like existing markets tend to be commodity markets ⁓ or commoditized at some scale, which what's really hard there is like for you to aggregate unique supply. And so in those markets, you have this problem where demand and price are reflexive, whereas demand goes down, price goes down, and you run into this situation and then also volume goes down, right? And so you're like, ⁓ my God, we're making less money in this. It's like, it's a very hard environment to be in. Or, but on the upside, it spikes, like it's gonna be really great. But the problem is it's like for cashflow for those businesses, really tough to predict. ⁓ So they end up being very hard to operate. just really like and manage really well. And so you see a lot of those businesses go more towards the SaaS product ⁓ to kind of smooth out the revenue side of it, which don't end up getting as much exciting scale. But the market making businesses are fascinating because what do they do? They go out and make a new market where they actually can maybe corner the supply, right? And actually own it and have real margins in it. So if you look at Airbnb, like they just continue to grow and do their thing and have this like uniqueness and quality of their supply where price doesn't really ever go down on those. I don't think UrbanBee's ever gotten cheaper, right? But it's also because that inventory isn't necessarily everywhere, right? ⁓ And so they have some stickiness to their product that also makes it so that price isn't really reflexive. But I think another good example is like, think of all the marketplaces like Kalshi, Polymarket that made new markets, right? If you can hit into a new market where there's massive market pull, it's just like, it's amazing. And we had that experience at Outdoorsy where we, you know, we were building a business where there was already millions of searches a month for RVs and just even getting RV inventory out and rentable just like unlocked the demand. And then COVID really sent it to the stratosphere where it became the only travel method in the United States at the time.

Niklas: Yeah, there seem to be quite a number of businesses in this space and I've thought about it a lot where the market wasn't obvious when they started. think Google is a good example. Facebook also. These were easy to replicate, I would say at an early stage before network effects kicked in, but a lot of people missed out on them. Shopify would also be an example, not really marketplace maybe, but a lot of... We see his past on it because they said there are too few online shops and then the friction was reduced so much. Maybe the best one actually is Airbnb. I think that's, ⁓ that is also a good one. How, how do you think about that and how would you spot that?

Colin Gardiner: Yeah, I mean, look, I think at some point you have to assume that you have some taste, right, in doing these things. But I'd also say it's a function of your fund and how you do this. Like one of the things that I've done very deliberately about how I set up the fund was that, you know what, I don't like the air of a mission of picking something that will be a winner is like the worst adventure. You know, it's less about not, it's more about getting into the winners than it is about all the loot, like the ones that you invested in that didn't become winners, right? Like there's only one X downside, but there's essentially uncapped upside into the winners. And so for me, I was like, okay, well, if that's the case, like, and I don't think I have this like picking edge, like I have some incredible taste, like, you know, like, think of Steve Jobs when I think of taste, like, that's not me, right? I don't have this such an opinionated point of view. But what I do have is an ability to source a lot of the great companies and see them. And that's where my edge is. so for my fund, said, Hey, look, we're to do a lot of companies in the fund. We're going to try and go as early as possible and do as many companies as I can out of the fund. Because I know that it's more about a surface area of trying to find the winners and getting into them than it is about me being able to pick one and load up into that one. This is not my strategy or my expertise. And so that's kind of how I've gone about it. I mean, one way to think about this is if you Take the year that Airbnb did its seed round. There's roughly like 2,000, 2,500 seed deals a year. And if you were to invest in every one of those, equal amount, everything went to zero, but Airbnb, you'd still return a couple thousand X just on that one investment. And then your fund would be like three or four X multiple somewhere in there. But it also turns out if you would have also hit Uber and Pinterest in that year. And so for me, I think like I'm much more the mindset of like, hey, I'm not going to invest in 2000 companies out of the fund, like, if I can focus in on these marketplace and network effect businesses, which tend to have really amazing venture scale outcomes when they work, if I can focus in on those, winnow out everything else, but also get a wide spread across those, I increased my surface area for hitting these like, know, venture lotto type outcomes. And so that's the core premise of the fund.

Niklas: Really interesting. And then I would be interested in which signets tell you a founder has real network effects versus just like a nice listing site, something driven by ads, for example, like you already mentioned it. ⁓

Colin Gardiner: Yeah, mean, look, network effects early stage are like nonexistent. So for me, what I'm really underwriting against is ⁓ founder and market direction. And so I really think hard about, is this a market making business? And if it's not, if it's a market taking business, do they have like ⁓ 100X better product experience? And do they have some edge in demand side aggregation? And if they don't have those things, it's usually a pass. But the market making one's a little more forgiving in the sense that like they don't have to have demand necessarily figured out. ⁓ but they do have to have something that's really unique and different. And it can sound crazy, but in those cases where they're going out into a green field opportunity, like you really want to bet on founders that have high agency, somewhat stubborn, are really opinionated ⁓ and like, you know, have a chip on their shoulder and they're not going to quit. So that's kind of what I like in a very basic sense underwrite for, for an amazing founder, which I think every VC would say they want to do. So don't think there's a lot of disagreement around, you know, broad strokes, what that looks like maybe in the nitty gritty details of like, what's a marker, what's not. But I also want people to be picking a market direction that has huge tailwinds. And so I've found that like great markets usually have a zeitgeist behind them. So I think about like outdoorsy, it was like, to me it was kind of obvious, like fan life was just a movement and people wanted to take pictures of their feet out of a van at a beach, right? And so was like, if this is going to continue to be the vibe, like we should, I should be in a business riding that wave. And so I think like specifically for consumer markets, it's really important to kind of align yourself where things are going, right? Like you said with Shopify, it's like, Hey, I'm not investing because there's not that many online stores. was like, well, we kind of all know that the world's going more and more online. So like, I think we can bet that more commerce will happen online, know, secularly for the rest of our lives. And so I think for me, it's like, just kind of trying to do first principles thinking on really basic things on like directionally where things are going. Now, is it the right time right now? Like, is this the most optimal moment? I think that's the hardest question to answer. So it's very often, it's very easy to be early. But, you know, I think I'd rather be early and have the tailwind right than miss the tailwind because I didn't get in at all, you know, and miss that part of it. So anyway, just some food for thought on it.

Niklas: Yeah, I think timing is extremely hard for everybody and you can just get unlucky at the end of the day. Market changes, something else, and the environment changes. I think this is really something that is so incredibly hard to predict. I think one big change that we are seeing currently is obviously AI LLMs. How do you see the best people that you see in marketplaces leverage that early on for their advantage?

Colin Gardiner: Yeah. Yeah, it's a good question. mean, I, you know, two years ago, much different story. Now I would say for like net new investments, like I kind of want to know that they're like in Claude or the Codex, Claude Code, Codex, whatever. they're like, kind of have some psychosis around AI because I don't think the next generation of great businesses are going to happen without people being like fundamentally. AI native and first. So that's what I'm changing my underwriting for, is looking for people that are kind of thinking first principles and building from the AI perspective. just, like, I'd see it myself. I kind of went through a transformation for the fund where I was like, got 900 plus deals submitted in the last quarter. And I was like, I can't scale this personally. I can't respond to those emails. I need to like fix this. And so AI was like the natural solution. And I honestly went into a hole for like two weeks, wrote a bunch of code and AI and figured out how to automate a lot of my fun. And I now kind of cross that bridge and on the other side of it with AI and I'm like, man, if founders aren't doing this, they're gonna have problems because they can't scale, like other people can scale. And so, I don't know, that's what I would say. In terms of how does AI change the business models, I think that's yet to be determined. think agents are still very early in days of what they can actually do and how reliable they are, although it's improving. very quickly, which is amazing to see. ⁓ But I still keep coming back to this fact that AI is really good at working with structured data that's aggregated already, and then it can do really cool things. Most marketplaces are in the business of aggregating data, In a very basic sense, that's what they do. And so I think there's some tailwinds for AI to help with that. But at the end of the day, you know, what I'm seeing, they're really great founders still have to have an amazing ground game IRL, right? Like in real life, they have to be able to go out and talk to other people, aggregate real things. And so I think that's, you know, something that's still really matters is that you have to have these soft skills that aren't just, you know, all technical. ⁓ There's a lot of like real world messiness where AI can take, can help ⁓ if it gets the data available to it. But if that data isn't available, AI is relatively... useless for doing anything with it.

Niklas: That's my feeling as well. I think it's just a very strong amplifier. So I'm technical by like since my teen years and now I can just build products extremely fast. I think it helps you a lot if you're already good at things because you can just be a lot faster if you know what you want done. ⁓ And if you can judge the output quality, if you cannot judge the output quality and you don't know what you get done, you always run the risk that the output quality will be just...

Colin Gardiner: Yeah.

Niklas: relatively low. That's my current feeling. So what you see is the people that have very high expectations to output and are already better get amplified a lot by using these tools. And that's not so true for the other part of the spectrum. That's what I think. They will not derive the same results. my feeling is just an amplifier. People get a lot faster.

Colin Gardiner: I agree with that. I I work very hard and it just helps me work even harder and faster. That said, I do think we're entering a stage around optimization. I think a lot of cost constraints have come into play. Like, know, just with the paradigm shift of, you know, clogged essentially removing this description for open call users. Like it really forced to the forefront that like, Hey, maximizing your token usage is not really a sustainable equilibrium. We actually have to figure out where. supply and demand meet for like the cost of doing the job versus like the output out of it. Right. And so I think, um, now we're seeing a really interesting moment where it's actually the, I'd say the engineers are really coming back that understand how to use AI and optimize it. think Gary Tan at YC is doing an amazing job of like pushing out like code that helps you run your agents better. Right. And does like real optimization. Um, and so I think we're kind of in a, a re like a retrenchment phase with AI a little bit of like. the cost constraints are real and it's going to force innovation on the cost side, but also force everyone to like scaffold and put harnessing around what they're doing to make it even more effective. So I think that's the paradigm for the minute. ⁓ And then I'm sure someone will release some like crazy good model that will just blow things up again. And ⁓ yeah, just excited. And just trying to align with businesses that like every model improvement leapfrog makes their business leapfrog other people. Right. And so that's kind of like in a very basic sense, just build your business around. the tailwind that AI is gonna get amazingly good. And if you can do that and make it so that every improvement in the core models makes your business incredibly good too, then you're gonna win. So.

Niklas: Yeah, that's true. And maybe one last question, one piece of advice for founder raising the first pre-seed marketplace check right now. What should they focus on? What do you want to see?

Colin Gardiner: I mean, if I think that people should try and use AI and build as far along as they can without raising money, like I fundamentally believe that, like you should try and go as far as you can and get as profitable or as big as you can without raising money and then go raise money because raising money is highly dilutive, right? And so I think like you can maintain a lot more ownership and actually have a much better product to raise on if you can do that.

Niklas: Yeah, I agree. think it's a good idea to raise for growth and maybe not before you have a product and not before it's de-risked. That would be my, my feelings. So the pre-seed goes a little later than it was earlier. Colin, thank you so much for being on the podcast.

Colin Gardiner: Yeah.

Niklas: And ⁓ yeah, to you my listeners, see you next time.

Colin Gardiner: ⁓ Thank you for having me.