The Cold Start Problem

tags: business, tech, venture-capital

This is one of those books that I feel like you should read in a group. You should study discuss every chapter. There’s just so much here.

The book is about products that require “network effects” to work. Network effects is the concept that some things need more than one person using them to be of any value, and they often need many people using them before they reach “escape velocity” and really start to grow.

A classic example is the telephone. One person with a telephone is not helpful. You need at least two.

Another obvious example: a social network. People stay on Facebook because all their friends are there. And they didn’t go to Google+ because no one they knew was there. The network effects of a fully-populated social network keeps it going, and the opposite in a new social network prevents it from getting started.

The author was an early employee at Uber. Many stories are about how they grew that company. Each time they expanded to a new city, they had to build a network of drivers. Without a bunch of drivers, there would be no riders. Unfortunately, with riders, there could be no drivers.

The author maps all of this against a framework with the following phases:

  1. Cold Start
  2. Tipping Point
  3. Escape Velocity
  4. The Ceiling
  5. The Moat

Each phase presents different challenges.

To the author’s credit, he offers some very clear, practical strategies for building a network. Things like:

There’s a lot of advice here. More than I could retain, honestly. This is a book that would be well-used in a college course on entrepreneurship.

I recommended it to a friend just after I started. When I was done, I texted him again:

I’m gonna call that a “must read” for anyone working in tech. I have a ton of new knowledge bouncing around in my head now. Really practical stuff for someone competing in the space.

Book Info

386
2021
978-0-06-296974-3