Billionaire Venture Capitalist Has 4 Crucial Strategies For All Young Startups
Aspiring entrepreneurs and infant startups can never be short on advice, especially when it’s advice from a billionaire venture capitalist. Peter Thiel — co-founder of Paypal and Palantir, a partner in Founders Fund, and an early investor in Facebook, LinkedIn and Yelp — knows a thing or two about successful business strategies for young companies.
“With respect to startups, it’s never a solo effort in Silicon Valley. It’s always a group of people that you are working together with, and so it’s incredibly important how good those relationships are, how complementary they are.”
A startup is surely doomed to fail if you don’t get along with the people you are supposed to be building a company with — it’s the perfect recipe for disaster, no matter how talented the team may be. That’s why it’s actually a good thing to start businesses with friends.
2. You need to have a secure product.
“It always is good to have some technological advantage … What are you doing that’s actually somewhat hard to do, can’t be that easily copied or replicated by other people?”
Even if it’s a great innovation, if it’s simple to do, you have two choices — patent your idea as soon as humanly possible, or cry as you watch other people easily copy what you’ve done. If your idea isn’t protected and an investor can see ththere’s nothing that special to it, your dream is toast.
3. The right time to enter a market is later, but not too late.
“You want to have a great business strategy … have a path to monopoly if you are doing something that’s unique, you’ll have a ‘last mover advantage’ that will be sustainable.”
We’ve all heard of the first mover principle, where the first one into the market is the winner and everyone else is just battling for scraps. Thiel, however believes in the last mover advantage, where it’s the last company that ends the race — if done right.
The secret to venturing into a pre-existing market is to be late enough so that future companies can’t really pose a threat, but early enough so that you can still get a foothold and grow. This is hopefully where your genius innovation — with all the mistakes learned and flaws from pioneers corrected — helps your company grow. In the past, Thiel has used the example of Google being the last search engine and Microsoft being the last operating system.
4. You can either try to gobble market share or grow it.
“It turns out that vast markets are incredibly competitive and it’s very hard to make progress. You want to start with, not non-existent, but very small markets and expand them over time.”
It’s only natural to think that going after even a small slice of a gigantic, billion-to-trillion-dollar pie will keep your company pretty secure. You can either choose to fight for a tiny scrap or grow your startup to own a much larger piece of a smaller pie. Thiel suggests the latter — this big-picture strategy offers more long-term security and success, assuming you don’t fail. Even choosing the right market is an investment, so choose wisely.