Many review websites, such as Yelp, are based on the premise that the wisdom of the crowds can help a user to select from anywhere and everywhere purely through wading through ratings and reviews. However, it can certainly be the case that when making a selection, the user is looking to specifically avoid crowds, harkening back to the day when recommendations were started with a friend saying “I know this great little place…” focuses on identifying locations where “charming and individual is the order of the day.” The company originated as an idea on Facebook to share ideas for spots in the London area, and quickly grew to provide charming choices in close to 50 global cities with around 250,000 followers. The founders point to the viral nature of the concept, content creation, and the catchy name for the explosive growth through only a year and a half of existence. In fact, the company was literally founded on the backs of their users, as the company crowd-sourced funds to start operations rather than approaching VCs or private investors from the start. The users, seeing the value in not having to wade through seas of reviews to find memorable places, quickly responded. However, as they look to take their rebellion against chain restaurants from simple Facebook groups, Twitter feeds, blogs, and a newsletter into a money-making endeavor, they face many challenges, not the least of which is expanding the user base across new markets. The new website will include some new features (geo-location, communities, events), but the brand itself is the only true differentiator.

One of the fundamental issues in growing to scale is that the company relies on co-creation but exists on the strength of its brand. Currently, the company’s website is continuing its organic growth and focused solely on the London area. Around 1% of their base makes suggestions for the next great little place, and the founders work closely to edit suggestions and provide color commentary around each location to protect the brand they have founded. Though the website continues to gain users, it needs to expand its reach outside of the London area in order to hit a mass big enough to monetize.

The other 40+ cities with a “I know this great little place…” group on Facebook are being led by volunteers. Without extensive knowledge of many of the markets, the company’s founders are relying on these selected volunteers to carry on the same charming criteria used for the London site. Since Facebook communities do not expect the same level of editing as a formal website, this model has worked to grow followers. However, the company faces the risk of distilling the brand and knows that it needs to bring on the global communities when it launches the formal website in January. Thus, a key portion of the new website design will be centered on an algorithm to ensure that a highlighted location is indeed a great little place.

Rather than rely on the masses like Yelp, the company will continue to verify each location to match its branding and user expectations. Currently, only 40% of suggestions make it to the site, but the selection process is very manual and the selection criteria are very qualitative. The founders are looking to mechanize the process of capturing user sentiment instead of user ratings. Since their website will be very binary (either the location makes the cut or it doesn’t), they are shying away from a star rating system leveraged by many other sites. Similar to Digg, they envision a holding area for suggested locations wherein a spectrum based rating system will allow users to comment on how memorable and charming they have found the location. In order to make the cut, a location will have to pass some hard metrics (such as a view to review ratio), as well as softer metrics (such as the tone and diction used in the comments). They clearly understand that the website is only as good as the locations it includes, but without knowledge of the entire globe, their very emotional brand is going to rely heavily on a very functional algorithm.

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The notion of sharing isn’t new to us.  From carpooling to soccer practice to enjoying your week at a timeshare vacation home, we’ve seen informal and formal sharing mechanisms for a long time.  A recent wave of startups has taken old-fashioned sharing to new levels.

Valued at $1 billion in July of this year, Airbnb seems to be the biggest success so far.  A marketplace to list and rent homes to and from others, Airbnb was launched in 2008 and has since grown to over 100,000 unique listings across 13,000 cities in a bid against the more traditional hotel model.  But people are finding ways to share and monetize every underutilized asset they own.  Beyond homes, there are recent consumer-to-consumer startups facilitating sharing of cars (Relay Rides, GetAround, HiGear), boats, bikes, planes, and RVs (Qraft), and parking spots (Parking Panda); at least one business-to-consumer site that rents unused office space (Kodesk); and another bevy of business-to-consumer sites that rent their own inventory: handbags (Bag Borrow or Steal), designer dresses (Rent-the-Runway), and even children’s toys (Toygaroo).

So what’s driving this trend?  For one, consumer preferences are as fickle as ever today.  Is it a sailboat or skiboat day, Porsche or Ferrari tonight?  Gone are the days of committing to one leisure good.  Sharing sites allow indecisive, hard-to-please consumers to spread their spending over a diverse variety of indulgences that might change from day to day.  What’s more, rental sites give everyday Joes access to a higher-end luxury than they otherwise couldn’t afford.  To be sure, though, these sites facilitate sharing of non-luxury goods as well (parking spots?); and so some of it just comes down to simple economics: sharing sites offer an easy way for lenders to monetize their underutilized assets, and they allow borrowers a much more sensible way to consume.  Why buy a full-time parking spot that I’ll only use when friends drive in from out of town?  These more frugal spending behaviors were born out of necessity for some during the financial crisis, and bolstered more recently by inspired movements against waste, extravagance, and reckless spending.

What’s the next step in the evolution of these sites?  Well, perhaps not surprisingly, an aggregator already exists, though largely for B2C sites.  Rentcycle, founded in early 2009, pools inventory from stores renting everything from power tools to office furniture to rock climbing gear.  They raised a $1.4M seed round in August of this year from a group including Andreessen Horowitz and Max Levchin.  But as consumers become more comfortable with the concept of borrowing and sharing, look for more peer- to-peer sites to grab the headlines in the future.  Consumers will continue to find new ways to monetize underutilized assets, and they’ll demand equal innovation in the peer review systems that facilitate trust on sharing sites today.

So what’s your take?  What will define the next growth phase of this promising category of startups?

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