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

Said plainly, each time a user joins an app with a network behind it, the value of the app is increased to n^2.

A successful new product should be able to answer detailed questions: Who is the hard side of your network, and how will they use the product? What is the unique value proposition to the hard side? (And in turn, the easy side of the network.) How do they first hear about the app, and in what context? For users on the hard side, as the network grows

The tech industry still talks about winner-take-all markets and first mover advantages, when in practice, these are myths and in practical terms have been disproven. Look at the reality: there are weak advantages to being first, since the winning startup is usually a later entrant. And the winner usually doesn’t take all, and instead has to battle

This makes it much easier to get started—because as long as you can get each new user to find a friend that’s already on the network, or to invite a friend, then it’ll work.

If you can create one stable, engaged network that can self-sustain—an atomic network—then likely you can build a second network adjacent to the first one.

The addressable market will seem small, and it’s not until relevant people join that the product will feel like it’s for you. It’s not that product changes are needed—it’s that the network needs to fill out to the point where the people and content are relevant.

I studied Dropbox’s pricing strategy and wondered, why did they start charging at 2 gigabytes instead of 1? As I thought about it, I realized, it gave you time to use Dropbox more, and the more you used it more likely you will hit the cap and starting paying. I wanted Zoom to be the same way, so I set the limit to be 40 minutes per meeting but you

For marketplaces, the hard side is usually the “supply” side of the network, which refers to the workers and small businesses who provide the time, products, and effort and are trying to generate income on the platform.

The networked product should be launched in its simplest possible form—not fully featured—so that it has a dead simple value proposition. The target should be on building a tiny, atomic network—the smallest that could possibly make sense—and focus on building density, ignoring the objection of “market size.” And finally, the attitude in executing t