Book · How companies get built
The Cold Start Problem
Andrew Chen · 2021
How network effects actually get started, sustained and defended — the most rigorous available treatment of the term everybody uses loosely.
Why it is here
Network effects are claimed in a very large proportion of pitches and understood in a much smaller one. This book takes the concept apart: how a network gets its first users, why it stalls, what makes it defensible, and why most claimed network effects are local rather than global.
That last point is the one an angel most needs. A marketplace with a network effect in each city is a collection of small businesses, not one large one, and it is attackable city by city. Our marketplace diligence guide asks the question; this book explains why it is the right one.
The author spent years working on growth at a company where these dynamics were the whole business, so the material is operational rather than theoretical.
Read it if
You look at marketplaces, social products or anything where value depends on other users being present.
Skip it if
You invest exclusively in business software sold seat by seat.