How to Validate Marketplace Idea Before You Build?

According to CB Insights, one of the top reasons startups fail is a lack of market need. This hits marketplaces even harder. You’re trying to meet the needs of two customer groups at the same time.

Marketplace history is full of cautionary tales.

Founders who assumed “if we build it, they will come” ended up with empty platforms. They poured time and money into development before proving that anyone actually wanted what they were building.

As Y Combinator’s Michael Seibel warns, you need to prove you’re solving a real problem before you commit serious resources. 

That means your marketplace needs to create value for both sides,not only connect them.

Finally, remember: belief in your idea is not enough.
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​As YC’s Jared Friedman puts it:
“No one knows for sure if a startup idea will work.”
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You might feel confident about your vision, but your job is to test that feeling with real evidence.
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Let’s dive in and help you build the foundation for a marketplace that people actually want. 

Firstly, you should understand that validating a marketplace idea is a process, not a one time task. You’re going to test assumptions and learn what your users look for.

We’ll walk you through a proven framework used by successful marketplaces.

Each step is enhanced with practical tactics, real examples, and insights from the market. You can (and should) repeat steps as you learn - this process is iterative, not linear.

Here’s the quick overview of the roadmap:

1. Define Assumptions and Hypotheses
Before anything else, get clear on what must be true for your marketplace to work. What assumptions are you making about the supply side? The demand side? What behaviors are you expecting from each group? These become your hypotheses to test.

2. Customer Discovery (or Problem Validation)
Talk to real people on both sides of the market. Learn about their pain points, existing solutions, and willingness to try something new (and pay for it!). Your goal here is to understand whether the problem is real and painful enough to solve.

3. Market Research and Sizing
Is the opportunity big enough? Look at both total addressable market and niche segments. A small but urgent problem can still be a winning niche.

4. Smoke Test the Idea
Before writing a single line of code, test the waters. Create a landing page that explains your value proposition and lets people sign up. Run targeted ads. Are people clicking? Signing up? This gives you early signal, without building the product.

5. MVP / Prototype Phase
Deliver the service manually or with a simple prototype. Match supply and demand yourself, behind the scenes.

6. Launch MVP and Measure
Now build a foundation of your marketplace. Get it into users’ hands and track metrics. Numbers will tell you if you're delivering value.

7. Evaluate Results & Iterate
Review what you’ve learned and decide on the next steps.
This framework helps you validate the right things at the right time. In the next section, we’ll dig into Step 1: defining your marketplace assumptions. 

Every successful marketplace starts with a clear understanding of who it's for and what assumptions you're making about those users.
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At Ulan Software, we often guide founders through a simple positioning statement, as recommended by YC and others:
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The platform links [Group A] with [Group B] to tackle [problem] using [solution]
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Let’s say you’re building a marketplace that connects freelance photographers with small event organizers. We’ll continue using this example throughout the article to make each step easier to understand.

You’re assuming organizers want affordable, last-minute access to photographers. Photographers want more flexible, short-term gigs.

From this, you can already outline a few key assumptions:
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• Event organizers are actively looking for photographers for casual events like birthdays or company meetups.
• Photographers are willing to accept ad-hoc jobs through a new platform if they get enough leads or better payment terms.

These assumptions become your hypotheses. In other words, statements you need to test and validate.

Map Out the Critical Assumptions

Now, list all the underlying assumptions your idea depends on. Be especially honest about the ones that feel risky.

​Few example:

Once you’ve mapped out your key assumptions, it’s time to leave the whiteboard and start talking to real people.
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If you’re building a platform for photographers and event organizers, that means interviewing both groups. This includes people who book photography services (demand side) and those who offer them (supply side).

Talk to Real Users (But, Please, Don’t Pitch!)

Aim for at least 5 to 10 interviews per side. These can be casual chats or more structured conversations, but come prepared with a few open-ended questions. Don’t start by pitching your idea. Instead, focus on understanding how your users behave today.
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For example, if you’re interviewing freelance photographers, ask:

“How do new clients usually find you? ”
“What’s your typical booking process like? ”
“What part of your job takes the most time outside of shooting? ”

​Now switch to the demand side. They are event organizers, small business owners, or even individuals planning personal events:
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“Have you ever needed to hire a photographer? How did you find one? ”
“What made it easy (or frustrating) about that process? ”
“Did you ever give up or settle for someone you weren’t sure about? ”
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If someone says, “I ended up asking a friend because I couldn’t find anyone I trusted online,” that’s a pain point worth digging into.

Pro tip: Use the Mom Test approach (from Rob Fitzpatrick’s book The Mom Test).

Never ask leading questions like “Would you use a marketplace to do XYZ?” – people tend to say yes to be polite.
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​But if you ask, “Can you walk me through the last time you tried to hire a photographer?” their answer reveals what they did, not what they wish they did.

Where to Find People to Interview?

You don’t need a research lab - go where your users are.
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​You can find photographers on Instagram, in Facebook groups, or on freelancing platforms. Event organizers hang out in LinkedIn groups, local business forums, or coworking communities.

Example of Your Output of Step 2

At this point, you should have a clearer picture of what each side needs and where your platform could deliver real value.

While you're talking to potential users, it's important to do some quantitative research. You want to make sure you’re not building a solution for a market that’s too small, or overcrowded.

This step helps you answer two key questions:

Is the market big enough to support a marketplace?
Is there real, measurable demand for this solution online?

Let’s break it down.

#1 Estimate the Market Size

In our case, think about how often people need photographers and who those people are:

• Private events like birthdays, engagements, and small weddings.
• Small business events like product launches or networking nights.
• Content-driven businesses needing brand or social media photography.

Let’s say your target city hosts around 100,000 small events per year. If 30% of those events typically hire photographers, that’s 30,000 potential bookings. At an average of $200 per shoot, you’re looking at a $6 million annual opportunity in just one city.

Now go one step further and define your starting niche. Maybe you focus first on local business events, which account for 10,000 of those bookings. That focus can help you craft features, marketing, and onboarding specifically for that group. As the result it will make your early growth more manageable.

You can roughly define:

TAM (Total Addressable Market): All freelance photography bookings in your country or market.

SAM (Serviceable Available Market): The portion you can serve in year one—say, bookings in your city or industry.

You don’t need perfect numbers. You only need to know whether there’s enough demand to support a functioning, healthy marketplace.

#2 Analyze Search Trends and Keyword Demand

The next step is to check if people are already searching for solutions like yours online.

Use tools like:

• Google Keyword Planner
• Ahrefs or Ubersuggest
• Google Trends

Search for terms a potential customer might use:
“hire a photographer for an event”
“local event photographer”
“last-minute photographer booking”

Let’s say you find that “event photographer near me” gets 2,400 monthly searches in your region. That’s a strong sign that demand exists—and that people are actively looking for better ways to solve this problem.

Look at:
-> Search volume (how many people are looking each month?)
-> Search intent (are they looking to book or browse/scroll?)
-> Keyword difficulty (how competitive are the search results?)

If you see high volume and moderate to high competition, that usually means demand is real, but the current solutions may not be meeting all needs. That’s your opening.

You might even find underserved sub-niches with their own search terms like:

“affordable photographer for baby shower”
“photographer for small business event”
“female event photographer in [city]”

These can guide how you position your marketplace and what kinds of photographers you recruit first.

#3 Understand the Competitive Environment

Finally, scan the current options people use to find photographers today. Are there other platforms? Are users mostly relying on social media, agencies, or referrals?

For example:

• Instagram and Facebook are full of photographers, but there's no booking or pricing transparency.
• Traditional photography agencies may be too expensive for smaller events.
• Generic platforms like Thumbtack or Craigslist might be crowded, unreliable, or poorly filtered.

Search Reddit, Quora, or niche Facebook groups to find real user feedback. Phrases like “Can anyone recommend a photographer who’s not overpriced?” or “I wish there was an app for this” can signal pain points and opportunities to differentiate. Like here. Check the example.

Example of Your Output of Step 3

By the end of this step, you should have a one-pager summarizing:

• Market size: “~$6M spent on event photography annually in [target city] across small private and business events.”
• Search demand: “‘Event photographer near me has ~2,400 searches/month; related terms total over 5,000/month with high booking intent.”
• Competitive gap: “People rely on Instagram or agencies; there’s no simple, trustworthy way to compare, book, and pay photographers in one place.”

If you're now thinking about how to turn this opportunity into a real product, our guide on developing service marketplaces can help you plan both the technical and strategic side. 

Now that you’ve confirmed there’s a problem worth solving, it’s time to test whether your solution sparks interest. You can do this without writing a single line of backend code.
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One of the simplest ways to do this is by creating a landing page MVP, also known as a smoke test or fake door test. It’s a fast, low-cost way to evaluate demand and collect early leads.

Build a Landing Page That Sells the Concept

Set up a single page that clearly explains your marketplace idea.

By now, people have shown interest in your online marketplace. But will they actually use it? That’s the next test and it’s a big one.

MVP lets you find out by simulating the full experience without building the platform.

What Is an MVP?

Your Minimum Viable Product (MVP) is the simplest version of your platform that lets real users interact, make requests, and complete transactions. It strips away nice-to-haves and focuses only on what’s essential for the core experience.

In a marketplace, that usually means:
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• User registration
• Listings or request forms
• A way to connect both sides
• A basic payment option

This step validates something crucial: can you deliver the promised value, connect both sides, and get someone to pay?

Why This Works

At Ulan Software, we've helped clients run MVPs to:

• Test whether users will actually complete a transaction
• Discover where manual processes break down
• Understand what makes early customers delighted or disappointed

Best of all, this step often brings in your first real revenue, which is the strongest form of validation there is.

Not sure whether to build your MVP from scratch or use a ready-made solution like Sharetribe? Here's our take on when to go custom vs Sharetribe.

Output of Step 5

You should now have real interactions between both sides of your online marketplace, even if they were completely manual. Ideally:

“We facilitated 12 bookings in three weeks, with a 75% fulfillment rate and one repeat customer. All payments were handled manually. Feedback from both sides was positive, with minor friction around scheduling.”

That’s real-world proof that your idea can deliver value. You’ve built trust, tested demand, and learned what the future platform must include.
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You’re no longer guessing. You’re building based on experience. 

Once your MVP is live, your task is to observe how users behave.

​Are people using the platform, completing bookings, and coming back?
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At Ulan Software, we advise founders to focus on a small set of practical metrics that show whether the marketplace is taking off or needs refining.

Are Matches Happening?

Liquidity is the clearest sign your platform is working. For event organizers, track what percentage of booking requests lead to successful matches. If 20 out of 40 inquiries result in a booking, that’s 50% demand-side liquidity.

By this point, you’ve collected feedback, data, and real-world behavior. Now it’s time to step back and ask: Do we have enough proof to scale? Or do we need to adjust before moving forward?

Create a Validation Debrief

Start by summarizing what you’ve learned:

Even well-funded startups fail when they skip key parts of validation. Here are common mistakes and what you can learn from them.
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Scaling Too Early

Homejoy raised $40M and expanded fast, but users didn’t stick around. Only 25% returned after one month, and fewer than 10% after six. The experience was inconsistent, and retention relied on heavy discounts.

Ignoring Supplier Incentives

Marketplaces fail when suppliers don’t stick. High fees or lack of value can push them to transact off-platform. Validate why suppliers will stay. Make it easier, safer, or more profitable to use your platform than to bypass it.
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Not Building Trust and Safety Early

A common mistake is delaying trust features. If your validation feedback raises trust concerns (safety, fraud, quality), address them early. 
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Don't strive for perfection while validating your marketplace idea. Talk to users and test assumptions. Measure what matters. Each step helps you build with confidence, not guesswork.
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Whether you decide to scale, iterate, or pivot, do it based on real signals.
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At Ulan Software, we help founders go from idea to launch with smart validation, fast MVP development, and a clear focus on what matters.
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If you’re planning a marketplace and want an experienced partner to guide the process, let’s talk.