How to kickstart a marketplace, lessons learned from Andrew Chen's book The Cold Start Problem

Jakub Piskor
4 replies
[The Cold Start Problem]( is one of my favorite startup books, and Andrew Chen is the author from which I like to read almost everything (I recommend his [blog]( ). I believe the book is a must-read for everyone who wants to build a marketplace. It's written as a step-by-step guide to building a marketplace with many examples of already successful marketplaces. **6 lessons on how to kickstart a marketplace** 1) You have to create network effects in your marketplace (network effect describes what happens when products get more valuable as more people use them). 2) The first step is to determine and build Atomic Network (the smallest possible network that is stable and can grow on its own. For example, Zoom’s videoconferencing network can work with just two people, whereas Airbnb’s requires hundreds of active rental listings in a market to become stable). 3) In networks, you have sides (buyers/sellers, content creators/consumers). Generally, one side of the network will be easier to attract—this is the easy side of the network. The important part of any early network is attracting and retaining “The Hard Side” of a network (which is the small percentage of people that typically end up doing most of the work within the community). 4) To attract the hard side, you need to “Solve a Hard Problem”—design a product that is sufficiently compelling to the key subset of your network. How many users does your network need before the product experience becomes good? (Communication apps can be 1:1. Contrast that to products that are highly asymmetrical, with content creators and viewers, or buyers and sellers—these are likely to require a much bigger number to hit the threshold, and require a much bigger effort to get started) 5) The solution to the Cold Start Problem starts by understanding how to add a small group of the right people, at the same time, using the product in the right way. (If you add more people, but add the wrong people, then it won’t work.) 6) "The hard side" of the network has its name because it's much harder to acquire and retain. (For social networks, these are often the content creators that generate the media everyone consumes. For app stores, these are the developers that actually create the products. For workplace apps, these are the managers that author and create documents and projects, and who invite coworkers to participate. For marketplaces, these are usually the sellers and providers who spend their entire day attracting users with their products and services.) The above are my top learnings from the first part of the book. What is the solution to kickstart a marketplace? You have to understand to "hard side" of your network. Who is the hard side of your network? How will they use the product? What is the unique value proposition of the hard side? Hope you like it. This is not an affiliate review, I'm just a fan of this book and would recommend it to everyone who just starts to build a marketplace. Good luck!


Adam Patterson
This article is really amazing. Thanks for the sharing. Price Chopper Employee Login
Elias Fares
Hi Jakub, these are really good points. You're probably super busy but is there any chance you can checkout my marketplace and give me any tips and feedback on it?
Zach Castaneda
Love this book. Great post!