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A venture capitalist 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 networks effects to launch and scale towards 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, Pinterest — to provide 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 successful, 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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