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

Written by one of our investors, the book is a collection of startup industry insights on building and scaling social software, specifically the ones that grow more powerful, useful, or retentive as they scale. The most important part of social software is that over time, the most defensible and irreplicable part of the company is the network of people it created as it grew. The book dives into many examples of companies and how they leveraged the network they made to solidify competitive advantages and scale more - or how the absence of a good network can cause the collapse of the entire network. The book spans all stages of a network’s scale, from no network at all in the beginning all the way to what happens when a network is saturated or hits a growth ceiling, and it’s easy for someone building to identify where they stand and what insights are most useful to their stage.

As a first time founder, many times I felt panic whenever there was a slowdown in growth or a slight shrinkage in revenue. The charts of hypergrowth companies always looked like they grew nonstop, where in reality as the book pointed out, every network grows in spurts: rapid growth and then hitting a ceiling and slowing down, before hitting the next spurt. The best networks find ways to consistently look for new verticals, new S curves to build and layer on top of their existing growing verticals, so that the growth spurts and slowdowns across many different verticals balance out and the business overall grows. Each time we’ve had a slowdown, maybe a bit later we’d find a new audience and hit another growth milestone. Learning that hitting growth ceilings is normal and everyone experiences it is deeply validating. On the flip side, hitting a ceiling necessarily requires a response, usually in the form of needing to expand into adjacent markets or needing to spend more resources on that network - and this is precisely what we’ve done in the past when we have hit ceilings to break through.