The Cold Start Problem Quotes

“Flinstoning” is a metaphor for this car, except in software, where missing product functionality is replaced with manual human effort.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“acquiring the hard side of the network and keeping them happy is paramount to standing up an atomic network.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“Launching “Buy It Now” was a large change that touched every transaction, but the eBay team also innovated across the experience for both sellers and buyers as well. With an initial success, we doubled down on innovation to drive growth. We introduced stores on eBay, which dramatically increased the amount of product offered for sale on the platform. We expanded the menu of optional features that sellers could purchase to better highlight their listings on the site. We improved the post-transaction experience on ebay.com by significantly improving the “checkout” flow, including the eventual seamless integration of PayPal on the eBay site. Each of these innovations supported the growth of the business and helped to keep that gravity at bay. Years later, Jeff became a general partner at Andreessen Horowitz, where he would kick off the firm’s success in startups with network effects, investing in Airbnb, Instacart, Pinterest, and others. I’m lucky to work with him! He recounted in an essay on the a16z blog that his strategy was to grow eBay by adding layers and layers of new revenue—like “adding layers to the cake.” You can see it visually here: Figure 12: eBay’s growth layer cake As the core US business began to look more like a line than a hockey stick, international and payments were layered on top. Together, the aggregate business started to look like a hockey stick, but underneath it was actually many new lines of business.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“Success comes with an inevitable problem: market saturation. New products initially grow just by adding more customers—to grow a network, add more nodes. Eventually this stops working because nearly everyone in the target market has joined the network, and there are not enough potential customers left. From here, the focus has to shift from adding new customers to layering on more services and revenue opportunities with existing ones. eBay had this problem in its early years, and had to figure its way out. My colleague at a16z, Jeff Jordan, experienced this himself, and would often write and speak about his first month as the general manager of eBay’s US business. It was in 2000, and for the first time ever, eBay’s US business failed to grow on a month-over-month basis. This was critical for eBay because nearly all the revenue and profit for the company came from the US unit—without growth in the United States, the entire business would stagnate. Something had to be done quickly. It’s tempting to just optimize the core business. After all, increasing a big revenue base even a little bit often looks more appealing than starting at zero. Bolder bets are risky. Yet because of the dynamics of market saturation, a product’s growth tends to slow down and not speed up. There’s no way around maintaining a high growth rate besides continuing to innovate. Jeff shared what the team did to find the next phase of growth for the company: eBay.com at the time enabled the community to buy and sell solely through online auctions. But auctions intimidated many prospective users who expressed preference for the ease and simplicity of fixed price formats. Interestingly, our research suggested that our online auction users were biased towards men, who relished the competitive aspect of the auction. So the first major innovation we pursued was to implement the (revolutionary!) concept of offering items for a fixed price on ebay.com, which we termed “buy-it-now.” Buy-it-now was surprisingly controversial to many in both the eBay community and in eBay headquarters. But we swallowed hard, took the risk and launched the feature . . . and it paid off big. These days, the buy-it-now format represents over $40 billion of annual Gross Merchandise Volume for eBay, 62% of their total.65”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“The other question to ask is, if a user wants to reactivate, how hard is it? At Uber, we had a staggering statistic where several million users were failing their password recovery per week—how do you make this much easier, and treat reactivation with the same seriousness as the sign-up process? While reactivation is typically not a concern for new products—they should focus on new users, since their count of lapsed users won’t be large—for products that have hit Escape Velocity, there will be a pool of many millions of users to draw upon. Reengaging them can become as big a growth lever as acquiring new users.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“This is an important tool that is unique to networked products. Traditional products that lack networks often struggle with this, because they rely on spammy emails, discounts, and push notifications to entice users back. This usually doesn’t work, and company-sent communications rank among the lowest clickthrough rate messages. Networked products, on the other hand, have the unique capability to reactivate these users by enlisting active users to bring them back. Even if you don’t open the app on a given day, other users in the network may interact with you—commenting or liking your past content, or sending you a message. Getting an email notification that says your boss just shared a folder with you is a lot more compelling than a marketing message. A notification that a close friend just joined an app you tried a month ago is a lot more engaging than an announcement about new features. And the more dense the network is around a churned user, the more likely they are to receive this type of interaction.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“Once Hopkins showed that this worked in creating one atomic network, the effort could be repeated in building the second, third, and so on: We proved out this plan in several cities of moderate size. Then we undertook New York City. There the market was dominated by a rival brand. Van Camp had slight distribution. In three weeks we secured, largely by letter, 97 per cent distribution. Every grocer saw the necessity of being prepared for that coupon demand. Then one Sunday in a page ad, we inserted the coupon. This just in Greater New York. As a result of that ad, 1,460,000 coupons were presented. We paid $146,000 to the grocers to redeem them. But 1,460,000 homes were trying Van Camp’s Milk after reading our story, and all in a single day. The total cost of that enterprise, including the advertising, was $175,000, mostly spent in redeeming those coupons. In less than nine months that cost came back with a profit. We captured the New York market.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“Networked products also have strong advantages in attracting new users, by leveraging their users to refer other users—this is critical as the channels to market to potential audiences have become highly competitive.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“The first phase of the core framework, naturally, is called the Cold Start Problem, which every product faces at its inception, when there are no users. I’m borrowing a term here for something many of us have experienced during freezing temperatures—it’s extra hard to get your car started! In”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“What if . . . we did a $750/$750 referral bonus here in SF, LA, and San Diego?”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“But the pattern repeated itself, where each subreddit—think of this as Reddit’s network of networks—needs at least a thousand subscribers to self-sustain.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“New users were asked to import their email contacts to invite more people. After each connection request, users were shown screens of even more suggestions. New users who appeared in other people’s contacts—even if they skipped importing it themselves—had suggested connections right after sign-up.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“I encourage product teams to develop their own form of this metric, laid out as a dashboard of networks—whether that’s divided by geography, product category, or whatever else makes sense. Within each, it can be useful to track the percentage of consumers that are seeing zeroes. If it’s too high a number, that category of users is experiencing anti-network effects, and it will never break through.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“Fred Wilson at Union Square Ventures,”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“Samwer brothers and their startup studio Rocket Internet,”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“It might have been easy to think they should just double down on their marketing spend, but instead the team looked toward amplifying the network effects that engaged its streamers. Leveraging network effects for customer acquisition is the norm for the more successful products on the planet. Many of them have more than a billion active users, and as you might imagine, it’s simply not tenable to buy this scale of users through paid marketing.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“solutions to market saturation might sound straightforward—add new geographies, support more formats and business models, and other tips that sound like common sense. However, the challenge is in the execution, which can’t be underestimated. Launching in every major country around the world while simultaneously staying on top of a hypergrowth startup in a core market is not easy. Yet that’s exactly what eBay had to do, building one of the most valuable internet companies in the 1990s while simultaneously adding the international business, “Buy It Now,” and new product verticals. Once these obvious growth levers are mined, what’s next? Eventually new products have to be layered on. It’s hard to ask teams to start and build new products from scratch. It’s difficult enough as a startup, but trying to do this inside a larger company adds myriad of complexities—there’s internal politics, distractions, lack of resources, adverse selection of talent, and dozens of other challenges.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“This is the Rocketship Growth Rate—the precise pace at which a startup must grow to break out. How do you calculate this rate of growth? First, by setting a goal of exceeding a billion dollars of valuation—thus being in a position to achieve an IPO—and working backward.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“David Sacks,”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“You just add two more variables, multiplying the active users number with the average revenue per active user (ARPU).”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“It’s easy to think of Zoom’s simplicity as a competitive advantage, but this kind of simplicity is actually hard to implement in practice. Customers request endless features while competitors emerge with a longer list of functionality. Yet I observe that it’s a distinctive quality of networked products that they often do one thing well. What”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“Superhuman,”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“Usually the hard side will continue to use Airbnb or TikTok because that’s where the demand is, and thus, they are locked into the positive network effects on those platforms. However, the trick is to look closer—to segment the hard side of the network and figure out who is being underserved. Sometimes this is a niche, like a passionate subcommunity of content creators for makeup or unboxing that might be better served with additional commerce features. It could be a low-production-quality, amateur part of the community, like those who are doing #whateverchallenge of the week, who would benefit from basic video editing tools.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“The term “network effect” has almost become a cliché. It’s a punch line to difficult questions, like “What if your competition comes after you?” Network effects. “Why will this keep growing as quickly as it has?” Network effects. “Why fund this instead of company X?” Network effects. Every startup claims to have it, and it’s become a standard explanation for why successful companies break out.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“A successful new product should be able to answer detailed questions: Who is the hard side of your network, and how will they use the product? What is the unique value proposition to the hard side? (And in turn, the easy side of the network.) How do they first hear about the app, and in what context? For users on the hard side, as the network grows, why will they come back more frequently and become more engaged? What makes them sticky to your network such that when a new network emerges, they will retain on your product? These are difficult answers, and require a deep understanding of the motivations of your users. The motivations of the hard side depend on the product category—content creators have different goals than marketplace sellers.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“Recently, the opposite trend has emerged—products like Uber and email company Superhuman, have started at the top of the market as a luxury product, and worked their way down.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“New products often disrupt markets by starting on the low end, providing “good enough” functionality, and growing from there into the medium, and eventually into the core market of the incumbents.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“The key insight in the stories of Homobiles or Tinder is—how do you find a problem where the hard side of a network is engaged, but their needs are unaddressed? The answer is to look at hobbies and side hustles.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“The answer is by building a product that solves an important need for the hard side.”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects

“Cofounder Nate Blecharczyk is highly quantitative and had determined that 300 listings, with 100 reviewed listings, was the magic number to see growth take off in a market.11”
― Andrew Chen, The Cold Start Problem: How to Start and Scale Network Effects