Business

The Cold Start Problem: 8 key ideas

by Andrew Chen

The core ideas of The Cold Start Problem, each in under a minute, written in our own words. Want the full depth? Get the book.

1. IDEA 1 OF 8

   New networks start empty

   Chen, a technology investor, explains that products built on network effects, like messaging apps or marketplaces, face a cold start problem: they are useless until enough people join.

   Solving this problem is the first challenge.

2. IDEA 2 OF 8

   Start with an atomic network

   Chen suggests building the smallest network that can work on its own, which he calls an atomic network.

   Small, dense networks can grow. In his view, a small group where people really use the product is stronger than a thin spread of users across many places.

3. IDEA 3 OF 8

   Focus on the hard side

   Chen explains that every network has a hard side, the users who are harder to attract, such as drivers or sellers.

   Winning them is crucial. In his view, once the harder group is on board, the easier side usually follows, since they come for the people already there.

4. IDEA 4 OF 8

   Reach a tipping point

   Once enough atomic networks form, a product can reach a tipping point where growth becomes easier.

   Each network helps the next. In his view, as these small networks link up, the product becomes useful to many more people, and growth speeds up.

5. IDEA 5 OF 8

   Escape velocity speeds growth

   Chen describes escape velocity, when network effects drive rapid growth.

   Engagement and acquisition improve. In his view, the product at this stage grows more or less by itself, since each new user adds value for others.

6. IDEA 6 OF 8

   Growth hits ceilings

   Chen explains that networks eventually hit ceilings, such as saturation or spam.

   Companies must find ways past them. In his view, what worked in the early days may stop working at a larger size, so the company needs new ideas.

7. IDEA 7 OF 8

   Networks create moats

   Chen argues that strong network effects protect companies from competitors.

   Users stay because of the network. In his view, it is hard for a new rival to copy because it would have to bring the people along as well, not just the product.

8. IDEA 8 OF 8

   Network effects can be studied

   Chen offers a framework for understanding network effects at each stage.

   It helps founders plan. In his view, knowing which stage a network is in helps founders decide what to do next, instead of guessing.