081 - Exploring the 16 Types of Network Effects with James Currier of NFX.com

What is up PartnerUp!?

Today we’re talking about the ground floor of growth - network effects.

But not just with anyone, we’re talking with the king of NFX himself, James Currier, Managing Partner of the kingmaker VC firm, NFX.com.

Network effects are kind of like compound interest:

All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest. - Naval Ravikant

But they’re also so much more. In fact, there are SIXTEEN types of network effects. And what holds the nodes together? Oh, James calls that “node bonding theory.”

Yeah, we’re going that deep. I mean, he did write the “Network Effects Bible,” and currently has an entire masterclass for FREE on network effects.

James is a legend, and we were delighted to welcome him to the show.

Oh, and James will be speaking at plxsummit.com on Day 1, November 7th, for Partner Led Startup Day. Register today at plxsummit.com.

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Full transcript:

Jared Fuller  0:11
All right, what is up, partner up? We're back. Isaac, I'm really excited for this conversation because you and I are no strangers to mental models and first principles and all the things in the world that might govern 1000 things for every one idea that's true. And at the beginning of 2022, I made a prediction that the next generation of founders, were actually going to be x partnerships, people. I don't know if you recall that Isaac, and I've been harping on that for a while because you have to have a command of product marketing, sales, customer success and build value outside of your own company walls. And that's why I'm super excited for today's Convo, because we have James Currier of NSX, which is network effects. And Isaac, I know you have some history with James, and I'd love for you to kind of tee this up. I'm just excited because I think the partnerships professionals that are listening today, they are the future founders, we know, a good chunk of them. And I think network effects underpins a lot of the stuff that we're talking about it at the even more fundamental level than ecosystems, etc. Isaac, I'm gonna kick it over to you, and then we'll reopen.

Isaac Morehouse  1:20
Yeah, so I'll cue up James in this way. You ever have. I don't know if anybody's ever had a call where like, you were trying to close a deal, raise funds, make a sale. And you got just a big no, but that no made you want to talk to that person, and learn for them a lot more. That's what happened with James man, I pitched him I pitched him on a funding round in my last company. And he gave me a no, I pitched him hard. I came back at him a couple of times, I tried a lot of different angles. And he was great to talk to and was interested in what I was saying and listen intently and ask good questions. But he was just like, No. And he told me, uh, no, it wasn't like one of those fake, like, oh, we'll take a look at it. And then he just goes to me, he told me no. And he told me all the reasons that he was telling me no. And it was like, hard. It was hard to hear. But I was like, I must, I must learn from this man. So I've been following and effects ever since that was four years ago, and dove into the network effects Bible and all this stuff. So I want to kick it off, James, by asking you this question, which was what I asked myself when I first jumped on and effects and started looking at your content. How could there be so much to learn about network effects? Isn't it just Metcalfe's law? Isn't that about it? Right. Okay. Every new person to a network adds value to everyone else? Like how could there be you've got a master class, that's hours and hours long, you've got so much content? How was there so much to extract from this seemingly simple thing?

James Currier  2:45
It? Well, it's great to see you guys, and thanks for having me on. Yeah, I mean, network effects is really just the study of the math. And math is sort of infinitely interesting. And it turns out that we've at least identified 16 different network effects. It's not just one, Metcalf identified what we call a direct network effect. But there's 15 others. And we've been able to parse them out by looking at different companies that we've invested in or decided not to, or things that work to things that within. So being practitioners on the ground, actually building these companies ourselves for 20 years, and then investing for the last 10, you get to really see the differences between the different types of network effects. And that's because you just have this incredible multiplicity of math. I mean, if you think about the world around you, it's all just fractal geometry, probably. But the world looks pretty complex. And so what we try to do is boil it down to its fundamental principles, but then also recognize the sort of cornucopia of various expressions of those network effects that take place in the real world.

Jared Fuller  3:43
I have a follow on question to that James. Some of the My Favorite follows are, let's say more simple business follows. And I mean, people like you know, Charlie Munger, poor Charlie's Almanac, people that speak in mental models. So in my last video was David cancel of drift, who was a big, big reader. And he'd always say things like, you know, the, the best things in life or in business are simple, not easy. And what I've come to believe, you can correct me if I'm wrong on this, when it comes to things like ecosystems or network effects, they're the opposite of simple, not easy. They're complex, not difficult, meaning any individual facet of what we're talking about these 16 different things, these are all just probably execution. But the complexity starts to stack to where how the heck do you start to see the forest through the trees like breaking down these different 16 network effects? Do you view this as a math problem that it's like, hey, you need to have models on top of models? Or how do you get around that complexity that's inherent from manifesting these things?

James Currier  4:42
That's a good question is how do you operate when you have all this knowledge or as you're learning all this knowledge, and the way we do it is you sort of know enough about it by talking to me or by reading our stuff that you hone in on one or two network effects. You know, one that you can start with And then once you get it going, then we do a reinforcement exercise where you can then reinforce it with other forms of network effects or other forms of defensibility. So we try to break it down into step by step privacy where you wade into it. And after four or five or six years of doing it, you'll start to see the world the way we do, because you'll have experienced it. So you're right, it's, it can be complex to navigate, but we boil it down to sort of one starting point, and then we work on specific playbooks for that one network effect. And we get it going. And you see the beauty of it, you have the feeling of it, your, your teammates have the feeling of it, they know what they're going for, they know it's going to be worth it. They have the energy, they move forward. And then you can reinforce with others as you go.

Isaac Morehouse  5:42
So give me some give me some for people who haven't read and aren't familiar with the all these different kinds of network effects. Maybe we can distinguish at least a few of them, we're not have to go through all 16 One at a time. But like, take something that people are familiar with, like let's say LinkedIn, everybody's pretty familiar with LinkedIn, and you feel like you have an intuitive grasp of okay, there's a network effect here. That is a every time somebody joins, my potential network gets bigger, it's more valuable to me, this is very, this is sort of very obvious. What kind of network effect is LinkedIn relying on? Man? Could you contrast it to like one of the other types in there so people can kind of get an idea of what you mean by these different kinds?

James Currier  6:21
Yeah, sure. So LinkedIn started with what's called a personal direct network effect. It's direct, because all the nodes on the network are equal. And then it's personal, because it has to do with your identity. Okay, you could have another direct network effect, like a phone network, where it's not personal. It's just a phone. And when you would call the phone, you would say, Who is it? Because it's not personal. Whereas right now you call someone's cell phone, you know, who you're calling, you say, where are you? Right? Okay. So these network effects are slightly different, but they're both direct in the sense that each phone and each person is equal on these networks, like LinkedIn or on your telephone network. you contrast that to a network effect, like a marketplace network effect, where you have buyers and sellers, the buyers have one interest in behavior, and the sellers have one interest in behaviors very different, actually need different profiles and different interfaces, for the different the two types of, you know, buyers and sellers on eBay, for instance, you have different interfaces, different workflows. And, and that would be a marketplace network. You can have a data network effect where the data makes your algorithm more, you know, more accurate. There's a different type of network effect. So those would be some examples of people would, would be, you know, ways.com is a great example of a data network effect where the more people are driving their car, and you have more data coming in on a minute to minute basis, you know how fast cars are moving on the roads, and that you can calculate better where to drive to get the fastest part of your route. So that that would be a network effect. And that's hard to compete with, which is why Waze is still the number one company doing this 12 years in gyms. Quick

Jared Fuller  7:56
follow on to that. I'm not sure if you're familiar with this company. Have you heard of crossbeam? No. Okay, so crossbeam reveal partner tap, there's a handful of these companies right now in partnerships, technology, or ecosystem tech. And what they basically provide is an escrow service for data, meaning b2b companies can share target accounts, current customers versus not. And it allows you to go to market in a very different way that's not third party cookie reliant, basically, you know, a little bit of a hack towards getting closer to that trust signal by going oh, they, they already use this software, oh, they're using this agency or this Si. So these are some really interesting businesses that are doing very well in partnerships, tech, Bob Moore, the CEO gave me a definition of a platform. And as I've been, I've been hearing you talk, I'm like, well, he defined a platform feature as the following. A platform feature is any feature that by virtue of you being in first place, has more value now, than your competition, your competition. And if you unpack that a little bit, it means, okay, by virtue of you having more people on or data contributing, that's his version and definition of a platform feature is that similar to what you might call a network effect feature,

James Currier  9:12
it is similar and for your listeners, I think it's helpful to know that, you know, there's a sort of a language battle going on here,

Isaac Morehouse  9:20
which is one of the network effects by the way, language

James Currier  9:23
there. Yeah, language is one of the network effects. And I, this word platform has been promoted by a guy and as been picked up by a few folks at HBS. And I don't think it helps anyone understand what the folks I, if they call any business with a network, in fact, the platform is just, it's it's very unclear. And there is one thing we call a platform network effect. It's one type of it which is like an OS. So if you build a platform like Microsoft OS, and you get people building apps on top of that, because they want access to all the people down below using it it's like a two sided marketplace network for factor is different, and that the sellers are actually building into your network. Right. So if I'm on a marketplace, I can sell my stuff on amazon marketplace, Zolani bag and sell it on Etsy doesn't matter, I'm not building my product into your software platform, but an OS, that is a platform where I need that platform on top of which I cannot build my product. Okay, it needs to work through your OS. And, you know, iOS is like that force, which is part of Salesforce is like that, where they're like, look, build into Salesforce, build your app on top of us and be distributed through us get distribution to all the users of Salesforce, that is a platform network effect, there is such a thing, but it's one of the 16. And what these guys are doing with this word platform, is they're saying anything that gets you ahead and you're in first place, know that the CEO is doing great, their business is obviously doing great, I'm not disproving their business, it's just the language that we're using, I don't think is as helpful as we could make it.

Jared Fuller  11:02
It's a bit it's a bit narrow, focused in terms of the wider remit, if you feel like, hey, I want to become an expert, so to speak, or commit my career and my business or my new company to leveraging this path to market or to growing a company. If you're just thinking through the lens of platform, you're missing 15 other network effects. And I feel like a lot of people in b2b SaaS, in particular James get caught up in that they think they think from the lens of what's happening with their company, oh, we need platform, that's how we get network effects is to get people to build on top of us. And that's a bit too myopic, perhaps

James Currier  11:39
there's so many other ways to create defensibility in your company, you need to be aware of the different playbooks. And you'd be able to turn up the dials in different ways. You know, when you when you use words like platform, people say stuff work, you know, it's winner takes all man, platforms are winner takes all, as if that's some sort of giant insight. It's not a giant sign, because it's just not true. You have lots of companies which have network effects, which have direct competitors, and they're doing well as well. It's just that your network effects help you be defensible against a number of other and other other players and helps you increase your margin and help you increase your virality. And to have all these other benefits, it doesn't mean it's a winner takes all market. Just people are trying to, I don't know, we just need to get the language right so that people can navigate better. That's all I'm trying to do.

Isaac Morehouse  12:20
Well, I love the another distinction you make. And this was in like one of the very first of your I've been listening on audio to your masterclass. But the distinction between virality and network effects because there's a relationship there. They're not an unrelated network effects. Businesses often have virality. But there's a difference. And you were kind of distinguishing like, hey, just because you can get new users for very low CAC, because current users will help bring on new users. That's not the same as each new user adding value to the current users, that's a different thing. And what's that, you know, virality helps you with that growth. But network effects is so much more about the long term, the defensibility, the robustness. So if you have that, the ability to outlive products that come along, that are just as good or maybe even better, from a feature standpoint, right, and Jared, and I have been talking about this, we've been kind of chatting about this, kind of like Netflix versus YouTube. And maybe it's not a fair comparison, but the ability of YouTube to have that they can tap into the longtail they get all those creators that can come and build where Netflix, I can't just go upload a video to Netflix. So even though that Netflix has innovated in a lot of ways, there's just something that's really defensible about YouTube.

James Currier  13:37
No, yeah, yeah. And often people get viral effects and network effects confused, because many of the companies they see which were they understand network effects, like Facebook and Twitter, were also viral. But those are actually different playbooks and different approaches. And as you say, viral effects are about getting new users for free from your existing users. And network effects are about keeping your users there, because the value of your product goes up so much, they can't leave. And the value of their product goes up because other people are using. What's

Jared Fuller  14:11
so interesting about that is I tend to hear the word viral from a very specific subset of the b2b world. And that's typically from a growth marketer. There's, like Brian with reforge, for example, like some of the stuff that he started to put out really early on, evangelize this component of like how to create viral you know, effects and blah, blah, blah, through growth, marketing, and these were all about how to create viral loops. And then you saw a lot of businesses really start to obsess with that. And I think it's unfortunate where it went because it only it started and stopped with the marketer, which really isn't paying attention, especially not someone that's reports into demand gen, for example, right? The defensibility component, right, the retention component, the ability to drive more value beyond the sign up, right then compounds and that compound interest what have you seen since that's become popularized? I feel like those types of words and you know, the rise of the growth marketer role has that benefited the wider conversation and where we find ourselves in 2022, where the b2b go to market playbooks kind of being ripped to shreds right now, like CRO CMOS, a lot of people are going, Hey, we're throwing this out. It's not working, just going direct, we need to be thinking differently, is, are those things that like the reforge class and growth marketers coming up? Is that helping facilitate this conversation? Or is it muddying the water?

James Currier  15:33
I think it's helping facilitate the conversation. I think that this movement toward product led growth is another word for what we've been calling virality. Since 2001, was invented the term and we invented the K factor of events at the email address important. We invented all of these AV testing techniques that were copied by Facebook and everything else we were, we were inventing that stuff back in the early 2000s. And now that knowledge and way of thinking is penetrating into the b2b software space, but it just wouldn't. You know, I gotta be honest, when we were really experts in viral growth in 2004, we said, everyone's gonna figure this out in the next two or three years, we're gonna need the new thing. And we were and we were so shocked that year after year, people still didn't understand about viral growth. And still today, these basic ideas from 20 years ago, are trickling into the b2b area when when they should have been there, you know, 15 years ago. So I think it's helpful look, Brian Balfour's, very smart guy, I appreciate his work. I actually like reforging him and, and many of the things that he's he's put out, he's doing great, some of the stuff that he was promoting around getting viral in 2015, or so that was that was stuff was all, you know, in 2008. But he was popularizing it, which I thought was great. And I think that, honestly, you know, I've seen a lot of b2b companies hire in heads of growth, and don't give them the ability to actually make a difference. Because there's the CMO there, because the VP of Marketing, because everyone's sort of in place. And they have their way of doing stuff from, you know, 1998, or 2004, or whatever they kind of grew up. They're not allowing the more holistic approach of a growth thought process to take over the company and help it grow. Because the problem with growth from a business perspective, as it's implemented in most companies today is it encompasses everything. And it comes into the product and encompasses the language and encompasses the channels, compasses, partnerships, sales, all that stuff has to be seen holistically, so that the flows move easily, so that you can get something to grow through the product lead product lead. So then what that means that the product features have to change, the language of the product has to change. And then the language of all the emails and every other piece of it has to change so that it itself can lead the growth, not the head of sales, not the head of marketing with the product leads to grow. And so really, my perspective is that, you know, you had a lot of these very viral successful consumer companies, because you could get two or three people who are really into the product, both the language and the tech and the loops and the emails, to do everything sitting in the same room and creating these beautiful artistic things that just like an organic, being like a thing that's alive, who would spread out into the world,

Jared Fuller  18:24
like WhatsApp or Instagram, right? Like it doesn't few dozen employees, both of those companies, multibillion dollar outcomes.

James Currier  18:29
And in b2b, you don't have that scale of team, you have 5x 10x that scale a team and everyone wants to have a hand and what goes on everyone wants to be respected. Everyone wants to be making decisions. Everyone wants to be adding value. And in the end, it gums up the works. And if and if you could centralize it in the growth team who understands the data, who understands the language and understands the design or understands the features, right? If you could do that the way we did in consumer back in the 2000s, early 2000 10s, you would have a much more effective product lead growth strategy for most of these companies than you do. Because you would have fewer people and it would be this more holistic approach. And you think back to the 60s, you know, you had Ford Motor Company, and they had a separate building for the sales team, a separate building for the AD team, a separate building for the manufacturing separate. So they actually had like separate cultures in these in these different wings. And the b2b companies are better than that. Because it's now digital, and everyone's kind of connected, but they're not nearly as far along as the consumer led software companies have 15 years.

Isaac Morehouse  19:32
That whole, like feed the funnel mentality, sort of like myopic, you know, just feed the funnel versus now if you feed or seed the ecosystem, and it grows healthy enough, it will sort of feed the funnel on its own. We were just talking to cmo earlier today about you know the difference between just creating actually create doing category creation through content and community. And when you do that, right then the product is the easy part people are they're there, they know that you're evangelizing the category and the problems and the pain points. And they'll the solution, finding that solution is easy if you've got the trust established in that ecosystem. So I want to i You're making me think about in partnerships, especially this distinction between virality and network effects. And both are useful things. Like it's not a bad thing to have virality, obviously, but in thinking about partnerships, it's really interesting, because it's easy to think, hey, like, let's say we partner with somebody, maybe it's for a tech integration, or maybe it's for CO marketing, or both. I think it's easy to focus immediately on just the kind of viral component, or at least the component of this helps bring more users to us. Because now we get to tap into somebody else's user base and their network. And you know, my network plus yours equals a larger pie for both of us great, but there's not like, could you think about partnerships where that partnership actually has a network effect, not just increasing your reach, but it does something by working together with that partner, whether it's a tech integration, or somebody you're doing marketing with or a reseller, you know, agency, is there something about partnering with them, that makes your product more valuable? That adds value to your customers? That's a different kind of partnership question. It's just I don't know, I don't know if Jared, you have any thoughts on that either. But that's kind of like spinning around in my head. That distinction?

Jared Fuller  21:25
Well, based on what I know, from James's work in this conversation, is I would say that partnerships have different types of network effects. Right. So for example, an ISV partner that builds on platform has a very different network effect than let's say, an agency like Matt Heinz with Heinz marketing. And what Heinz brings to the table is a 50,000 person list of marketers, and they all trust the heck out of him, right? So if you're doing co marketing, and Heinz is a great partner, you've you know, cut your CAC in half, because you're doing co marketing with Matt, and the content that he can produce over time, does a lot more to educate and embolden your customer base, but that's very different than an ISV. So that would be my thought process is that different types of partnerships have different types of network effects. And what your thoughts are on that, James?

James Currier  22:11
Sure. And you got it exactly right. And the way I think about it is think of each person or company as a node in a network, right? So you're trying to abstract it to sort of mathematical thinking, you abstract a person or a company to a node, and then you think what is shared between the two notes. So if you go to an article on FX called bonding theory, so network bonding theory, this is an article that not that many people read, but those who do understand the religion. Okay. And basically, it shows you a picture of two nodes, and then shows you a long list of things that these nodes can connect that that are shared between the two nodes. So it could be technical integration, it could be traffic, it could be credibility, it could, could be money. There's lots of things. And you just have to pick through the long list in your partnership of what you want to exchange on this link between these two notes.

Jared Fuller  23:10
This is so interesting. We've had a couple of different conversations on the podcast, James about how the funnel is just such an erect preventative model of the way that businesses are built in 2022. And beyond I mean, it's, it's, it's easy, because you can put it in a spreadsheet, right? There's input, and then there's output, right? So it's two dimensional, so to speak. This will be rife with poor analogies compared to yours. But I think are unit unit directional, at least, right? Right. It's input output, right? So if we do these activities will generate. So x activity Y output, right, so that's pipeline revenue, whatever, just extend that down. And I think in my opinion, the way that I've been describing it to go to market executives is that the network is the new funnel for all businesses, whether or not you're viewing it that way. And what that means is there's a delta or a Z axis, so to speak, right? It's not just input output, its input output throughput, so to speak, right? The bond between those nodes and how they're tied together, dictates so much more than merely activity at the top. So you have these, the distance between nodes, and then like how fat or wide or how much, let's say throughput capacity between those nodes, dictates much more about the health of that network than any activity itself. And I feel like that three dimensional thinking so to speak, like being able to think like a graph is what oftentimes holds people back.

James Currier  24:35
Yeah, no, you're, as soon as you start breaking it down into how thick is this link? How long is this? Like? What are all the different things that are traveling between this link? Now you're starting to open up your mind to how to really think about network effects ecosystems in this sort of thing. This is the language that's going to allow you to actually master it. And if you obfuscate it with the words like platform, you're never going to get there. So that's exactly how we think about it. Now, when it comes to partnerships, the thing I want to point out is 3d another article that we've got called your life on network effects. It talks about the human elements about what we call network gravity. Okay, so when I proposed the partnership earlier today, the person who works for me immediately say what he immediately said, what do we get out of it? No, I had a PowerPoint slide with like eight things that we were going to get out of it that were very in short writing, so he could understand very quickly what we got out of it. But his initial network gravity was to resist doing the partnership, more work for him. Unclear, what are they going to need from us? Will it be successful? How long would it take, he's got all these questions and concerns about his own requirement to be part of the partnership. So the gravity of this is what kills most partnerships. And even once partnerships are signed, what kills them after they've been signed, is because the other nodes on the network haven't been activated. The other nodes meaning of the other people in the company that you're working with. And and this is how you, I think, if I were doing partnerships, and as a venture capitalist, I kind of do right, with with the founders that I work with. But if I were doing partnerships, that's what I would be mostly thinking about is how do I light up and align the rest of the network around the person that I'm talking to?

Isaac Morehouse  26:30
So let's let's talk about this a little bit more of the venture capitalist, as a partner manager, I guess, if you will, or at least somebody who's running an ecosystem, because we talked about this Jared, a little bit on the last episode with Jen from from high alpha, but you have on your on your port code page and effects. It says right at the top, every new company makes the other stronger. And I know that every VC will tell you, Oh, we're a value add VC, you're joining, you know, this network, you get all this. But most of the time, the value they add is is the check they write. It's it's there's the exception is something else, right. And I think what I'm curious about is how you, because you, you have an ecosystem and your I guess a way a way in which you're you're doing I'm thinking out loud here the give first we talk about all the time like first mover advantage, you demonstrate that you're somebody people want to partner with by giving to them first before you ask for something. And so all the content you're creating, you're creating all this content for free. So founders can go and follow and say, Well, I've gotten a lot of value from James, I'm already getting value from him. Boy, I would love to be in his network and get even more value. That's one way you're kind of demonstrating that. But how do you? How do you prevent the problem of because as a VC, the check is the big thing that the big gateway in the door? How do you prevent all the rest from disappearing? Because we all know what happens. Oh, great. You're a port co now, we also have a Slack channel. And you go to the Slack channel. And it's very, it's it's cringy. Because like somebody posts, and there's like one like on it. And everybody's embarrassed that nothing's happening there. And you all feel obligated, like you're supposed to make it something happen, but it's not valuable to you. I feel like that's a really hard thing. People who try to add a community on but it's not the main thing they're there for the main thing you're there for is to is to get that company funded. How do you make the network valuable beyond that in a deliberate way? Some of it just happens. You make intros and things. But I know you guys are doing some interesting things there that affects I'm really curious how you think about that?

James Currier  28:30
Yeah, you know, what you're pointing out? It's a real challenge. I don't just agree that that's that's the mentality. And it's hard to do. Look, I think most VCs say their value added because they really want to. And it's not that they don't want to be it's not that they don't have good intentions. It's just that sometimes in your busy lives, it's hard for them to find a way to insert and make a difference. Most of the VCs I know are trying to make a difference. There's 10 or 15%, who are who are deeply grieving about their relationship with their dad, and therefore they're not great to work with. But that's a whole nother subject. So the way we do it, we do look at our, our VC company, our VC firm, as a startup, we see it as a network effect business. We we run it like a startup. We've got 60 employees, we don't we got 20 people on our tech and data team, you know, engineers and designers basically making software both internally and externally. And we've been we've been building out the ecosystem, and we track hundreds of 1000s of deals, sources, and we know who they are, and we've got all this data. And the way typically you do it is you get a platform team that on day one, soon as we make the investment. You're on boarded to the platform team, you're on boarded to the software that we built. You then get immediate help on your PR or on your plants for recruiting or on your development of culture or all the things that your seed stage company needs to know Have lots of things. We have 500 different videos and checklists and whatnot for, for people to get 80 to 90% of world class, in just a few hours by shortcutting, everything we have, you know, 30 people on our staff who will help you with various aspects of your business, call them on the phone bill. So these types of real value ads start to seep in with the founders, like, Oh, this is different. This is amazing. And I'm going to keep looking here. First, as I keep growing my company, and when they do that, then they come to the events, and they become friends with the other founders. And what's their friends, then there's conversations that happen. Once those conversations happen, they realize how much value they get from the other CEOs or the VPs of engineering that they're that they're dealing with. And they share KPIs in an environment of trust, they get to know each other, you know, so so it does take work to build an ecosystem, and to build a real partnership between a VC firm and a founder. And I'll tell you the biggest barrier, the biggest barrier, which I had four times because I started for venture backed companies that were successful. Our mentality as founders, is that what I really want is the money. And once I get that, I feel like, okay, I'm done with that process. Right, it's like buying a Fitbit, Fitbit made a huge mistake. They said, buy a Fitbit, as opposed to join the Fitbit, no. And the VCs are, basically buy a Fitbit, buy my money with your equity. And the founders are think I'm just buying a Fitbit, I'm just gonna put it on, I'm gonna use it up, it's three months, I'm bored with it, I never use it again. Whereas the way founders should be looking at it is I'm joining a network.

Jared Fuller  31:52
Fitbit plus Strava.

James Currier  31:55
Yeah, I'm joining an ecosystem of joining effects as ecosystem. The problem is, the problem is that we're basically in a bar, and, you know, it's about a sex appeal. As opposed to meeting someone at like a bookstore, where you have a conversation and you become friends for months before you start dating. You know, VC land is like a bar where it's about, you know, who's going to go home with whom, who's gonna, you know, who's just gonna close the deal, who's going to inseminate that capital into that company, right? It's very transactional. And and, of course, the founders when when they think, okay, it's not going to be transactional, and then they don't get value out of for VC like, okay, all VCs are bad, all guys are bad. All girls are bad. But this is the mentality. And so anyway, you're so we're fighting a language issue, we're fighting a mental model issue, you know, trying to build ecosystems into venture capital. But but it can be done both with software and with support and intention and language, we don't call our portfolio a portfolio, we call it a guilt. Because we want to, to have this idea both internally to our company, as well as well, the founders that this is about you coming together, because you got a lot to share with each other.

Isaac Morehouse  33:18
So everybody who's listening, that runs a partner program, you just go back and re listen to the way James just walked through the process of what they do with founders. And it starts even before they fund right, so James, and FX is putting out tons of really valuable content that's valuable to founders for free, as well as a few products, you have a prominent product called the signal, where you can go on there and connect and you can use I use it when I was raising, where you can, you know, upload your pitch deck and you

James Currier  33:46
just basically get used to it. It's a it's a signal that affects.com And it's the best place to go find seed stage and series A investors.

Isaac Morehouse  33:54
Yeah, it's it's a, it's a simple way to share your your pitch deck with a link, you can put a video on there, it's just a really nice kind of like,

James Currier  34:01
that's all brief link. So we have two products, one a signal that in effect.com. And that's where you find VCs to write. It's the opposite of AngelList. So Angeles was like, Hey, I'm a founder, please invest in me. Well, you can imagine what quality founders ended up on AngelList not the best. So this is the opposite of that. This is the VC saying please let me invest in you. And all the best VCs are on there. And now the best founders can now use that system to find the people they want to invest in. So by reversing it, it makes it a lot more valuable. So about 100,000 founders a month using that to find VCs. And since we can only find point 4% of the of the companies we see. This allows us to help nine 9.6% of them find the funding they want to go forward with their business. And then the other thing we call this reef Lake, and so that's where we put up that's where you put up your deck. That's where you put up your video. That's where you answer these questions. And that's like having a first meeting with a VC and that's going to that's gonna really speed your will get about 1000 companies a month, putting that up, and we've $8 billion has been raised using brief lengths. So it's, it's, these are useful free tools that we give to people because we want them to move on their journey.

Isaac Morehouse  35:13
Yeah, so to finish the the comparison, the analogy like, Okay, so you've got content and tools that are free, that are really valuable to the to the potential members of your network. And if you're running a partner program, those are potential partners. Then once you've funded them, they have this really first class onboarding process that feels different. It's not like you got to check, then you get an email invite to a Slack group, good luck. It's like no, we actually have put together an entire, like enablement, you would call it in the partnerships world that feels very high level, then you make connections to other people in that ecosystem. So if you're thinking partnerships, how can you connect those partners to other partners, like the whole, and then you're sharing, you're asking them to share data with each other, because it creates more value for them, etc, this, this entire process, the way that you're treating your ecosystem, is, I think, really, really instructive. There's a lot of stuff to draw from there to, you know, first make people want to work with you by giving them things that are valuable for free. So they're already kind of in your orbit. And then once they officially get on board, because the typical partner program is like, Hey, join us, okay, great. You're a partner. Now, here's a link to a portal, go log on, you got some stuff you can poke around in the portal. And that's how it is with most VC firms. Similarly, right. Here you go, we funded you, here's a link to our VC resources, and our Porco resource page or LinkedIn or slack or whatever. But just the way that you're kind of doing this whole thing. So deliberately, I think it's really, really instructive. So Jared, I know you got some stuff you want to jump in with?

Jared Fuller  36:43
No, I, this conversation is, to me, this is where this is like the early innings of the types of conversations that need to happen between founders, early stage teammates, and then eventually executive teams with scale. James, you and Isaac, you were both speaking to something very interesting around. Like, James, you also mentioned the word platform. I know that in the VC world, like heads of platform means something different than you know, like a SASS platform, of course. But the content alone, I think we find ourselves at a very interesting inflection point. And you talk about in your bonding, what was that piece called Network bonds, bonding theory, and network bonding theory, you talk about some of the

James Currier  37:29
components of boards. It's a boring title, which is why no one clicks on it. But it's actually where the goods are,

Jared Fuller  37:33
yeah, is when you talk about the types of compensation between multiple nodes, right. And what I'm finding, and let's get into a little bit of information theory here is that there's so much information, the average American receives 400 to 10,000 advertisements per day, every day, 400 to 10,000, like it's mind boggling number of how much and how frequently we're inundated with information. And then I'll also add the caveat, that the information is getting increasingly good. For example, let's say I go and do a software evaluation of drift, intercom and qualified. The problem isn't that one company has much better content than the others. And it's more expensive, but I believe it's a better product, it's that all products are also competing with the content, all three of those content, like I get fed by those three companies, that it's all good, right? It's not none of it's bad. It's good information. So what does that leave me to do in terms of me as a company, establishing a better relationship to that other node in the network? I think what I'm hearing based on what you just added something like belief in the mission. Right? So for example, the founders that join and effects are committed to the cause of network effects above and beyond anything else. It's not just the content, maybe it starts to educate them, but then they start to believe it in their core. So for example, if one of the founders in your portfolio company needs help, are they going to google it? No, they're going to ask what another founder, right? Yeah, we are defaulting to these like, information was everywhere. And now all of a sudden, we're finding it being like, hey, what's the closest piece of information? To me? It's someone I know. This seems like an emergent phenomenon to me where, hey, like, we can just go Google it. Let me Google that for you. Right. And we can all get the answers to everything. But now what I'm seeing instead of review sites, instead of Google instead of these other things, we're turning to those people closest to us who look most like us in think most like us. What would you say is emergent about this trend that I I feel like it's affecting everything about how we consume and purchase goods.

James Currier  39:42
I think you're right. And I think what's happening is we need more filters. And we're looking for better filters. Because there's so much information so the power moves from the content to the filter of the content. And what the battle is, is who's the best We see this at the politics, you see this at the politics level, right? Where there's a lot of people who don't want certain people being the filter for people like why you listen to that person, like they're nuts. And and we're seeing the same battle in tech, which is, who are the voices that people are now listening to, this is why I get annoyed with this whole platform silliness, if it's not helpful, or like the lean startup methodology that they teach at the GSB. It's like, it's just doesn't work. No good companies come out of it. And yet, there's 1000s and 10s of 1000s of people and companies in universities who are using this methodology to try to find the next business idea. And it's just busywork. It's not actually helping them do anything with their life. So I get annoyed when I see things that aren't working, getting a lot of attention. And I really tried to promote people like Brian Balfour, who, you know, and obviously, the content we believe in at our firm as the place to go because you do need to filter and, and finding those filters is critical. Now, unfortunately, what's happening nonetheless, then is, unfortunately, it's the most narcissistic people who are most interesting to listen to almost Sapiens, Homo sapiens love narcissism, we're fascinated by it. We can't avert.

Isaac Morehouse  41:24
Hey, now you're talking to podcast hosts here.

James Currier  41:28
And so even in tech, we're seeing the most narcissistic people get all the blank time, all the attention. And I don't I wish that weren't the case. But but it is. And so as a culture, we have to fight it as a system, we have to fight it as software developers, we have to fight it. Because that's what people clicked on. That's what people listen to?

Jared Fuller  41:49
Well, I think I think we're seeing a global shift away from the popularity contest. And the best tweet, the best distilled fast food information to I mean, I just listened to a conversation, James, I don't know if you saw this come out. But with Balaji Srinivasan of Coinbase, and Lex Friedman on the LEX Friedman podcast, it was an eight hour podcast. And I was like, who's gonna sit down for an eight hour conversation? It's one of the best conversations I've ever heard in my life. And why are these long format two hour, three hour podcasts, eight hour things catching on so well, is that I think we're rejecting in a lot of ways, the popularity contest and realizing nuance and substance does matter. And as a result, we're listening to longer form content, right? I mean, Google is even prioritizing content from a search perspective, that is 3000 5000 plus words, right podcast that do well aren't 20 minutes, they're two hours. There's something about the information when it's like, you're able to catch on to something that someone believes in and trust and then you have other people that listen to it or believe in it. That's the thing that's catching on. So I think I mean, it is a bit pessimistic, but Well, I

James Currier  43:03
hope you're right. I hope you're right. I'm glad you're optimistic about it. And Balaji is certainly is one of these unique people who is more helpful to those listening to him than being narcissistic. I mean, he's certainly got a big ego, but I think it feels like a healthy ego, as opposed to these other folks that are getting a lot of attention.

Jared Fuller  43:21
There's a lot of nuance there. It's kind of my point, right, is that we're seeking out the thing that's underneath the thing, and that the fast food information isn't enough, because there's so much of it. It's abundant, it's everywhere. And I'm hopeful that, you know, that ends up being the future. And I think that's one of the most interesting components of where partnerships meets network effects is the people that are like me, the tagline for partner hacker, James is trust is the new data. It's very intentional, right? So data was the new oil until it polluted our world. And we got 410,000 advertisements per day. And the people that we're turning to for making purchasing decisions are people like us, right. So why did podcast advertising work? It's because, like, I relate to that host. Right? And, you know, I've been drinking athletic greens every day for three years now. Right? Because of Tim Ferriss. Right. I was like, oh, like I really trust, Tim. But someone else trying to sell me a supplement right now. They're gonna have to come through not advertising there enough to come through Isaac, or Alex, or someone else that I know and trust. How do you see that emergent phenomenon where like, we're really not making I mean, I'll give you one more example James that you might not be aware of. Do you know the Amazon Save for Later button in the past two years has seen a 4,000% increase in usage. We don't even trust ourselves to make a purchasing decision. Right like we because it's not the reviews. The reviews are all gamed, it's 4.7 stars, every single thing is 4.7 stars. We're trying to find people like us more and more. What do you think that means for like the back half of this decade like everything's changing? These trusted relationships seem more important than ever.

James Currier  45:02
Yeah, but you know what? I gotta be honest with Jared, we said that 10 years ago, we said that 10 years before that, we said that 10 years before. And I'm sure that if I had been alive in the 60s, they were saying that at that point, and I think trust is a little bit like fashion or novelty. Right, you have to find a new person to trust a new reason. And then they betray you. And then you feel like you will trade and then you stop trusting. They've done something in the relationship by overcharging you, or by over communicating something that you then lose trust, and then you gain trust. So there's this there's this fashion element, there's this novelty element, there's this trust comes and goes, element and trust has always been, right. I mean, that's one of the reasons why we left the president FDR for the war on the depression is because we trust it, you know, and trust is the Paramount thing in this society. Now. He gets on the fireside chats on the radio, everyone trusted, so I get it. But every generation feels this way. And this is just, it's just you're trusting more. You're, you're connecting with more people because of the internet and your life now than you did 50 years ago, or 100 years ago. And you're just having to learn how to quickly trust more things faster.

Jared Fuller  46:13
Isn't isn't there a ceiling though? Just what's that principle that you can only keep in your brain 150 people at any given time. So like, you know, you have to You're basically cycling people in and out of that 150 people. It's called Dunbar's number. Dunbar's. Yeah, there we go. Dunbar's number.

James Currier  46:28
Yeah, yeah, I mean, but but I don't know. I mean, you buy a lot of products on Amazon, probably more than 150 already. There's lots of things you trust.

Jared Fuller  46:36
Interesting, right? It's the number of much bigger Dunbar's numbers doesn't. I've always thought like, I know my network bigger. And I kind of know these people.

James Currier  46:44
Dunbar's number relates to people whereas you're talking about can I trust his newsletter? Can I trust his website? Can I trust this product? Can I it's like homosapien Can I trust that rock and that tree? Or, you know, there's lots of other things I had to learn to trust. So it's a bigger number than 150.

Isaac Morehouse  46:57
But I think I think what you're pointing to Okay, I'm going to try, I'm gonna try to say, here's a way in which you're both right, is that humans are always in an environment where there's more information that we can directly process to make direct judgment calls about everything based on firsthand knowledge. So what do we use, we use signals. And every signal takes place within a game within a context. Yes. And once those get figured out, and new technologies often get built specifically to enhance signals, then the signals get diluted, that are signal inflation, we call it now it's totally fake, that you're rich by taking a picture on Instagram next to a car that you don't own. No longer is that a valuable signal of your fitness to date, or whatever, right? And so it's this constant race. And we're kind of in the cycle now where, hey, social media and the creator economy and all this stuff was like this new explosion where people could create their own signals without going through intermediaries like never before, and get the signals of a like and whatever. But that always gets gamed when you see every new platform. If whatever the rules are of the platform, eventually it gets gamed, and then there's ways to counter the games or whatever. So we're in one of those phases, where to your point content marketing, or we had a conversation earlier today about like content is the new spam, whatever. Like, there's, there's a whole new, always it's always in cycles, but we're at the edge of one of those cycles, I think we're what signals matter. And what conveys trust is sort of shifting, and we're kind of trying to figure it out. And most people are playing the old game when it's played out, you know?

James Currier  48:33
That's right. That's right. It's constantly changing. It's just like marketing. mean, your channels that worked two years ago don't work anymore. What was viral in 2003? Wasn't in 2005. And certainly isn't today. Same thing with trust, trust, you got to you know, we talked about being a shrew. You know, where, you know, when the dinosaurs became extinct, what lived was the shrew. They lived underground. They kept their own body heat. They lived in tiny little groups, there were little tiny things that didn't lose us a lot of joules that they didn't burn during the day, but they ate all day long. They never stopped moving. Even when sleeping. They were not they were they were moving. And that approach ended up dominating the planet, right? The mammals ended up dominating the planet because they never stopped eating, they never stopped moving. Where the reptilian and the dinosaur genetics had them doing something very different. So we look at all of this as truths, and we have to keep moving on trust. What creates trust with people is always changing. Right now, it's, you know, 10 years ago, if you looked bad on a video, it would lose trust. Now when people see up your nose and your unshowered I was like, Oh, he's so authentic. I trust him. Totally, totally. Right. So what what creates trust is always evolving. What channels is always evolving. That's why we need marketers. That's why we need new part. readerships all the time, because the partnership US did six years ago just isn't producing any more. you've tapped out. Whatever you can get from

Jared Fuller  50:06
James. This was one of my favorite conversations to date. Isaac, thank you so much for making this introduction and bringing kind of James to our watering hole so to speak. But this isn't the last that we're done. We're talking Isaac, we've got James pls I'm gonna kick it over to you to bring us home.

Isaac Morehouse  50:25
Yeah, you gotta you gotta be a shrew. James said Never stop eating. That's a survival strategy. Never stop learning. So we got the next level of this conversation. I'm really excited about doing a session at the pls summit on partner led startup day one November 7, a session with James and Kyle Boyer from open view. And we're gonna kind of talk about Kyle's big on product lead growth. We're gonna talk about plg network effects. What happens when those collide? I'm really, really looking forward to that. So if you're listening to this, you want more you want to be that true? Go to pls summit.com.

Jared Fuller  50:58
James, it was a pleasure. Thanks so much for joining partner up.

James Currier  51:01
No, thanks for having me.

Jared Fuller  51:02
Absolutely. All right, partner up, peace out. We

Isaac Morehouse  51:04
will see you all

Jared Fuller  51:04
next time.

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