Leveraging Network Effects for Startup Growth

Network effects are a typical way for you and your business to more quickly create value for different types of user groups.

"When a Network Effect is present, the value of a product or service increases according to the number of others using it."

We have seen social networks like facebook and twitter use this to great effect by racing to connect users with one other, and providing them the infrastructure to interact on these platforms.

Building any social product requires us to think about the proverbial chicken and egg problem. How does one build a product/service offering, while also building a customer base and gain traction?

Content creation and community building are two tools you can leverage to gain network effects as a startup.

Further down the line, this leads to efficiences of scale, not only for you as a business builder, but also for new users joining your business network.

"When a platform attains a critical mass of users, the cost of joining the platform is outweighed by the value of joining, with most of that value being derived from the power of the network."

However, as an early stage builder or founder, you can't attract your first users with network effects, because there is no network. Manual outreach and onboarding is a necessary endeavour for "Doing things that don't scale". High quality growth is growth that lasts, so platform builders and community managers should emphasize a “higher quality” nature of growth and maintain a high standard for access and use, especially in the early stages.

Your Network starts with that first connection and builds from there. By building community as part of your business or platform, many people will come for the tool and stay for the community.

So how can you optimize for network effects as you build and grow?

The 5 C’s of Network Effects: Connection, Communication, Collaboration, Curation, and Community.

1. Connection

This refers to new users and their ability to find others on your platform. How easy is it for users to find the right counter parties to share and collaborate with?

2. Communication

Communication between users should be as seamless as possible, allowing for the greatest ease-of-use.

3. Curation

Curation maintains the usability and integrity of your platform by keeping the quality of your users and content high and easily searchable. You should consider two main factors here; user access (who is on the platform) and content curation (what is on the platform).

4. Collaboration

Collaboration allows users to self-organize into new networks that advance the specific agendas that are important to them individually. These are also often in line with the overall agenda of the greater network too. Think about how you are facilitating collaboration into your product/platform?

5. Community

Community grants users a sense of ownership of the platform. It acts as a form of user-enforced curation, while also providing platform managers with invaluable user feedback.

If you want to follow along, you can check out more of what is going on at Startup Sanctuary.