Yesterday I had a fantastic call learning about network effects from Sameer Singh.

Here's what I learnt:

1. Is there a unique clearly defined interaction? If the interaction could be made without too much difficulty elsewhere you won't get network effects.

2. How can you tell if the unique interaction works? Network effects mean there is more value per user as the number of users grows. You need a KPI that captures this. It will often look high-ish at the start when friends and family use the product, will drop as you bring in other users then will rise again as you start generating network effects. If you can't define this metric or track it behaving in this manner, you don't have network effects.

3. Look for founders who understand the above. User or revenue growth doesn't matter if you don't have the network effect. First-time founders are often better at this for two reasons. Second-time founders are able to raise more money. They feel obliged to generate growth in conventional metrics because the money is there. They may also have a playbook from their previous startup and so not think out of the box which can be necessary to generate network effects.

Sameer Singh, thank you again. For those who are interested, he runs a course teaching network effects which you can find here - https://maven.com/breadcrumb/applied-network-effects.

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