Catalyst flywheels: four types

We just said that flywheels are the gold standard of growth catalysts. And particularly in tech, network effects are the gold standard of flywheels.

Network Effects

At its simplest, a network effect is when the value of your product increases with the number of users or partners on the product.

There are three main types of network effects worth understanding.

1. Direct network effects: when more users directly increase value for all users (think Facebook/TikTok/LinkedIn, where more users means more potential connections and content for everyone)
2. Two-sided network effects: when more users on one side of a platform increase value for users on the other side (take Airbnb, where more hosts create more value for guests through better selection, while more guests create more value for hosts through higher occupancy rates)
3. Data & technology network effects: when more usage generates more data that improves the product for everyone (like Google’s or TikTok’s core algorithms getting better with more user data)

An important callout for data/tech network effects: Having proprietary data and/or tech does not mean you have a network effect. Even if data volume or tech quality improves with more usage, that still doesn’t guarantee a network effect is in play. For it to be a true network effect (and growth catalyst), the data/tech gains must directly improve the core value of the product. 

Scale Flywheel

The next category of flywheel catalyst type is Scale Flywheels. Scale Flywheels occur when increased volume and scale drive down unit costs, enabling lower prices and higher investment into the core foundation, which attracts even more customers.

Amazon is interesting because its scale flywheel is perfectly aligned with its core value proposition: being the lowest-cost, most convenient provider. Every cycle of growth didn’t just bring in more customers; it also reinforced their brand promise and supercharged their network effects. Scale feeds directly into the heart of their growth system.

But not every company has a value prop rooted in low prices. For many, the benefit of a scale flywheel is a margin advantage. That extra margin can then be reinvested into the highest-leverage part of the system.

From a growth perspective, one of the most powerful uses of margin advantage shows up in model–channel fit. Most companies fight in red oceans, trying to out-tactic competitors and bring CAC down via channel levers. But the real unlock is being able to spend more to acquire customers than your competition can. A stronger model allows you to push outward into larger audience segments — or even unlock entirely new channel categories — that your rivals simply can’t afford to play in.

Key insight: It's not enough to simply benefit from lower unit costs as you grow. For it to function as a true Growth Catalyst, a real X-factor, you generally need to hold the greatest scale advantage in your market. If you have a phenomenal Scale Flywheel, but so does your biggest competitor, your net gain is limited.

Embedded Flywheel

An embedded flywheel exists when ongoing usage of the product creates an ever-growing investment by the user. The more they use the product, the more it becomes embedded in their workflows, habits, or daily life.

Each usage, kind of like roots, drives the product deeper and deeper into the customer's world. The more they use it, the more the investment compounds through data, customization, integrations, or simply habit, making it harder to leave.

Important Limitations

That said, while this is a flywheel dynamic, embedded flywheels are generally the weakest of the flywheels we've examined. For one, they lean heavily on the retention side of the growth engine, whereas other flywheels can amplify acquisition, monetization, and retention all at once.

But more importantly, it is really hard for an embedded flywheel to truly create a sustainable advantage. We see many startups that believe embedded flywheels will give them an edge. But in tech and software in particular, the reality is that switching solutions has gotten easier and easier, even if those "roots" run deep, particularly in the consumer context. Embedded flywheels generally show more strength in a B2B setting. If your product roots span multiple org functions, systems, etc. then the embedded effects (also known as switching costs) have a much better chance of providing a true growth catalyst.

B2B Example: Salesforce

Salesforce is a staple B2B case: every new workflow, integration, or data entry deepens reliance on the platform. Span that over hundreds or thousands of employees within an organization, and you've got a product that is going to be very difficult to leave.

Brand Flywheels

Another important, but less discussed, category of flywheels is the brand flywheel.

At the highest level, a brand flywheel is at work when having more customers either strengthens your core brand promise or chips away at a constraint in the market, which in turn attracts even more customers.

What makes brand flywheels interesting is that they don't all look the same. They show up in unique ways depending on a company's DNA.

Example 1: Breaking Social Constructs

Some brands act like a wedge, unlocking markets that were previously closed due to cultural norms or taboos. Companies like Hims, Thinx, and TUSHY built their entire thesis around this. They targeted huge markets of people who weren't seeking solutions, not because they didn't need them, but because of embarrassment or shame.

Here, the flywheel worked like this: more customers → more openness and conversation → taboo erodes → even more customers.

Airbnb is another version of this. Early on, people thought it was strange to stay in a stranger's home, or to let one into yours. But every successful booking normalized the behavior. Each cycle of usage chipped away at the social barrier, making the next cycle easier.

Example 2: Reinforcing Associations

Other brand flywheels look more like classic habit reinforcement. The more customers interact with your brand, the deeper the association with your core promise becomes. Over time, this reduces decision friction and builds loyalty. Think of Coke's association with happiness, or Nike's association with athletic excellence.

The flywheel is: more exposure → stronger association → more customers → even stronger association.

Example 3: Community as Brand

Finally, some brands are powered by community itself. Here, the brand's (and typically, the product's) value is the community. CrossFit is a good example. The workouts aren't inherently unique. Instead, the community, shared identity, and culture are the draw. The more people who join, the stronger the community becomes, which attracts even more members, reinforcing the flywheel.

Key Takeaway: What Makes a True Brand Flywheel

A true brand flywheel isn't just "more customers = stronger brand." For the flywheel to exist, every new customer must do more than buy. They must reinforce or project the brand in a way that compounds its value. That means:

• The brand is tied to a behavioral, cultural, or social dynamic (e.g. taboo-breaking, norm-shifting, community signaling) that gets stronger as adoption grows.
• Or the brand is tied to a core association (e.g. "low prices," "elite athletes") where repeated exposure deepens trust and reduces friction.

If customers are simply using your product, the brand doesn't get stronger just because the customer base gets larger. A brand flywheel only spins when each cycle of usage actively changes perception, reinforces identity, or lowers friction for the next wave of customers.

Timing Considerations

That said, it's worth noting: the classic brand-association flywheel is a long-term play. It can take decades before that flywheel spins with real force, which is why traditional business theory treats brand as one of the few defensible "moats." For startups, that's not immediately useful.

What is useful are the brand flywheels that can create short-term breakout conditions, like we saw with Hims or TUSHY, where the brand itself unlocked a market that was otherwise closed off. That's why we encourage you to carefully examine brand flywheel opportunities.

While the guardrails created by the DNA of your product determine the viability of network effects and embedded flywheels, brand is a more flexible sandbox. In short, it's a flywheel that is more accessible than the others. Especially to startups. Yet for some reason, it's also the one startups most commonly dismiss.

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