I recently had the chance to sit down with James Currier, a serial Silicon Valley entrepreneur and investor. He is very well known and one of the most sought after and respected start up advisors. Among other things, James is considered one of the the godfathers of "growth" and an expert in network effects. In this interview, I asked James about his latest endeavor, NFX Guild.  

Currier co-founded NFX Guild with Stan Chudnovsky and Gigi Levy Weiss. Chudnovsky currently runs product for  Facebook Messenger, and in the 15 years before that, co-founded four companies with Currier that had major exits, including Iron Pearl, a growth analytics company, which sold to PayPal in 2013.

Levy-Weiss is considered one of the top early stage investors and advisors in Israel. Prior to that, he had a prominent operating career and was a helicopter pilot in the Israeli Air Force.

James, Stan and Gigi were early investors in Flickr, AngelList, Goodreads, Lyft, Poshmark, Doordash, Similarweb, Kenshoo, Playtika, MyHeritage, and numerous others.

Q: What is NFX Guild and what do you want to accomplish?

James Currier: We're a Founders Guild. Our mission is to build one of the most powerful and impactful alumni networks in the world. Through a network of Scouts we know and respect, we accept applications from product-obsessed founders with a track record of excellence who want to build businesses with network effects.

We've created something like the Navy Seals training or the Julliard School of Music for them. It's very focused, Not everyone can handle it, but those who do, go on to build large companies.

I had the chance to attend NFX Guild Demo Day in March.  The Partner-only event featured a who's who of the Valley. Partners from just about every top firm on Sand Hill Road attended and listened attentively to the company's four-minute presentations.

Every company had one characteristic in mind - each one had the potential to be a network-effects business.

What is a network effect and why does it matter?

In its simplest form, a network effect is when as the number of people using a product increases, the value of the product increases for all users.

Telephone networks were the first to document this effect in 1907, and companies such as eBay, Facebook and Lyft have since taken network effects to higher levels.

These effects matter because since 1994, when the world got wired through TCP/IP, approximately 60 percent of tech company value creation has been in companies with a network effect at their core.

By focusing on these types of businesses over the last 12 years, we've identified eleven different network effects, each with its own playbook, so it does get difficult to navigate. Thus NFX Guild.

The Guild brings together founders with products that are aiming taking advantage of these types of effects. They learn from the NFX Partners and they learn from each other.  When they get the network effects right, the payoffs are massive.

Is there really a tech bubble right now? What is the one characteristic of companies they'll need in order to survive?

Yes, there's been some froth, but let's be honest, that's a natural cycle.  Over long enough time horizons, it all evens out.

If there's a problem we see now, it's that both investors and entrepreneurs have taken for granted the craftsmanship that needs to go into a great product and building defensible network effects.

For the last few years, the startup ecosystem has been overly focused on fundraising theater instead of focusing on product. And if any companies will stand the test of time, it's the companies with network effects.