Tech startups must get past a 'cold start' in order to thrive. A new book by andrewchen explores how the most successful ones have done it
asserts it has identified 13 different kinds of network effects and claims to have demonstrated that they're responsible for 70% of the value created by tech companies since the internet became a thing. Contrary to popular belief, they're not a competitive advantage in themselves; the core advantage remains relative size — known as economies of scale.
In the analog world, economies of scale typically manifest themselves through the benefit of spreading fixed costs across a larger customer base. In the digital realm, however, economies of scale also increasingly manifest as network effects. This provides additional protection for an established market leader, but accordingly ensures that a new entrant or smaller industry participant is likely to suffer from a significant competitive disadvantage.
Where"The Cold Start Problem" is at its most useful is in breaking down the key decision points in the life cycle of a network effects business. Chen begins by defining an"atomic network" as the smallest network needed with enough density and stability to stand on its own, and uses this concept to show what's needed to successfully launch a business — solving the cold start problem of the book's title.
In doing so, Chen demonstrates why even when trying to establish a huge business — he describes $1 billion in valuation over 10 years as"a pretty standard minimum bar" to attract venture capital — it's far better to start with a manageable niche than go for a big-bang launch.
The question of what market characteristics lend themselves to resilient network effects has been the subject of extensive discussion by both academics and practitioners. Indeed, some of the mostby practitioners has come out of the very firm, Andreesen Horowitz, where Chen now works. Incorporating these structural insights would have significantly improved"The Cold Start Problem.
Norge Siste Nytt, Norge Overskrifter
Similar News:Du kan også lese nyheter som ligner på denne som vi har samlet inn fra andre nyhetskilder.
'SNL' Mocks Andrew and Chris Cuomo in New 'Cold Open''SNL' made sure to get a few jabs in a the Cuomo bros in their coronavirus-focused opening sketch over the weekend.
Les mer »
'SNL' Mocks Andrew and Chris Cuomo in New 'Cold Open''SNL' made sure to get a few jabs in a the Cuomo bros in their coronavirus-focused opening sketch over the weekend.
Les mer »
How Drew Barrymore and Chef Pilar Valdez's Friendship Culminated in a CookbookThe pair discuss their friendship, kitchen preferences, and their new book, 'Rebel Homemaker.'
Les mer »
How a chance encounter in a New York subway station led to an unexpected familyA New York family who came together by chance just over 20 years ago is now sharing their story in a new children's book.
Les mer »