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NFX ran a study on all unicorn businesses (e.g. worth $1BB or more) since the Internet was widely available in 1994. 336 companies met this criteria.

Of those, 35% of those companies had network effects (NFX) at their core. However, they were more valuable than companies without network effects, so they added up to 68% of the total value.

Are NFX the core driver of growth to startups we're overlooking?

On the one hand, the study is skewed towards examining only unicorns. So this data doesn't even consider centaurs (e.g. $100MM+ valuations). On the other hand, there is something to be said about examining what made the best, the best.

Are there other factors that drive major value to a startup? Your thoughts?

  • JQ

    Jason Quey

    about 1 year ago #

    It's interesting to note that GrowthHackers itself uses network effects to grow this community.

    From the outside looking in, it seems this community has grown faster than most as a result of NFX. And they were able to do this with a relatively small team.

    That said, I think the greatest hindrance of growth will be from negative NFX. That exists because there's a limit to what we as a community see on the front page. Reddit solved this problem by creating subreddits.

    I feel Inbound.org began to erode because their community began to deteriorate, and their redesign practically killed the NFX of smaller communities, like @joelklettke 's landing page community.

    I'd be interested to see how @anujadhiya, @danihart, @sean, and the rest of the GH team continues to grow this community.

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