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The Cold Start Problem: Using Network Effects to Scale Your Product – A Review

So you wanna build a Network? ⏱️ Time to read: 12 minutes I have to say this is one of the best books I have ever read. Author @andrewchen (Andrew Chen) from a16z goes into depth from personal experience and research on what it takes to build a networked product and platform and more importantly what…

CompanyBeginningHard SideAtomic SizeStrategyUberLimo/Black Car Service in SFDrivers~15-20 cars for <3 min ETA Solving a Hard Problem(unreliable taxis), Paying Up(driver incentives), Hustle(local recruitment/events), (vs. Lyft) AirbnbRenting Air Mattresses during ConferenceHosts (Property Lister)~300 listings Hustle(founder photography), Solving Hard Problem(trust, unique stays), Building the Moat(defending vs. clones like Wimdu) TinderMatchbox (Initial Name)Initially Women (to attract men)Whole Party Solving a Hard Problem(social friction in dating), Atomic Network(college campuses, sororities/fraternities), Hustle(party outreach) RedditInitial concept pitched to Y CombinatorInitial Content Creators / Submitters~1000 Subreddit Flintstoning(founders seeding content), Community Moderation(managing Eternal September), Atomic Network(niche subreddits) SlackGlitch (Failed Online Game)Initial Teams / Power Users3 people (>2000 messages) Atomic Network(built a tool their game company needed), Killer Product(superior team communication) ZoomVideo Conferencing at WebEx (Founder's previous company experience)Meeting Hosts (who invite participants)2 people Killer Product(reliability, ease of use) InstagramBurbn (Check-in app with photos)Content Creators (Photo Sharers)1 (tool first) (hipstamatic filter clone) LinkedInProfessional Network ConceptInitially Influential Professionals1 (tool first) (resume builder) Invite-Only(exclusivity, leveraging social proof), Atomic Network(focus on professional niche) PayPalMoney Transfer via Palm Pilots (Confinity)Sellers / Merchants (esp. on eBay)1 (tool first) (buy on eBay) Paying Up(referral bonuses), Acquisition Effect(eBay integration), Economic Effect(network value driving transactions) DropboxFile Syncing Tool (Personal Need)Less distinct early on; potentially users initiating shared folders1 (tool first) (free storage) Killer Product(easy file sync/backup utility), Acquisition Effect(viral referral program) YouTubeVideo Sharing Site ConceptVideo Creators1 (tool first) (embed videos on your website), Solving Hard Problem(easy video sharing), Managing Overcrowding(competition among creators) TwitchJustin.tv (General Lifecasting)Streamers1 streamer + 1 viewer Solving Hard Problem(niche focus on game streaming/community), Managing Ceiling(streamer support, content moderation) ClubhouseTalkshow (Initial Audio App Concept)Interesting Speakers / Moderators~1000s (extended friends of founders) Invite-Only(creating scarcity/buzz), Magic Moments(experiencing live conversations) eBayAuctionWeb (Personal Side Project)SellersNiche (Not mentioned) Atomic Network(focus on specific categories like Beanie Babies), Managing Saturation CraigslistEmail Newsletter for Local EventsSellers / PostersN/A Simplicity, Broad Utility (vulnerable to Cherry Picking by niche competitors, Airbnb) Microsoft (IE/Windows)Operating System (DOS)Existing DistributionPlatform ecosystem (Different dynamic) Bundling(IE with Windows), Building Moat(network effect around Windows developers/apps) We can split these strategies into two phases. This initial focus might seem like a "toy" market (e.g., Airbnb's air mattresses, eBay's Beanie Babies, Tinder's frat parties, Instagram's filters), but this hyper-focus is essential to build the critical first stable network before expanding.

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