In partnership with

Happy New Year everyone! We hope you enjoyed the break, we’re still thawing from the Christmas slumber but it's an exciting start to 2025 for us at Scale. 

We've launched our advertising spots for the year ahead and introduced some new products (more on those soon). We're also back to our day jobs, and in fact Rahul’s starting a new role this week 🤫!

We're kicking off 2025 with Tom Beverley, CEO and founder of Fy!, one of Europe’s fastest growing online marketplaces. Here’s why you should listen to Tom: 

• Has been building online marketplaces for 15 years 

• Backed by the best VCs in Europe, including Hoxton Ventures 

• Mentor dozens of Europe’s best start-ups including Zenjob, Heycater at 500 Startups

The Story

☝️What is Fy? 

Fy! is a marketplace for art and home decor that lets customers purchase from independent artists and established home decor brands. 

Have you ever looked up at the walls in your home or office and found them boring? Well, Fy! will have a solution for that. Check out what you could buy here. 

Now back to the topic at hand… 

What’s the marketplace problem? 

The classic marketplace challenge is a brutal catch-22:

• Suppliers want customers before committing inventory or resources

• Customers want choice and quality before shopping 

Many VCs have covered how to approach the marketplace problem, but none has summarised it quite like A16Z and Lenny Rachitsky. 

They say, for marketplaces, “owning demand” is the surest path to sustainable growth. In practice, that means users come directly to you, rather than going through intermediaries like Google or Facebook, and that they exclusively (or almost exclusively) rely on your marketplace instead of comparison shopping with competitors.

Whilst, “demand efforts” like SEO, SEM, CRO, and amazing UX are necessary, but not sufficient; ultimately, the key to owning demand is through supply strategy. 

Remember! Just rushing to fill your supply side isn’t enough, finding out what your users value is key to optimising the user experience.

For some marketplaces, it’s consistency and predictability, like Uber, so early success was determined by not just accumulating drivers everywhere, but concentrating supply in user hotspots to make sure their ride arrives ASAP.

However, for most consumer product marketplaces like Fy!, consumers value variety.

Not all supply sides are built equal…

Fy! wasn’t always a home and art decor marketplace, it initially started out as a jewellery and women’s accessories marketplace. 

The initial thesis was that the jewellery and accessories thesis market is extremely fragmented, i.e. has a lot of tiny producers. This means that (usually) they are unable to afford a warehouse or pay for transport. 

So the idea was: let’s work with them on a consign basis. This means Fy! would hold their inventory, help with transport for a fee whilst also providing them with the marketplace to meet their customers.

In traditional start-up style, this meant that the “warehouse” was one of Tom’s rooms at home, which at one point held nearly £1,000,000 in inventory belonging to 200 brands! 

But why jewellery? 

The main reason they chose jewellery & women’s accessories is to maximise value per square foot of inventory. 

When working on a consign basis, businesses want to maximise the value of inventory you can store in their warehouse.

In that respect, there is nothing better than jewellery, imagine how small a ring is versus the value it could be sold for.

Another reason was that the founders all previously worked in jewellery, so accessing sellers was no big deal. They signed up hundreds of suppliers within the first few months. 

Great! So why NOT jewellery?

The main insight that Tom and his team got was that at the lower price point, your customer doesn’t really care or think about quality, make, or WHO made it - just how it looks. 

What that means is you end up competing just on price and nothing else, and for tiny, indie jewellery makers that’s super hard to do.

This problem is compounded by the fact that the big retailers (think TopShop back in the day) already owned the customer buying journey, and it was very tough to break that. 

Another issue is that the suppliers you’re dealing with are not professionalised at all. They don’t forecast inventory, track production, and so it’s very difficult to keep customer promises and maintain inventory.

Still, Tom still believed that connecting customers with indie artists was the right idea, just not for jewellery. They then moved into decor, and print on demand (think posters, paintings) specifically which worked for multiple reasons: 

1. Low inventory Given it’s print on demand, you need to hold no inventory 

2. Great margins 80% gross margins with no inventory! 

3. Customers care! Customers love to support indie artists / home decorators and take pride in having certain taste

4. Literally infinite supply side 15-25% of Fy!’s sales are AI created art, meaning there’s no supply-side shortage 

5. Extremely large category There’s art for everyone and everything (also $700-800bn market size in Europe/US) 

6. Predictable customer behaviour if someone is looking at kids art, that means they probably have child in their life they want to gift something, making it easy to build product recommendation algorithms off that 

What This Means For You

If you're building a marketplace in 2025, here's what Tom's journey at Fy! teaches us:

#1 Focus on the supply side: Start with the supply-side is integral to launching a healthy marketplace. Excitement doesn’t translate if there’s no one to transact with. 

#2 Pick your supply strategy early: Decide between comprehensive, exclusive, or curated inventory and don't try to be everything to everyone. 

#3 Understand your marketplace: How fragmented or concentrated is it? How professionalised are your suppliers? How well funded are they? These are all questions played a massive role in Fy!’s journey. 

If you enjoyed this issue, please share it with fellow founders and operators. Have questions about building marketplaces? Reach out at [email protected].

See you next week!

Rahul & Aryaman