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The Cold Start Problem: How to Start and Scale Network Effects Hardcover – December 7, 2021
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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.
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"A practical handbook for entrepreneurs struggling with how to effectively apply what can be a devilishly tricky concept." — Business Insider
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.
- Publisher : Harper Business (December 7, 2021)
- Language : English
- Hardcover : 400 pages
- ISBN-10 : 0062969749
- ISBN-13 : 978-0062969743
- Item Weight : 1.2 pounds
- Dimensions : 6 x 1.25 x 9 inches
- Best Sellers Rank: #31,125 in Books (See Top 100 in Books)
- #7 in Knowledge Capital (Books)
- #26 in Computers & Technology Industry
- #246 in Entrepreneurship (Books)
- Customer Reviews:
About the author
Reviewed in the United States on April 18, 2022
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Trust me, this is a book you are going to want to keep, as I read a book I take notes, and the more notes I take, the better the book is, and this book is in the top five of the notes I have taken, it is chock-filled with essential observations about how to solve the chicken egg problem, with lots of case studies and lots of details from numerous companies. It's an essential book for anyone who is starting a company.
The author is clearly an insider and knows these companies from the inside as well, and you are not going to find much information in this book from other sources, for that reason. Several of the things that he has talked about I have done Google searches for, and come up completely empty, so if you believe that information is gold, as I do, that means that to not read this book is to be giving up lots of pieces of gold.
Do yourself a favor, get this book, start reading it, and after you'll have learned a valuable lesson about how essential it is to ignore negative reviews and just try things out yourself.
Among the many things I liked about the book is it’s structure that matches the “stages of the cold start framework” (Figure 8 on page 44 of the hardcover edition). The stories (“case studies” as we call them in enterprise software sales) are well written, short and easy to read.
I read the first half of the book diligently, taking notes, highlighting, re-reading sections etc. I read the second half a lot faster and skimmed quite a few sections.
Strange as this may sound, one of the best parts about the book is in the “acknowledgments” section (last “chapter”) where Andrew gives credit to everyone that helped him write and produce the book. One realizes that it takes a village to raise a child, produce a book, close a deal etc.
One final note: my standard for a truly amazing book is “is it worth reading a second
time?”. My favorite books (eg., “Thinking Fast and Slow” by Kahneman, “Ascent of Money” by Niall Ferguson, “The Future of Money” by Prasad, “Naked Economics” and “Naked Money” by Wheelan, “Basic Economics” by Sowell … these come to mind) are ones that I’ve read multiple times. Does “The Cold Start .. “ make that list ?
…. The answer is “no”, and the main reason is that the topic is a little dry and unrelated to my core love of economics, finance, neuroscience and lately geopolitics…
However, I recommend every tech marketeer read this book.
Awesome job Andrew Chen !
So I was pleasantly surprised to read about a fresh theory on network products that I have not encountered anywhere else. Andrew Chen devises new concepts like "networks of networks" to explain different phenomenons and strategies that he has observed across the industry. It's a riveting read recommended for anyone in tech.
Top reviews from other countries
The accounts ring true from personal experience and the structure has proved useful to articulate the network methodology to others.
I haven't gone out of my way to recommend that others read the book, but the parts I would suggest are:
1) the first section setting out the model.
2) how to delineate network effects into acquisition, engagement, growth phases - because people say do say "network effects" all the time without actually qualifying them. This imprecision leads to poor product strategy.
3) the horror story chapter of what went wrong at Google Plus.
Andrew, thank you for the great work. It would be great to meet you one day.
Last 3 units though come into their own. The Ceiling esp is a really good collection.
It's an exhaustive read but still leaves much in theory and takeaways uncovered. Look forward to Edition 2.