"Come for the tool, stay for the network"

I first heard this quote thanks to Maximilian Messing , Co-Founder & CTO of Sastrify . Digging deeper, I learned that this quote is attributed to Chris Dixon , Serial Entrepreneur and General Partner at Andreessen Horowitz (a16z). In 2015, Chris wrote:

"A popular strategy for bootstrapping networks is what I like to call “come for the tool, stay for the network.”

The idea is to initially attract users with a single-player tool and then, over time, get them to participate in a network. The tool helps get to initial critical mass. The network creates the long term value for users, and defensibility for the company."

Andrew Chen , also General Partner at a16z, wrote in his great book "The Cold Start Problem" about how multiple products, both in B2B and B2C, have become successful thanks to this strategy:

1. Instagram , who built a network since the beginning together with its photo app

2. Google Suite (now Google Workspace ), which included collaborative editing and comments functionalities on top of its productivity tools

3. LinkedIn , used first to showcase your resume online, but later focused on helping users build their professional network

Products under attack

I follow every week the All-In podcast, as many people in tech do.

In last week's episode, I was surprised by the announcement from Chamath Palihapitiya :

In a nutshell, thanks to AI and offshoring, a seasoned tech entrepreneur with access to capital is potentially able to create a useful version of any software tool you need to run your business and offer it at a fraction of the price of what current market incumbents do.

The discussion following this announcement was very interesting. One key takeaway from David O. Sacks is that this level of disruption may only apply in some categories where the incumbents have become stagnant.

Either way, fact is that products with limited defence mechanisms will be challenged more than ever.

The Chinese experience

In 2017, before AI went mainstream, I was personally able to see first hand how products could be replaceable if you have experience, talent, and money.

Between 2017 and 2018, while working at 英迈 , I had the opportunity to spend almost a year in Beijing helping the HNA Group (International) Company Limited to launch their Cloud Marketplace for Chinese small and medium businesses. At its core, the idea was to leverage the successful network of Cloud Marketplaces in 40+ countries that Ingram Micro had established worldwide and help HNA to leapfrog the process.

HNA was a Chinese conglomerate with assets in aviation, real estate, financial services, tourism, logistics, and technology. In 2016, HNA acquired Ingram Micro. As part of the acquisition, a cross-functional and international team from Ingram, including myself, were tasked to make the HNA Cloud Marketplace a reality. You can find the 2018 launch video in YouTube.

Long story short, thanks to that experience, I was able to see how the Chinese tech industry had been able to create a Chinese version of almost every major software tool that we had in the Western world.

One of the most known stories is Kingsoft, which managed to build an entire productivity suite equivalent to Microsoft Office. I personally saw it and was able to play with it, although I couldn't really do much since it was all in Mandarin. Nevertheless, it was amazing to see how its word processor was just like Word, its spreadsheet just like Excel, and so on.

There was, and still is, a heated debate about intellectual property, but I won't get into that.

The fact is that even established products such as Microsoft Office could be copied five years ago. Just imagine what is possible today with AI.

Is Network the main defence mechanism today?

Not an easy question to answer. There are many dimensions through which products and companies compete: brand, technology, etc. Network is one of them.

Nevertheless, companies with "networked products" (as referred to by Andrew Chen) such as Instagram, LinkedIn, Uber , Dropbox , Airbnb , and PayPal , which have networks at their core, have been able to stand the test of time and are still today some of the most valuable tech companies, with high defence mechanisms difficult to replicate by other challengers in the market.

From a customer standpoint, why would you bother trying other social media platforms if LinkedIn is where most of your professional contacts, as well as your target customers, partners, and investors hang out? Why installing other ride-hailing app if Uber is available in most major cities where you travel? Why using other payment platform if most of your contacts use PayPal?

With hundreds of products being launched every day (just give a look to Product Hunt to get a feeling), the increasing difficulty to distinguishing how Product B is different to Product A and why is it worth changing from Product A to Product B, and the limited time and attention span that consumers have, my assumption is that customers will more and more stick to whichever product:

1. they already have and helps them solve 80%+ of their use cases,

2. comes with an affordable price tag and a clear ROI (cost/benefit), and, most importantly,

3. most of their contacts use and recommend

Only "must-have" products, which offer a 10x improvement vs the status quo, which can quickly, easily, and seamlessly integrate with their users current setup, and with a strong "word of mouth", will have a chance to step in.

Is Network the same as Community?

I personally don't think so. As I mentioned in my previous article last week:

"a community is a group of like-minded people facing a similar problem and willing to collaborate between them to collectively solve each others problems."

A key element in that definition is the "personal connection" or "personal connections".

A network, specially when referred to networked products as mentioned above, is built thanks to the product. The product is the main motivation to join a network and the glue that keeps the network together.

In a community, a product is not a pre-requisite. The personal connections are the main motivation to join and stay in a community.

Nevertheless, network and community go hand in hand. One reinforces the other.

Including Network and Community since Day 1

I am very happy that, more and more, both first-time and seasoned entrepreneurs are talking about this as an integral part of their strategy when launching a new venture.

While Network and Community may not be their top differentiator and defense mechanism at the beginning, it certainly will be in the long run.

Learn more

• "Come for the tool, stay for the network", Chris Dixon, Jan 2015
• "The Cold Start Problem", Andrew Chen, 2021
• All-In podcast
• 8090 incubator announcement in X by Chamath Palihapitiya, Jan 2024