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

by Andrew Chen (Author) Format: Kindle Edition
4.5 4.5 out of 5 stars 1,213 ratings
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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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  1. Print length
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  2. Language
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  4. Publisher
    Harper Business
  5. Publication date
    December 7, 2021
  6. File size
    5989 KB
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  1. In its classic usage, a network effect describes what happens when products get more valuable as more people use them.
    Highlighted by 1,324 Kindle readers
  2. The entire ecosystem stays on because the value is in bringing everyone together. That’s the magic. The “effect” part of the network effect describes how value increases as more people start using the product.
    Highlighted by 1,259 Kindle readers
  3. Larger competitors are often able to copy the product, but find it difficult to capture the network.
    Highlighted by 1,234 Kindle readers
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Editorial Reviews

Review

"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, Virtual Kitchen Co, Singularity 6, Snackpass, and Sleeper, as well as an advisor/investor for dozens of tech startups including AngelList, Gusto, Dropbox, and Tinder. He previously led the Rider Growth teams at Uber during their high growth pre-IPO years. He has been feature 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 lives in San Francisco.

Product details

  • ASIN ‏ : ‎ B08HZ5XY7X
  • Publisher ‏ : ‎ Harper Business (December 7, 2021)
  • Publication date ‏ : ‎ December 7, 2021
  • Language ‏ : ‎ English
  • File size ‏ : ‎ 5989 KB
  • Text-to-Speech ‏ : ‎ Enabled
  • Screen Reader ‏ : ‎ Supported
  • Enhanced typesetting ‏ : ‎ Enabled
  • X-Ray ‏ : ‎ Enabled
  • Word Wise ‏ : ‎ Enabled
  • Sticky notes ‏ : ‎ On Kindle Scribe
  • Print length ‏ : ‎ 395 pages
  • Customer Reviews:
    4.5 4.5 out of 5 stars 1,213 ratings

About the author

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Andrew Chen

Andrew Chen

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Andrew Chen is a general partner at Andreessen Horowitz, investing in early stage startups — focused on the themes of games/entertainment, marketplaces, and next-gen social products. He is on the boards of Clubhouse, Substack, Z League, Sleeper, All Day Kitchens, Sandbox VR, Reforge, and others.

Previously, he served as the head of Uber's rider growth teams, where he focused on user acquisition, retention, and engagement during the company's meteoric pre-IPO years. He writes about user growth, metrics, and network effects at andrewchen.com and has been cited at Wired, WSJ, and New York Times. He holds a B.S. in Applied Mathematics from the University of Washington, where he graduated at the age of 19.

Customer reviews

4.5 out of 5 stars
4.5 out of 5
1,213 global ratings
This book will save your marketing budget.
5 Stars
This book will save your marketing budget.
Imagine cranking an engine, and it won't start. If you have a very particular set of skills, skills that you have acquired over a very long career as a mechanic, narrowing down various possibilities of the cause to just a couple based on its symptom won't be an issue, or you can simply read this book. This mechanical guide book for entrepreneurs and anybody in the marketing industry.Pretty sure you've read one of those books that presents the concept or an idea in the first couple of chapters and really milking it until the 250th page. Well, this book is totally the opposite. The author, Andrew Chen has done an excellent job presenting various perspectives (key points) that are evident by the research, case studies, his experiences, etc (which are also the takeaways themselves) evenly throughout 377 pages. Just by observing the way this book is structured, you realize the author's intention which is to offer as much insight as possible to bring value to the readers, and I can sure you, you'll gain perspectives that will save you expensive mistakes and headaches in marketing.
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Top reviews from the United States

Barry Krusch
5.0 out of 5 stars One of the top five business books!
Reviewed in the United States on November 13, 2022
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I am writing this review out of anger, for all of the so-called "helpful" negative reviews that for some reason are at the top of the heap, these reviews are dangerously misleading, and proof positive that the best way to buy books on Amazon is simply to buy the book, check it out, and if the negative reviews are right, return it, and if they are wrong, keep it.

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.
28 people found this helpful
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Kurt C. Davis
4.0 out of 5 stars Some interesting info but a bit verbose
Reviewed in the United States on November 6, 2022
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This book is really for someone who is starting a new marketplace — which I am. I took away some good points but those have to be uncovered in the chapters. The book is not that well written. I had a difficult time completing it; the stories often didn’t seem on point and forced. His introductions are not clear and end of chapters have no summaries. I think he needs a proper business editor to help him next time. Nonetheless you may get a few nuggets. I’d suggest to focus on his one experience at Uber with clear points and then add some anecdotes from others.
6 people found this helpful
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Shankar Saikia
5.0 out of 5 stars Fabulous, obviously :)
Reviewed in the United States on January 2, 2022
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I summarized my review as “fabulous, obviously” because Andrew Chen, from my reading of his newsletter, tweets etc over the years, seems to know this content absolutely “cold”. He IS the guru.
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 !
12 people found this helpful
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Pranab Majumder
5.0 out of 5 stars Know what you are reading, it could be golden
Reviewed in the United States on November 10, 2023
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If you are contemplating creating a SaaS platform or app (and have the coding side taken care of), where you will either depend upon user engagement for growth, or have a two-sided matching situation, this should be on your bookshelf. This draws upon a very light framework to present numerous examples over the past 15 years which show how all the successful and unsuccessful ideas worked (or did not work).

Reading this book helped me connect a number of disparate facts most of us may know about many companies of our interest- Uber, Slack, Zoom, FB, Twitch, Tinder and many more. Andrew was in the ring for many of these fights, and has had a ringside seat for many more, thanks to his role at Andreessen Horowitz. There are as many examples of when some approaches do not work, as there are of when they do work- that helps understand these concept so much better. As Tolstoy said, "All successful software companies are alike, every unsuccessful ones is unsuccessful in their own way." (my memory is a bit hazy, apologies).

If you are a high level strategy person who is not directly involved in a software company, this book may not do that much for you- it starts from the general idea that Network Effects are contexts in which the connections become more valuable as more people join the network, and then breaks it down just one level lower- think of it as the Bass Diffusion curve of SaaS products meets Network Effects, with a side of Crossing the Chasm put in (repeatedly). Nothing more to add, except a wealth of examples, giving you something to think about.

What really put the icing on the cake for me was the very last section- how it can all implode after you have taken over the world. (Don't just jump to the last section, it is a payoff for having assimilated the rest of the material).

This book will reflect where you are coming from, when this catches your eye. For a book that was published just a couple of years ago (2021), it could have received a bit more traction. My conjecture is that this may be because Mr. Chen wrote this as a way to clear his head and put his thoughts down in a structured manner, rather than become a famous pop business author. Thank you for writing this book, Andrew.
3 people found this helpful
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Henry Tano
5.0 out of 5 stars You shouldn't start a platform company until you read this
Reviewed in the United States on February 12, 2024
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A great manual for platform companies, explaining what network effects is. There are many misunderstandings of network effects and I think this book will help to educate us, with practical examples. It is not easy to start a platform company, but doing it with ignorance will almost guarantee failure. Read this if you are interested in platforms, multi-sided customers (marketplace) and network effects.
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Top reviews from other countries

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Mike Hayden
5.0 out of 5 stars Deep understanding of platforms and marketplaces
Reviewed in the United Kingdom on March 30, 2024
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This book is like the bible for marketplace startups. Filled with practical advice based on real-world experience.
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FEDERICO
5.0 out of 5 stars L'autore non smentisce.
Reviewed in Italy on November 24, 2022
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Ottimi spunti per approfondire e scovare nuovi punti di visti su temi davvero importanti per sviluppare strategicamente prodotti innovativi
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Bindi Dharia
5.0 out of 5 stars Very useful book
Reviewed in India on July 10, 2022
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Am looking to start a network based product so very useful book. It gives some good concepts on how to think about the setup process in a stage wise manner. Would definitely recommend this book if you are thinking of a network based approach. Check out the number of bookmarks I have to make sure I come back to reference different points
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Bindi Dharia
5.0 out of 5 stars Very useful book
Reviewed in India on July 10, 2022
Am looking to start a network based product so very useful book. It gives some good concepts on how to think about the setup process in a stage wise manner. Would definitely recommend this book if you are thinking of a network based approach. Check out the number of bookmarks I have to make sure I come back to reference different points
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2 people found this helpful
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RAGHUVEER
5.0 out of 5 stars Detailed Descriptions of Operational challenges or setup of initial networks
Reviewed in Spain on May 5, 2022
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Best book ever the way the things are described ,the order of the content and the in depth detailed step by step operational challenges faced by the big companies adds a lot of value to the users who want to build their own company
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Kevin Lösch
5.0 out of 5 stars If you are an investors - must buy
Reviewed in Germany on January 9, 2022
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I am an investor at an operational VC, even though we face those challenges with our portfolio companies every day, Andrew laid out new facettes very nicely. It is an amazing read for everyone!
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