Startup lesson from Peter Thiel

Peter Thiel is a start-up guru. He co-founded PayPal and Palantir, invested in Facebook, SpaceX, LinkedIn, and started the Thiel Fellowship to encourage young people to focus son learning before getting good grades in college. So now you might understand why I devoured his book “Zero to One” in one weekend.

In 2012, Thiel delivered a course about start-ups at Stanford University (check out Stanford’s Entrepreneurship Corner for more goodies). One of the students attending the lectures, Blake Masters, took detailed notes of the class, and Thiel worked with him and revised the notes for a larger audience. “Zero to One” was published and it blowed my mind.

This blogpost contains the core learning points I took with me from the book, for my later use. If you haven’t read the book yet, I hope this post will start your appetite.

About the market:

  • Be so good at what you do, that no other company can offer an alternative: Proprietary technology is the biggest weapon a start-up has: make sure your product is 10x better that its closest substitute, if you want monopoly. Either create something completely new, or improve an existing solution radically and be 10x better than others. This will help you escape competition.
  • Start small: every startup should start with a nice market, concentrated together and served by few or no competitors, that really need your product. Conquer they hearts and let them grow your business by recommending it to others.
  • Scale-up: make sure your company will have something to offer in the long term and focus on long-term growth. The value of your company comes to only from what it’s worth today, but based on possible future cash flows.
  • reinforce the monopoly offered by proprietary technology by creating a strong, genuine brand.

About the product:

  • every entrepreneur should ask himself this question “what valuable company is nobody building?”  Focus on something important and unknown, something hard to do, but doable.

About the early days:

  • the beginnings are special. “Thiel’s law”: a startup messed up at its foundation cannot be fixed.
  • co-founders: pick someone who doesn’t only have the desired technical abilities and complementary skills, but someone you share history with, know as well as you know yourself and you know for sure you work well together
  • build a structure and make clear who legally owns the company (owner), who runs the company on daily basis (CEO), who governs the companies affairs (board). A board of 3 is ideal. Your board should not exceed 5 people.
  • make sure you have commitment: no consultants, no part-time or remote employees. At the beginning, all employees should work full-time, in the same place.
  • a company does better the less it pays the CEO
  • you are at the beginning, you don’t allow big salaries: offer equity – part ownership of the company itself. This form of compensation can orient people towards creating value in the future.

About the team:

  • a company doesn’t have a culture, is a culture
  • hire people that are skilled and will work together cohesively after being hired. Attract talent by talking about your company’s mission and about why a new employee will fit perfectly in your team
  • from the outside, everyone in your team should be different in the same way: it doesn’t matter how the person looks like, every new hire has to be equally obsessed with the mission of the company.
  • from the inside, every individual should be distinguished by its work: defining roles reduces conflict, that can evolve from fluid job roles at the beginning.

About sales:

  • make personal sales – sale the product to specific customers, for specific problems. Network effect will get you more customers and more profit on the long term
  • don’t invest in TV spot or pay superstars for your marketing campaign, use viral marketing: dominate a niche segment of the market with viral potential. A product is viral if its core functionality encourages users to invite their friends become users as well.
  • sell your company to your employees and investors and make them love you
  • make sure you have a top distribution channel for your product

Using real-life examples in explaining every stated idea, Thiel has build a masterpiece that every aspiring entrepreneur should read. You can purchase it on Amazon here.

Until next time, dare to play with your ideas!

Yours truly,