The Cold Start Problem: How to Start and Scale Network Effects

by Andrew Chen

Overview

A startup executive and investor draws on expertise developed at the premier venture capital firm Andreessen Horowitz and as an executive at Uber to address how tech’s most successful products have solved the dreaded "cold start problem”—by leveraging network effects to launch and scale toward billions of users.

Although software has become easier to build, launching and scaling new products and services remains difficult. Startups face daunting challenges entering the technology ecosystem, including stiff competition, copycats, and ineffective marketing channels. Teams launching new products must consider the advantages of “the network effect,” where a product or service’s value increases as more users engage with it. Apple, Google, Microsoft, and other tech giants utilize network effects, and most tech products incorporate them, whether they’re messaging apps, workplace collaboration tools, or marketplaces. Network effects provide a path for fledgling products to break through, attracting new users through viral growth and word of mouth.

Yet most entrepreneurs lack the vocabulary and context to describe them—much less understand the fundamental principles that drive the effect. What exactly are network effects? How do teams create and build them into their products? How do products compete in a market where every player has them? Andrew Chen draws on his experience and on interviews with the CEOs and founding teams of LinkedIn, Twitch, Zoom, Dropbox, Tinder, Uber, Airbnb, and Pinterest to offer unique insights in answering these questions. Chen also provides practical frameworks and principles that can be applied across products and industries. 

The Cold Start Problem reveals what makes winning networks thrive, why some startups fail to successfully scale, and, most crucially, why products that create and compete using the network effect are vitally important today.

Product Details

ISBN-13:	9780062969743
Publisher:	HarperCollins
Publication date:	12/07/2021
Pages:	400
Sales rank:	158,164
Product dimensions:	6.10(w) x 9.10(h) x 1.30(d)

About the Author

Andrew Chen is a general partner at Andreessen Horowitz, investing in early-stage consumer startups. He is a board member of fast-growing startups like Substack, Clubhouse, Z League, All Day Kitchens, Sleeper, Maven, and Reforge, and previously led the rider growth teams at Uber during their high-growth, pre-IPO years. He has a popular professional blog, and has been featured in Wired, the Wall Street Journal, and the New York Times. He holds a BS in applied mathematics from the University of Washington, where he graduated at the age of nineteen. He splits his time between San Francisco and Los Angeles.

Table of Contents

Introduction 1

Part I Network Effects

1 What's a Network Effect, Anyway? 19

2 A Brief History 29

3 Cold Start Theory 43

Part II The Cold Start Problem

4 Tiny Speck 53

5 Anti-Network Effects 63

6 The Atomic Network-Credit Cards 71

7 The Hard Side-Wikipedia 81

8 Solve a Hard Problem-Tinder 91

9 The Killer Product-Zoom 101

10 Magic Moments-Clubhouse 111

Part III The Tipping Point

11 Tinder 123

12 Invite-Only-Linkedin 131

13 Come for the Tool, Stay for the Network-Instagram 141

14 Paying Up for Launch-Coupons 151

15 Flintstoning-Reddit 163

16 Always Be Hustlin'-Uber 171

Part IV Escape Velocity

17 Dropbox 183

18 The Trio of Forces 193

19 The Engagement Effect-Scurvy 199

20 The Acquisition Effect-PayPal 209

21 The Economic Effect-Credit Bureaus 221

Part V The Ceiling

22 Twitch 233

23 Rocketship Growth-T2D3 243

24 Saturation-eBay 253

25 The Law of Shitty Clickthroughs-Banner Ads 265

26 When the Network Revolts-Uber 273

27 Eternal September-Usenet 283

28 Overcrowding-YouTube 297

Part VI The Moat

29 Wimdu versus Airbnb 311

30 Vicious Cycle, Virtuous Cycle 321

31 Cherry Picking-Craigsiist 331

32 Big Bang Failures-Google+ 339

33 Competing over the Hard Side-Uber 349

34 Bundling-Microsoft 359

Conclusion The Future of Network Effects 371

Acknowledgments 375

Notes 379

Editorial Reviews

"A practical handbook for entrepreneurs struggling with how to effectively apply what can be a devilishly tricky concept." — Business Insider

From the Publisher

"A practical handbook for entrepreneurs struggling with how to effectively apply what can be a devilishly tricky concept."

Business Insider