Network Effects in Scaling Startups
While conducting research on the major players in the venture capital space for the Cornell Blockchain Club l stumbled upon a real world instance of the power of networks. Andrew Chen’s “The Cold Start Problem” explains the power of networks in reinforcing the growth of expanding businesses and, as the title suggests, the hardship new business endure when trying to recruit users. This book focuses on the relational component between users that guides new customers into the business. These types of interactions might take shape in a range of forms. For example, A friend who uses tik-tok could send a link to a person who currently does not use the app. For optimal viewing experience, the receiver is prompted to download the app and signup with an account. In another instance, an employer might require a link to a LinkedIn profile in a job application. Those who do not already have one, would then be required to create an account. These are examples of how an established network of users, works to recruit new ones. In addition, the book delves into how certain business become more useful as the user base grows. Uber, Yelp, and TripAdvisor, are examples of these types of services.
The principles of graph theory and ties between nodes can be applied here as well. For example, there might be a group of three good friends. Two are using WhatsApp as their primary form of communication the other uses text. I this case assume all friends have smartphones and access to the app. WhatsApp in this group might be modeled according to triadic closure rules. Given the WhatsApp use of the two individuals, the majority of the group in this case as well, it is logical that the third member too might begin to communicate over WhatsApp as well. There are of course more variables involved. For example, one might consider whether WhatsApp offers a better user experience over that of SMS messaging. However, graph theory seems to offer a viable framework for analysis of customer onboarding to specific brands in addition to the social analysis introduced in class.