The Cold Start Problem

Chen, a partner at Andreessen Horowitz who previously worked at Uber, addresses the specific problem of launching a network product that has no value until other people are using it.

His framework has five stages. The cold start problem itself, where the product is worthless until a minimum viable network exists, and the solution is to build the smallest network that provides value to its members, which he calls an atomic network, and to build many of these rather than trying to grow one large one. The tipping point, where the product acquires networks faster than it loses them, achieved through mechanisms including invitations, paid acquisition against known lifetime value, and what he calls the come for the tool stay for the network approach. Escape velocity, where growth becomes self-sustaining through the acquisition, engagement and economic effects operating together. The ceiling, where growth stalls because of market saturation, spam, degraded quality or overcrowding of the network. And the moat, where network effects become defensive against competitors.

The specific content on atomic networks is the most useful part. Chen's argument that Uber launched city by city and even neighbourhood by neighbourhood, and that a network product's minimum viable unit is far smaller than founders assume, is directly applicable.

The book draws on Chen's own experience and on interviews with operators at network companies. It is practitioner synthesis rather than research, the failure cases receive less attention than the successes, and the venture capital vantage point shapes which examples appear.