Expert’s Corner with Marketplace Risk Founder Jeremy Gottschalk

Jeremy Gottschalk is an expert in risk management and legal strategy for marketplace tech companies. With nearly 20 years of experience as a lawyer, operator and consultant to venture capitalists, founders and operators, he has become an industry-leading voice for legal strategy and risk management. Jeremy founded Marketplace Risk as an industry education, networking and knowledge-sharing platform for the marketplace ecosystem, and regularly consults venture capitalists, tech startups and vendors in this ecosystem. Jeremy holds a JD from Loyola and an MBA from Kellogg.

Marketplace Risk is the most comprehensive source of risk management, trust & safety, compliance and legal strategy education, networking and information sharing for marketplace startups to successfully launch, grow and exit. From the Blog, E-newsletter, Virtual Event Series, Masters Program, Platform Podcast and Community App, to the Marketplace Risk Management Conference, the Sharing Economy Global Summit and beyond, Marketplace Risk is the first and only dedicated resource for startups to learn essential, proven information that enables them to avoid known pitfalls and distractions so they can focus on the growth and success of their venture.

1. Tell us a little about yourself? Your background and how you became founder of Marketplace Risk?

I began practising law as an IP lawyer at two large, multinational firms out of law school. Early in my career, I was working with startups and, specifically, several early-stage marketplaces. These were the initial days of eBay and Craigslist, and well before Uber and Airbnb were founded. After practising for seven years, I joined a client in-house to build the legal function for the largest childcare marketplace at the time, Sittercity. I spent another seven years in-house, where I managed all aspects of legal, risk, and trust & safety. Again, this was before “trust & safety” was viewed as a priority, let alone a full-time profession. I recognized at the time that I was under-resourced, with big mandates. So, I organised a working group of childcare and childcare-adjacent marketplaces to learn and share information about risk management, trust & safety, and legal strategy. Our group was created on the principle of helping one another and working towards improving the industry. Marketplace Risk was built on this foundation.

2. Why was the Marketplace Risk setup? What is its mission?

After seven years as in-house general counsel, I left to focus full-time on Marketplace Risk, and develop resources for startups to learn, network and share information about risk management, trust & safety, compliance and legal strategy. By this point, it was evident that there was a lack of resources, and an urgent need for additional support to manage these issues in our fast-growing industry. In essence, there were no readily available and cost-effective resources for resource-constrained startup founders and executive operators. To this day, our mission is to provide complimentary and low-cost resources for marketplace and sharing economy startups to successfully launch, grow and exit. We do this through our global platform and community, which comes together for the Marketplace Risk Management Conference (San Francisco), the Sharing Economy Global Summit (London), various virtual events, and our curated digital content built by industry leaders.

3. What does Trust and Safety (T&S) mean for marketplaces?

Trust & safety means different things to different people across platforms and verticals. We know that trust is one of the biggest barriers to conversion and customer acquisition for marketplaces. Building trust is therefore the key to unlocking growth. But, you can’t build trust without safety at the core of your operations. Again, safety looks different for different platforms in different verticals, but fundamentally, safety means your customers (supply and demand) and your broader community are protected from harm. In addition, trust & safety are a combination of human intervention and technology. Over time, trust & safety will rely less on human intervention, but until then, high-calibre trust & safety teams will use both.

4. What do you see as the biggest operational challenges for T&S in marketplaces?

Trust & safety are becoming more important to marketplaces, especially now that more prominent platforms publicly talk about trust & safety, even releasing details about their own policies, practices and data. That’s fantastic for the industry. But, startups are typically resource-constrained and must balance investing in trust & safety with developing technology, acquiring customers, etc. You don’t need trust & safety if you have no customers. However, you’ll lose your customers if you don’t prioritise trust & safety. As a result, it’s a resource prioritisation conflict that will always exist.

5. Have you observed common types of harms across marketplaces?

There is no common type of harm or fraud across all marketplaces. What I’ve seen is that bad actors invest time and energy to determine how to exploit different marketplaces in different ways. But, harm and fraud vary for goods marketplaces and services marketplaces. For example, goods marketplaces are likely to experience more financial and payment fraud than a services marketplace due to the nature of the transactions. On the other hand, services marketplaces will face a higher risk of physical harm to people, which is far more serious. What I tell founders and operators is to get out in front of bad actors — figure out how to exploit your marketplace before they do, so you can address those risks proactively.

6. Have you seen any patterns or recurring themes across these marketplaces?

With the explosion of marketplaces across every industry, bad actors and fraudsters are also increasing. And where there are similar marketplaces, bad actors employ the same or similar tactics until the vulnerabilities are addressed. But, it’s not always possible to mitigate all vulnerabilities, because marketplaces are the conduits or venues, they are not the ones perpetrating the bad acts, and they aren’t always involved in the transaction. So, it becomes nearly impossible to catch and eliminate all fraud, especially when you hit scale.

7. What can platforms do to make their marketplace safer for both buyers and sellers?

I think transparency is key — make your community aware of common scams and frauds — and provide as much information as possible to educate your community on precautions they can take to ensure smooth transactions. Certainly marketplaces can leverage identity verification solutions, background check products and various other screening tools. However, nothing is predictive of future bad acts. And, bad actors are getting more sophisticated, so there is no fool-proof tool, solution or method. But, in the aggregate, verification solutions, background check products and screening tools help improve the trust and safety of marketplaces.

8. How do you feel about the proposed regulations for the Online Safety Bill in the UK and Digital Services Act in the EU, Section 230 in the US and Online Safety Act in Australia? Do you think these regulations will be helpful in improving marketplaces and gig economy platforms?

Marketplaces have gone nearly unregulated for 25+ years despite explosive growth, which is astonishing. Unfortunately, during that time, we’ve witnessed that larger, well-known platforms don’t always act as good corporate citizens, which has brought scrutiny on all marketplaces, unfortunately. The result is the tendency of lawmakers to want to regulate. However, the very lawmakers proposing the regulations don’t understand the technology or the business model. So, the results are clumsy attempts to overregulate, which will threaten flourishing business models. Overall, the proposed regulations are well intentioned, but not necessarily well thought out or implemented.

In the US, marketplaces are protected by Section 230 of the Communications Decency Act, a federal statute that provides protection from legal liability for acts of marketplace users between each other. In other words, marketplaces are not legally responsible for the bad acts of their users. This protection is a huge asset to marketplaces, although there is much talk in Washington about scaling it back. And, two states — Florida and Texas — have even gone so far as to pass laws that limit the application of Section 230 in certain contexts. So, we expect the Supreme Court to review both state laws eventually, which could impair the broad protection of Section 230. And, that’s scary for anyone operating a marketplace in the US. Apart from that, the Supreme Court is currently reviewing Gonzalez v. Google, which will be the first time the highest court interprets Section 230. Again, the result of this case could spell disaster for certain applications of Section 230, if not having a broader, more far-reaching impact on the industry.

9. How can platforms best prepare for these new regulations?

The most efficient way is to visit www.marketplacerisk.com and attend the Marketplace Risk Management Conference (May 16–18 2023, San Francisco) or the Sharing Economy Global Summit (November 2023, London) — we are on top of all the regulations (and other high-priority issues) that impact marketplaces. We’ve also got a network of leading marketplace founders and experts dealing with these regulations head on and helping shape all aspects of the industry. So stakeholders in this space can access a myriad of resources to stay abreast of changes in the industry.

10. What’s next for Marketplace Risk?

We’ll continue to see incredible growth in all of our programs and events, which is how we provide the most value to our global community. We’ve been approached to launch additional conferences and summits in Asia, Canada and Europe, but we continue to focus on our core programs and events across the US and Europe. Apart from that, we’re evolving the platform to become an industry index, since we’re connected with so many marketplace stakeholders and have access to so much industry data and analytics. We’ll continue to expand our digital content to meet the demands of our growing global community.

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