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The Cold Start Problem refers to the initial challenge faced by networked products when they launch. These products rely on a user base to provide value, but attracting users is difficult without an existing network. This creates a chicken-and-egg problem. The impact on the launch of such products is significant as it can slow down user acquisition and growth. However, once a networked product overcomes this problem and establishes a user base, it becomes more defensible due to the difficulty in replicating its network.
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The Moat is the final stage of Chen's Cold Start Theory and is about a successful network that defends its turf with network effects. Warren Buffett popularized the concept of the competitive moat. He argued that to make good investments, one should determine the competitive advantage of a company, and above all, the durability of that advantage. For networked products like Slack or Airbnb, their software and functionality can be replicated fairly easily. Instead it is the difficulty of cloning their network that makes these types of products defensible.
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When a networked product launches, it faces a chicken-and-egg problem: people need to use it for it to be worth anything. So how do you start the very...
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