Cold start — Part 3
As I am reading this book, I came across this great post from First 1000 about Strava. It leverages some of the concepts explained in this book. So before we go into the “Tipping point” chapter, let’s discuss Strava and how it solved the cold start problem.
Strava created differentiated utility using the Inch-Wide Mile-Deep as their go-to-market strategy which was a fancy way of saying build a product that a small number of people find great. The question now is, how niche should one go? So it should be small enough to become the #1 player within an 18–24 months timeframe. The next question is, how does one become #1? In this example, it is by building just 1 or 2 killer features that barely anyone outside this tiny cohort of people find remotely useful. Yet for the ones within, it is a game-changer. Getting accused of being a feature and not a product, is a good barometer.
Go small, so you can go big!
When your target market is so niche, every customer matters. The famous book, “Hacking Growth” by Sean Ellis also emphasizes that it is crucial to have a great product before you try different growth hacks. If you focus too much on acquisitions before you have a great product, you will end up churning through the entirety of your niche. For most products, engagement is the closest proxy to measure if your product is valuable. Though in the early innings of your product development, this may need some bootstrapping through external motivators : encouraging people to do something for the sake of getting a reward or avoiding a punishment.
During Tour de France, Strava started running competitions along the way amongst their 20 users and asked them to upload daily metrics to the platform. One such campaign was, whoever uploads the fastest 5k ride sometime in the next 24 hours will get a free set of race wheels. The Strava team observed that the engagement spiked through the roof and people started recruiting their entire cycling clubs to the platform in the hopes of getting the free reward. Once Strava figured out one atomic network, they went on to iterate on the same tactic that worked. With every new user, every new customer onboarded, they understood the nuances of how people used their platform and the product just kept getting better, eventually causing users to flock to the platform organically.
Now let’s continue with the examples from the book.
When Tinder launched at the University of Southern California college party, they had the most, social, most hyperconnected people on their network at the same time. It was “500 of the right people”. Once the network starts gaining momentum and reaches the escape velocity, your focus should move towards tipping the markets instead of building atomic networks. One prominent strategy is, “Invite-Only”. Another one is “Come for the tool, stay for the network”. If these don’t work, some products just spend money to build their network, a strategy called, paying up for launch. Let’s discuss these through examples.
Invite only: It seems counterintuitive to turn down users who you so badly need. Some espouse it as a method to generate hype, others say that it creates the feeling of FOMO and some say it is a good way to limit the audience growth so that the team can fix bugs and scale the product’s infrastructure. But the most important reason is that if you start with a curated network and give them invites, the network will copy itself over and over automatically. This mechanism also provides a better “Welcome experience” for new users, similar to being welcomed by a good friend at a large dinner party. Every new user that signs up is already connected to at least one person. Clubhouse created a lot of buzz because the people with an invite to an exclusive product were posting praise and critiques causing people without an invite to ask for it which was driven by scarcity and exclusivity dynamics. Robinhood asked users on their waitlist to tweet or post on social media to jump ahead in the queue bringing a million users even before their release. For networked products, the curation of the network — who is on it, why they are here, and how they interact with each other is important and you need to be deliberate about it.
Come for the tool and stay for the network: Hipstamatic, does the name sound familiar? Didn’t to me as well. But in 2010 it was selected as one of the apps for Apple’s inaugural app of the year and had millions of downloads. It was an app that let users click photos and apply filters to them. Yet, some of their design choices were odd, like letting users add filters after several taps even when this was one of their core functionalities. They didn’t even support direct share of the edited photos to any social media app. This created an opening for a new competitor and they took this opportunity and ran with it. Instagram focused on being good at one thing. It had a feed to aid discovery within the network and you could share to Facebook, and each shared photo would link back to Instagram, driving viral growth. Moreover, you could add a filter with one tap on this free app. The engagement was initially for the utility of photo editing and later shifted to the network. Yelp is another example. It started as a directory tool, but later users started contributing to the platform with reviews and photos. This strategy not be simple though, a lot of people can get on just the tool and never pivot to the network.
Paying up for launch: Sometimes for a networked product, it makes sense to spend — often wildly till the market reaches the tipping point. After achieving the strong network effects, these subsidies can be pulled back. Remember, how initially on Google Pay you earned higher cashback amounts and more often? Similarly, Uber posted a $30/hour guaranteed payment for drivers, regardless of how many trips they did. This was quite expensive and not sustainable. The strategy was then migrated to a referral program of 200 dollars. These methods are sometimes termed as “Selling a dollar for ninety cents” by critiques, but it is not always possible to grow a network with positive unit economics from day 1. What looks like unprofitability in the short term might lead to dominance in the long term, if the market reaches the tipping point.
The common wisdom is to buy the chicken when you have a chicken and an egg problem.
Flinstoning: I loved this name. Do you remember how Flinstones drove their car? Fred used his legs to roll the family to their destination. Flinstoning is a metaphor for software where the missing product functionality is replaced by manual human effort. For example The initial library of videos on YouTube where probably uploaded by founders. The Reddit founders did the same. Food delivery apps have a nice hustle story to tell. Signing up restaurants, which are probably skeptical, is difficult especially before there is demand. What services like Doordash and Postmates did was they showed a large selection of restaurants regardless they signed up or not. When a customer ordered, the apps would send a courier to these restaurants who acted like customers, grabbed the food, and delivered it to the customers. Cyborg startups is a fun name for such companies. Can you do this forever ? The answer is no. Once the cold start problem is solved the network needs to grow and stand up on its own.
Nobody wants to live in a ghost town. No one wants to join an empty community.
Always be hustling. All the tactics described above were built on creativity and entrepreneurship. There are often brief moments of opportunity that can cause a market to quickly tip if you apply the right idea.