Peter Thiel’s Definitive Guide for Successful Startups and Entrepreneurs
In 1999 he co-founded Paypal and led it as CEO for a few years until it was purchased by eBay in 2002 for $1.5 billion. Peter Thiel has gone on to found his own company known as Clarium Capital. He has co-founded a CIA-backed company that is focused on big data to help finance and security companies do their best work. That startup, Palantir, is now worth a cool $20 billion and he owns a 10% stake in it, making up up-to two-thirds of his $2.5 billion net worth.
Peter Thiel is a household name in the startup industry. His talks and conferences where he has spoken have been watched by millions of entrepreneurs in Silicon Valley and all over the world.
He is not just an investor in startups, he is one of the best in the history of the startup world. In 2004, he took a chance with Facebook becoming the first outsider to invest in the company which no other investor had given a chance despite the numerous pitches that had been done by Zuckerberg and his small team. For $500k he bought a 10% stake in Facebook. Suffice to say that the investment made him a billionaire of proper levels. In 2012, he liquidated most of his Facebook shares, however, he still sits on the board of directors of the biggest social media network today.
He was born in Frankfurt, Germany, and is actually a citizen of the country. His family moved to the US while he was an infant. Over the years he lived in South Africa before returning to the United States.
Since his PayPal exit, Palantir co-founding, and Facebook investing, he has added into his share of the portfolio of investments. He has received wide acclaim for his investing strategies because most of the time they have worked out. Thiel is different. He doesn’t splash his money on several companies hoping one will probably turn a good profit or make a really good exit to justify the waste of money in mediocre companies. No. He invests in brilliant new ideas which he believes will turn the wheels of knowledge and create a whole new dimension. It is what he did with Facebook and Palantir. He has invested in LinkedIn, Yelp, Zynga, Asana, Reddit, Quora, Stripe, and Sofi while believing in this very philosophy. All these companies are the biggest in their niches making Peter Thiel one of the investors with a keen eye for excellence. The Peter Thiel Foundation now awards $100k to young entrepreneurs to skip college and chase their business dreams every year.
We have collected what we believe are some of the best of Peter Thiel’s tips to entrepreneurs and startups so that you might read and learn something.
1. Globalization does not necessarily mean progress
The idea of globalization is based on copying the things that worked in the past before and implementing them in the present. It could also mean copying and pasting things that worked in other places. Countries in the poverty margins are always at risk of globalization as they tend to learn from what developed countries have done before; often implementing copy-pasted practices and decisions.
In the startup world, it involves the same. Doing what another company has done before, or in the way another founder has. The truth here is that globalization only helps you to go from 1 to n. However, truly transformative companies need to go from 0 to 1.
This very concept is the basis of Peter Thiel’s prominent book titled Zero to One. Successful companies do something new. They do something that is definitely unique in the market. They grow from nothing, newness, whole new concepts, to one.
Startups and entrepreneurs have to be wary of globalization. The notion that if it worked this way somewhere else it will work the same for our company. The notion that if it worked somewhere else then it will work here for us. Companies to be new, to bring something different. Most technology companies involve going from zero to one as should your own.
2. Unanimity carries no value
Do not be a unanimous entrepreneur. Do not conform to unanimity. Do not seek to agree with everyone. Do not ask your company to want to agree with everyone. There is no value in that according to Peter Thiel.
Really good companies find a niche of people they agree with. From employees to the customers, founders must find their unique niche where they agree with a set of people. Once you find your niche, build a company helping that niche figure the problems out. The unanimity factor when taken out of the equation help a startup find the right market fit. It helps them to build the company that no one else is building.
3. Look for the secrets
The world keeps so many secrets. There are spaces that are not explored because they are kept off as secrets. If you think of evading risk, you will not seek to find the secrets that engulf our planet. However, if you seek to discover them, you will get exposed to newer methodologies, companies, customers, and investors.
Where existing conventions thrive and are more comfortable, exists some secret truths. This is more in connection with finding your niche and avoiding unanimity. If you find the secret truths, you start a company because these are truly valuable.
For founders and entrepreneurs who have already started their companies what they should ask themselves is what secret truths fuel their companies?
4. Competition is for losers
Peter Thiel does not believe in competition and competitors in business. In fact, according to him, competition is for losers. He believes that the best companies find whole new ideas that have not been built and then go ahead to build them. They assert themselves in these spaces and become monopolies.
“Competition is overrated,” Peter Thiel has often said. You can see this in his group of startups that he has invested in. They almost always live up to this belief and grow to become monopolies in their own new markets. Think of Facebook, Palantir, Yelp, LinkedIn, stripe, etc. These companies are incredible monopolies of their markets.
Do not be the entrepreneur who romanticizes competition. Instead of scrapping the market for remaining customers after other companies have scooped them Thiel recommends building a new market entirely. If you cannot build a new market entirely and you have to compete, then face it and win. Take over the market and make it your playing ground.
5. Distribution is key
The startup that finds the right distribution model wins. Most of the time ramping up more employees into the sales team and trying to sell more and more product doesn’t work.
As much as a quality sales team helps, the distribution model is more important. Peter Thiel believes that most of the failed startups could have changed their trajectories if the distribution models were well figured out. However, the investor agrees that sales and distribution must both be understood.
People think that startups fail because of technical problems. However, the main issue is distribution and to understand distribution you must have impeccable knowledge on the sales part.
6. You must have a plan
If you leave your future to be determined by fate or probabilities and statistics, then you will never really create the future you want. In the current world, it is easy to live in a state where you consistently convince yourself that by not determining your future, you are living free.
Startups and their entrepreneurs cannot allow themselves to only play part in the future as statistics. They cannot allow themselves to be indeterminate. Having a bad plan is better than having none at all. Having a good plan is better. Either way, you must have a plan. Otherwise, you leave your future to chance. You never really know what could have been if you do not formulate a plan and run with it. To dictate the future, take a swing at it; with a plan.
7. Don’t mess startup at foundation level
You might have thought that only buildings require strong foundations. Well, just in case you have never noticed, startups do too.
A startup messed up at its foundation cannot be fixed. ~ Peter Thiel
When we see most startups failing sometimes the news and insiders claim it was external forces, maybe they failed in their sales strategy or they didn’t figure out how to pitch journalists to get press attention. Thiel believes that as much as those could actually be real causes of concern, most of the time internal conflicts that were ignored at the startup’s founding are to blame for the inadequacies of the company in the future.
If you do not resolve things early in your entrepreneurial journey the effect keeps compounding over time. These mistakes amplify and destroy the company.
Keep your team in check but even more, keep them aware of what they are bringing and what they will get in return. Do not leave anything unspoken. Let the incentives be clear. Give your company the privilege of starting right on a strong foundation for a chance at success.
8. Founders are never average
The behaviors of founders of the biggest companies and startups around the world have been people who are different. Most people worldwide are just normal average people. But founders are different.
These entrepreneurs dare to dream; most times they dream too much. Steve Jobs was a round cog in a square hole, Elon Musk is nearly mysterious, Warren Buffet is weirdly smart, Bill Gates was one of the most aggressive CEOs in America. There is nothing average about these people.
Founders are always on the extremes of behavioral horizons. They are either charismatic or disagreeable, infamous or famous, extroverts or introverts. They have inherently unique behaviors that push them to change the game. Think of Mark Cuban, Lady Gaga, Chris Sacca, these are extremely different people.
Are you an entrepreneur? Have you identified what makes you unique? Are you building a unique company? One that is better than average?
9. An idea has to be so new it’s not so easily understood
Thiel believes that new companies with absolutely new ideas will be difficult to understand before they are actually understood – usually long after they have dominated the market.
He illustrates this with Google. When the company began many years ago, this company was called by many people as “another search engine”. They did not know that Google was the first machine-powered search engine. When Facebook began, people compared it to MySpace and called it “another social network” yet the social network was working to crack the idea of real identity online. The iPhone was thought of as “just another phone” yet when it launched it revolutionized the idea of a phone.
All these companies had new ideas that were not easily understood by either investors, customers or analysts. They went on to conquer their markets.
So your startup is a Saas startup and it wants to increase onboarding rates just like many other companies, but what does it actually do? Figure that out and you have your purpose.
10. Buzzwords. Buzzwords. Buzzwords. They suck.
As an entrepreneur, if you cannot articulate what your company does without calling in the help of buzzwords, then you probably don’t have a very new idea anyway.
Words like cloud computing, big data, Software-as-a-service, are big words in the current market space. However, if you were going to seek an investment from Peter Thiel and used these words in your elevator pitch, you would probably leave empty-handed.
Break down what your company does and leave the buzzwords alone. They chase customers away; they chase investors too. Be unique and different.
Peter Thiel’s Philosophy on Setting Goals
The nature of entrepreneurs is that they set goals all the time for achieving various objectives. Sometimes they set way too many goals. Then they resort to going for the lowest hanging fruit or the easiest to achieve. They don’t focus on one goal and try to go for two or more.
Peter Thiel believes that your choice of trying to achieve too many goals at the same time actually influences you to choose the easiest goals. That is a bad thing. If you set yourself one goal, a really insurmountable one there is no option of other goals so you go for it.
Do you set unrealistic or seemingly unachievable goals? Well, Thiel is your newest fan. He believes that setting easy goals is equivalent to selling yourself short. You only achieve immense satisfaction from doing something that you thought you wouldn’t be able to do. The same goes for goals.
Set goals that nearly skin you alive, the ones that push you to almost quit. Those goals for a startup could be milestones, number of users, PR strategies, seeking investor funding, among others. The further they are from reach; the more joy it is when you achieve them.
Why goals that seem out of reach are the best in life and business:
– Stretched goals help you grow
The easiest example for this is startup A that sets a goal they know they can achieve: to reach 1,000 users in a month. Startup B sets a goal they know will be hard to get to; reach 10,000 users within a month. Startup A has set a goal that is easily reachable and once they get to it they will take a holiday to celebrate or throw champagne in the office. However, Startup B will get to 1,000 and worry about how to get to 2,000, 3,000, 6,000 and so forth.
Startup B’s goal is quite stretched but it helps them to explore each and every option there is to amplify their growth. The most possible thing that will happen is that they will probably not reach 10,000 users in that month, but they will be at 4,000 or 6,000 users by the time it comes to an end. This way they do not get complacent until they reach the big goal.
Stretch goals push you. They force you to get out of that comfort zone and work your way to the big goal. They make you take the extra mile.
– They change your mindset
When you set goals that seem crazy, you know that conventional ways will not help you get there. They are not good enough strategies. You need growth hacks. When you start thinking about them you start to change how your mind is wired. You are looking for ways to achieve your crazy goals. You are thinking out of the box. How you do things changes.
Startups like Dropbox, Facebook, Instagram, Hotmail, and Airbnb are a few startups that managed to think out of the box. It is because they realized that the conventional ways were not going to cut it for the unbelievable goals they had set. What did they do? They found growth hacking strategies which helped them scale in numbers never seen before.
As a startup, the only way to leave the plateau level you are stuck at is to set unrealistic goals which will change your thought process. The whole team will be learning and looking for knowledge on how to get to the goal. Your whole team will start to think on a very new level.
– They give your startup momentum
When a rocket is taking off, the most energy is used in getting it off the ground and into the air. From then onwards, less energy is needed because the momentum is already set. The same works for a startup. Every time you set goals that seem crazy you are setting a momentum for yourself.
For startups, the momentum helps you to seek new ways to grow, do things differently. It sets you on to the trajectory of discovery. Once you kick off the journey to reach a stretch goal as a company, there is no stopping.
You do not have to achieve or reach each goal. However, the fact that these stretched goals are there for your company means that the team is always thinking of how to do things differently.
Peter Thiel is a strong believer in stretch goals believes that this moment, now, is the best time for startups to spring up. To set crazy goals. To beat those goals and change the world.