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

by Andrew Chen

The Power of Atomic Networks Growing city by city, campus by campus, or team by team is a surprisingly powerful strategy. It leads to dense, organic connections of users that strengthen network effects across multiple dimensions: Engagement goes up, because users are more likely to find other relevant users. Viral growth goes up when prospective users of a product see that their friends and colleagues are all using the service. In the earlier example of Bank of America’s credit card launch, focusing on one city at a time made it more likely that customers would find local merchants that accepted this novel new method of payment. Contrast that to when you peanut-butter your efforts across a whole industry or geography—the active parts of the network rapidly dissipate as anti-network effects kick in, because a network of 1,000 random users of Slack will have less retention than 1,000 users all inside the same company.