Mar 5, 2018 · 33m · 20vc
20VC: Why, How and When To Think About Growth Teams, The Right Way To Think About Network Effects & Scaling from Phase 1 To Phase 2 of Startup Life with Anu Hariharan, Partner @ YC Continuity Fund
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The 20 Minute VC, host Harry Stebbings interviews Anu Hariharan, Partner at YC Continuity Fund, to unpack the fundamentals of network effects, the optimal timing for establishing data-driven growth teams, and how startup founders must transition leadership frameworks as their companies scale.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 22.8% of the talking time here. How this is scored →
Harry as informed peer 2.5 Guest teaching 3.8 Guest disagreement 0.3 Harry pushing back 0.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 27:19 Critique of Founder-Friendly Boards
Anu challenges prevailing Silicon Valley consensus by arguing that boards have erred too far on the side of being founder-friendly at the expense of proper governance.
Hardest push from Harry ▶ 12:21 Questioning Network Effect DurabilityHarry pushes back on the assumption that network effects grant permanent defensibility, highlighting how several on-demand startups saw their network effects erode.
Biggest teaching moment ▶ 14:10 Barrier to Exit vs. Barrier to Entry FrameworkAnu educates Harry on evaluating true defensibility by showing why low user exit barriers make ridesharing fragile compared to review-rich marketplaces like Airbnb.
Harry holds his own ▶ 8:11 Citing Network Effect TaxonomyHarry demonstrates strong industry context and preparation by referencing James Currier's 13 forms of network effects to steer the discussion.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Anu Hariharan's Career Journey to Venture Capital | 1 | 2 | 0 | 0 | Harry opens with a standard background question asking Anu to share her path into venture capital. Anu provides a detailed summary of her career from electrical engineering to BCG and Andreessen Horowitz without host interruption. | |
| Patterns of Successful Startups & Business Sustainability | 2 | 3 | 0 | 0 | Harry asks straightforward questions about startup success patterns from Anu's BCG days and follows up with a basic definition request regarding network effects. Anu cleanly delineates network effects from simple platforms or nodes. | |
| Key Indicators of Network Effects and User Retention | 3 | 4 | 0 | 0 | Harry demonstrates domain familiarity by citing James Currier's 13 network effect categories. Anu educates the host on how retention and engagement, rather than top-line growth, serve as the true indicators of network effects, referencing Facebook's early Harvard strategy. | |
| Testing Defensibility and Barriers to Exit | 3 | 4 | 0 | 2 | Harry challenges the durability of network effects by bringing up on-demand companies that lost theirs. Anu responds with a structured breakdown contrasting low barriers to exit in ridesharing with high barriers to exit in Airbnb. | |
| The Future Importance of Network Effects and Scale | 3 | 3 | 0 | 0 | Harry asks an informed question about growth teams pioneering at Facebook. Anu explains how Facebook built a dedicated growth team when hitting 50 million monthly active users to overcome natural growth plateaus. | |
| When to Form a Growth Team & Common Pitfalls | 2 | 5 | 1 | 0 | Harry asks operational questions about timing growth team formation and common founder missteps. Anu offers deep tactical advice on fixing retention before scaling growth and cites Uber's cash payment experiment in India as an example of data overriding product dogma. | |
| Scaling as a CEO from Phase 1 to Phase 2 | 3 | 5 | 0 | 0 | Harry references previous guest Sean Rad to set up a question on CEO scaling. Anu provides a high-level framework on moving from Phase 1 to Phase 2, highlighting Patrick Collison's disciplined approach to executive hiring. | |
| Quickfire Round: Books, Governance, Fundraising, Bitcoin, and Global Tech | 3 | 4 | 1 | 1 | Harry drives a rapid quickfire round across governance, fundraising, and global tech centers. Anu offers concise, opinionated responses, including a contrarian critique of Silicon Valley board governance. |
Statements from this episode (15)
Unit economics matter more in venture capital than in private equity
“At scale, really paying attention to the business levers, and paying attention to unit economics, and figuring out if you're truly building a scalable model is really important, and probably more important in the venture world than the private equity world, si…”
A true network effect requires incremental value for existing users
“I think the common confusion arises from the fact that people get confused with systems, nodes, technology, platforms, you know, and I think they forget that it is about measuring the incremental value to the existing user. As more users join it, and if that d…”
Facebook delayed expanding beyond Harvard for 18 months to ensure retention
“They first launched in Harvard, and there was a lot of craze about the app. A lot of schools demanded that Facebook be available in those schools, yet they did not launch it for almost 18 months, and the simple reason being, the one metric they measured was ho…”
Strong user retention, not fast growth, proves network effects
“Because engagement is a sign of network effect, not growth. This is where the confusion comes. Most people think every fast growing has a network effect. It doesn't. The retention is a strong sign of network effect.”
Airbnb's review ecosystem creates defensibility that competitors cannot replicate
“A product that's not like Facebook, but it has that same network effect is Airbnb, right? Because it's a marketplace and obviously it's a matching of hosts and guests, but over time they've built so many reviews and ratings, both about the guest and the host. …”
Uber and Lyft have low user barriers to exit during surge pricing
“Now play the same thing on Uber and Lyft. I find the barrier to exit for the user on Uber or Lyft to be really low because I'm not the one choosing the driver. So if I'm on Uber today, and if the prices are surging, I'm going to check lift automatically, and a…”
Amazon scaled phenomenally as a first-party business without network effects
“Amazon is the prime example of a large company that started off as a first party business, which had no network effects, and they've done phenomenally well as they've scaled it.”
Most consumer apps around 2007 and 2008 plateaued at 50 million MAUs
“When they hit around fifty million MAUs, They realized that most apps in that era, around 2007 and eight, had plateaued at fifty million MAUs.”
Airbnb struggled for its first three years to build marketplace liquidity
“So Airbnb, when they first launched, I mean, they didn't have vital growth. I mean, they really struggled for the first three years to build liquidity in their marketplace, but”
Startups should form growth teams only after hiring 10 to 15 engineers
“I think that once, you know, you have strong retention and you probably have 10 or 15 engineers on your team, it may be time to actually focus on growth.”
Uber's growth team drove Indian expansion by introducing cash payments
“There's a very good example in Uber where, you know, the whole premise was it's a cashless transaction app. And they went to India, which has no credit cards. And the growth team actually ran an experiment by turning on cash to figure out how much it helped wi…”
Stripe's Patrick Collison met 5-6 top executives before making senior hires
“Patrick Collison from Stripe often says this, which is for every senior exec role that he decided to Hired. He first spent time with five or six execs in that role to really understand and establish what is best in class.”
Post-PMF startups plateau by delaying executive hiring or churning leadership
“Too often, I see companies that are plateauing in the phase two of company building is really because, A, they wait too long to hire senior execs, or they've switched their exec team at least twice, and all these things basically slow down the company because …”
Silicon Valley has erred too far toward founder-friendly boards
“I think we in the Valley have probably erred to on the side of founder friendly, and especially given, you know, companies are staying private longer as almost 10 to 11 years before they go public. I think the board composition really needs to adapt from Not j…”
The global tech ecosystem will become a triangle of SV, Beijing, Bangalore
“I think Silicon Valley will continue to play an important role in the tech ecosystem. However, I do think in the future, you will actually see the tech ecosystem be a triangle between Silicon Valley, Beijing, and Bangalore. I don't think it will, it'll no long…”