The Cold Start Problem

Why Startups Fail

Background

I first came across the term “Cold Start Problem” in 2021 through Andrew Chen’s book, How to Start & Scale Network Effects. I’ve followed his insights since 2013, during my time in San Francisco working at GREE International, where I tackled acquisition and growth challenges in social and mobile gaming.

Now, several years after the book’s release, many of its concepts still hold true. However, I want to explore how the Cold Start Problem has evolved in today’s market and what it means for building successful global products.

  • The antithesis of the Cold Start Problem lies in how network effects, fueled by product value, incentive design, and user empathy, build a strong competitive moat that propels companies to industry leadership.

  • For emerging startups, success is now even more challenging, as value, incentive design, and user empathy are no longer differentiators but fundamental expectations

Build Fast, Test Fast

During my time in San Francisco, I frequently attended hackathons, intense 2-3 day events where teams rapidly built and iterated on fresh ideas. These experiences taught me that successful startups thrive on speed, adaptability, and diverse perspectives.

As teams form, a mix of personality traits emerges, each contributing to problem-solving and execution. The most successful startups are built by motivated individuals who bring different opinions, expertise, and approaches while working together to tackle complex challenges and navigate shifting markets. The ability to build fast, test quickly, and iterate effectively is what sets high-performing teams apart, increasing their likelihood of success.

Failure is Knowledge

Failure isn’t just a setback—it’s a powerful learning tool. During my time in San Francisco hackathons, I saw teams build, break, and pivot within days. The most successful founders and teams weren’t the ones who avoided failure but those who embraced it, learned from it, and iterated fast.

Startups operate in uncertain, fast-moving environments, and every failed experiment provides critical insights that shape better decisions. Teams that openly analyze their failures, refine their strategies, and continuously adapt are the ones that ultimately succeed. Failure isn’t the opposite of success—it’s a necessary step toward it.

Every user is critical

Cohort analysis is your secret weapon. Want to know who’s sticking around and who’s ghosting your product? Dive into retention and engagement across your funnel. The chart below puts a fresh spin on the classic cohort view, but the lesson stays the same—understanding the customer journey is the key to success, especially for startups playing the long game.

It’s not all about being perfect

Perfection can be the enemy of progress, especially in startups. I’ve seen teams spend too much time polishing features, aiming for a flawless product, only to miss market opportunities. While quality matters, time-to-market and speed of validation are just as critical.

A product’s real test comes from customers, not internal debates. Releasing quickly allows teams to gather feedback, iterate fast, and adapt to real user needs. Startups that wait too long risk building in a vacuum, only to find out they solved the wrong problem. Speed, testing, and learning in the wild are what drive true success—not perfection.

Adapting today

Modern startups face intense competition and must tackle the Cold Start Problem strategically to gain traction. The key is to focus on small, self-sustaining atomic networks that provide immediate value before scaling. Rather than attempting a broad launch, successful startups target niche audiences, building a passionate early user base that drives organic growth. The key takeaway I’ve learned is that organic acquisition is a crucial growth lever, often more effective than simply increasing the marketing budget.