Posted on February 12, 2015 @ 08:54:00 AM by Paul Meagher
I have just finished reading Peter Thiel's new book Zero to One (co-written with Blake Masters). Peter was cofounder of PayPal, cofounder of Palantir, and a venture capitalist. The book is a recent best-selling business book owing, in part, to Peter's stature in the startup and venture capital community. It is quick and easy to read, interesting throughout, opinionated at times in an Ayn Rand sort of way, and filled with insights on venture capital, the keys to startup success, the Silicon Valley boys club (or the "PayPal Mafia" as he calls them), and his recipes for saving the economy and the planet (will depend on startups with insights into truths that are not commonly accepted).
When I read Peter Thiel I am cautious as Peter's advice is often directed towards providing insight into how the top .01 percent of companies achieve that level of success (see YouTube videos featuring him). He is not interested in companies that make incremental improvements in already established markets (1 to N companies), but rather companies that develop products or services that are sufficiently
ground-breaking that they can monopolize a market (0 to 1 companies). These are the companies that allow venture capitalist to stay in business and make money when most of their other companies under perform. Sometimes I wonder if Peter's advice
is pertinent to the majority of incremental companies that exist. Sort of like thinking that your kid is going to play in the major leagues when their sports career will be much less stellar. The advice in the latter case might focus more on fun, balance, and sportsmanship. Many parents, however, want to hear advice telling them what
it will take for their kid to be a superstar. Peter Thiel's book appears to be more directed towards entrepreneurs that want their startup to be the next PayPal, Facebook, Uber, Spotify, and so on; not those entrepreneurs who want to make an above average income and gradually grow a company.
That being said, I did find that chapter 13, Seeing Green, had a very useful framework for analyzing the keys to startup success that has general applicability. In that chapter, Peter suggests that
companies should address 7 questions to determine how successful they will be (pp. 153-154). These questions are:
- The Engineering Question: Can you create breakthough technology instead of incremental improvements?
- The Timing Question: Is now the right time to start your particular business?
- The Monopoly Question: Are you starting with a big share of a small market?
- The People Question: Do you have the right team?
- The Distribution Question: Do you have a way to not just create but deliver your product?
- The Durability Question: Will your market position be defensible 10 and 20 years into the future?
- The Secret Question: Have you identified a unique opportunity that others don't see?
These 7 questions summarize the themes that Peter discusses in more detail in earlier chapters of the book and in chapter 13 he uses them to analyze why cleantech companies in the last decade
imploded (poor answers to most of these questions) and why a company such as Tesla Motors is very successful (good answers to all the questions). For me, chapter 13 was the most useful part of this
book and one that most entrepreneurs would benefit from reading. These are some good questions for startups to ask themselves.