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I've spoken to a few early stage marketplace founders recently that were building in more than one market. I told them all to stop immediately and focus on one. Here's what I've learned building two-sided local marketplaces.
Early on, you do not have enough resources and will be spread too thin if you focus on more than on city or market. Whether that be operationally or financially. Spending time and money on acquisition is more costly when it isn't targeted and the volume isn't high enough.
By focusing on two or more markets, you also take longer to reach critical mass to see any real flywheel effects take place. If its word of mouth or some other factor you may not have considered.
For example, if you are building something in real estate or insurance, you may benefit from partnering with agents who have existing networks that you can leverage. But if you don't have enough demand or pipeline to justify their interest, you won't see their benefit.
When you spend the time to get one market humming you can learn a lot. You can fine tune the incentives to get acquisition and distribution to work in your favor and get that flywheel spinning.
If there is no flywheel to be found, you'll find out a lot sooner as well without burning valuable capital. Focusing on one market buys you time but also makes you learn a lot faster.
Investors are more likely to invest if you can show early signs of momentum or flywheel effects happening to drive CAC down and LTV up. They will care much more about that than how many markets you're in. They will only worry about that when you need to scale what you know works.
