Want to know how startups get successful? What better than to learn it first hand from the mogul himself?
Remember the days when the thought of setting up a business sent you looking for a property dealer right away? Well, no more of that fuss now because the times have changed and so has the need to buy hectares to conjure your dream into reality. The only space you need is in your head that should be filled with ideas, desires and the determination to make it big. After all, an office doesn’t really come with the guarantee of inevitable success.
How Startups get Successful?
Peter Thiel, one of the world’s most prominent venture capitalists gave a sneak peek into his own set of principles in Zero to One that undeniably paid off and made him a billionaire. Having founded and sold PayPal and invested in Facebook, Thiel amassed not only billions but also a wealth of experience, expertise and strategies that he considers infallible while laying the foundation for a start-up.
Originality is something Peter Thiel treasures. He believes that the next Bill Gates will not build an operating system nor will the next Zuckerberg create a new social media. In fact, he says that blandly copying successful people wouldn’t effect substantial learning but merely enables one to go from A – n. On a flip side, treading the path from Zero to One requires immense ingenuity and inventiveness.
Thiel delineates the following four philosophies while laying the groundwork for a business start-up:
- The biggest progress is vertical as opposed to horizontal.
- Monopolies are beneficial for business and for society at large.
- It takes a definite vision of the founder’s part to take the enterprise from zero to one.”The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete.”
- Ever contemplated what the future will look like? How will things unfurl 10 years down the line or what shape the world will take in the next 5 years? Where will you be, same as before or completely revamped?
So many questions but no answer in sight? Difficult to decipher the mystery, isn’t it? The reason is that progress and concomitant changes are taking place at a breakneck speed so much so that the customer, in attempting to buy the latest iPhone finds a few months after leaving the store with the brand new phone that the next model is already in the market. The world is taking giant strides towards advancement and even though man is at the helm, he has no clue when he is going to stop. In the midst of such a state of affairs, its impossible to state anything in absolutely certain terms. However, not all progress is alike.
According to Peter Thiel, progress can be categorised into two types:
Horizontal progress: It’s a form of progress that merely builds or supplements a known idea. It is like improving upon an already established concept and manages to bring only marginal success that will take you from A-Z. Also, its relatively easier.
Vertical Progress: This kind of progress entails building from scratch because you need to do something that has never been done before. It is harder to achieve vertical progress but it helps to take you from Zero to One.
Actual growth occurs not in copying and improvising on the ideas of others. Rather it emanates from having a unique vision and unflagging devotion in such a direction. For instance, technology is the classic example that has enabled the world to navigate the life-altering path from Zero to One. It’s possible to have both horizontal and vertical progress or either of them or none at all.
The future is radically different from the present. Thus, to achieve such a difference, it is essential to look beyond the status quo and so, to design a splendid future, you have to fashion the present accordingly and view it critically.
“Brilliant thinking is rare, but courage is in even shorter supply than genius.”
Monopolies are good for business and for society at large. They tell you that you’re taking the lead!
Thiel is at odds with the popular notion that competition is healthy and good. The business tycoon, on the other hand, believes that the concept of competition is too negative and should be replaced by “creative monopoly” which acts as a much plausible substitute because of its excellent performance and high yielding results.
What? Monopolies? Do you mean cut-throat competition? To a layman, the term monopoly is spiked with vicious undertones, possibly referring to an ambit where various companies scheme to plot each other’s downfall. In contrast to general belief, competition is just a requisite catalyst that is essential for the furtherance of the enterprise.
Monopolies are creators of innovation. It does not exactly intend to be unfair to its contemporaries. Instead, the company’s focus is to outdo its previous performance which incidentally causes the loss of other companies who are unable to keep up with the pace and eventually fail to survive the mounting pressure.
Surprisingly, monopolies are actually beneficial for society as they provide the impetus for businesses to aim for ceaseless progress and surpass the current dominant company. For example, if a budding mobile phone company wants to gain popularity in the market then it has to make smartphones as good as or even better than Samsung or iPhone in the low budget so that people are able to access the improved versions in lower prices. In such a scenario, the beneficiaries will be the smartphone users.
In Thiel’s opinion, possessing a monopoly puts the company in a highly advantageous position and gives them the liberty to set its own prices. This, in turn, augments income and swells profit exponentially. Conversely, if the product is not up to the mark then the prices are naturally smaller and attracts customers in a low-margin market which drastically affects profit margins.
Ever reckoned what factors boost monopolies? Essentially, monopolies are characterised by the following four profitable attributes :
1. Proprietary Technology
This is responsible for the biggest advantages reaped by the company because it’s the most crucial aspect of the business that is often very difficult to duplicate. For instance, Google is universally recognised as the best search engine because of its algorithm which Bing or Yahoo has been unable to outperform. Likewise, to achieve mammoth results it is imperative to improve exponentially otherwise the risk of “marginal improvement” always looms large.
2. Network Effects
Via the social media platform of Facebook, YouTube, Vine, Twitter, etc., the particular product is introduced and popularised among the masses which obviously works to increase the consumer demand.
3. Economies of Scale
It is preferable to engineer a product that scales. For instance, Twitter is scalable by design but a yoga business, though possible to scale, is naturally more difficult to continue growing when compared to Twitter.
Only essential when something substantially valuable is linked to the said product.
The aforementioned facets of a business determine whether the enterprise does have a monopoly in the market or not.
It’s absolutely indispensable for successful companies to unearth secrets that are inaccessible to their competitors.
A philosopher once said that being a realist is the most common way of being mediocre. Accepting that there is no more room for vertical progress can immediately plunge a company down into the ruins. Evidently, the mantra to maintain the success is to continue exploring avenues that could lead to untapped arenas.
The world is a mystery and still holds many secrets waiting to be unravelled. However, the conventional and mainstream people often debate against any such possibility and this obliterates the ability to think outside of the box.
Sometimes, the secrets are entombed so deeply in the society that it takes years before they are finally brought to the fore. In technology, the objective is to programme unsurmountable software that consciously solidifies and reinforces the company’s stance as a fortified market leader.
If a start-up endeavours to be successful, it has to dig up an exclusive secret which is the only way to become anything more than a moribund horizontal progress supplier. Hewlett-Packard was a company that boasted of bringing out the best of technology in the market back in the 1990’s with an affordable coloured printer and a three-in-one printer, copier and fax machine to name a few. Unfortunately, the company started losing its popularity when it failed to invent new products in 2000’s and gradually lost its traction.
Rome was not built in a day and neither is any company worth its salt.
One thing that is essential to bear in mind is that a start-up can take several years before it actually starts pumping out profits in large numbers. The value of the company is not diminished by its initial patchy performance. Rather, the value lies in its ability to make profits in the long run. As opposed to popular idea, lack of gargantuan profits does not signal that the company is bound to be doomed.
Running a start-up requires tireless patience and gradual efforts. Usually, it is recommended to start small and build the enterprise bit by bit, slowly but steadily. The logistics are the same as the ones that work in an academic curriculum. It is not important to have a diverse curriculum but it is indeed significant to be dexterous in a given set of things. Expertise matter a lot in business. It is only after gaining mastery and upper hand over the competitors that dominance and expansion of the enterprise follows. Not before that.
For instance, Jeff Bezos, the founder of Amazon had embarked on his journey to becoming the world’s largest online retailer by just selling books online. He divided his giant goal into smaller ones and only proceeded forward in expanding his business in CD’s and DVD’s after Amazon assumed total hegemony in the realm of e-commerce.
The upshot of this sequential progress is that Amazon tops the list of e-commerce in today’s market. However, the success came at a high price of 15 years of unwavering dedication and devotion. Therefore, endless hours of investment is a pre-requisite in a start-up.
Golden roofs are not built on weak foundations
The perfect mix of right people, culture and balanced owner interests is the recipe to start-up success! Thiel emphasises the need to build a solid base for a budding company. It is this base, he says, that is going to support the start-up in the first crucial days that the company is hit with.
Additionally, an amicable relationship between founders and employees is a good predictor of the degree to which a company is likely to succeed after all the company starts out as a close-knit group of unified people whose individual efforts are magnified and has a lasting impact on the enterprise.
It is suggested that investors should be made only after ensuring the skills of the people involved in the company and that you have a good rapport with them. Peter Thiel recounts his experience of investing in a company that his business partner, Nosek had started with nearly unknown and incompatible partners with the result that he had to endure a fraud.
Clearly defined objectives and shared values and habits go a long way in sustaining the company especially because it fosters cooperation among the collaborators. It is not just sufficient to provide additional perks to the employees as part of the company culture. Building a harmonious relationship with them is a must.
The factors that contribute to the extraordinary performance of your startup are the inclusion of right people and partners, aligning ownership, possession and control and development of long-term relationships.
Without a seller, a thing never sells: Not just developers but sellers are also important!
A salesman? What a tiring and ungrateful job! That’s the conclusion people jump to almost instantly. However, in business, sales is a necessity that cannot be overlooked. Even if humungous efforts are put into crafting the product, the innovation and efforts go down the drain unless there exists a consumer demand for the said product the creation of which, is the responsibility of the company itself.
Not only distribution, promotion and advertisement comes in handy but also the effort and organisation to sell your products. The capacity and potential of every customer need to be considered before determining the efforts to make the sale. Hence, it is imperative to come up with effective marketing strategies and competent sales team to bridge the gap the between production and consumption.
You may not always get him but the founder always gets the team through with his vision.
He is eccentric, isn’t he? From time immemorial, great minds have always received resistance from mediocre ones. They’re called names ranging from madhouse to oddballs but it is these supposedly mad people who have been able to go from Zero to One because they always refuse to settle with the real and the established.
Thiel reveals that among the founders of PayPal, nearly all of them are unusual and had equally unusual hobbies as children such as building pumps. This, he says, is important because such people are the ones who create a definite vision and culture for the start-up which is paramount.
Their originality and ingenuity are important because it is they who carve out a distinct vision and, in extension, a direction for the whole company to move in and this cannot be substituted by management strategies no matter how fastidious they are.
For instance, Steve Jobs did a wonderful job in launching the iPod after his return to Apple which was an immense success. He made an impacting comeback after being evicted from the company solely because of his revolutionary vision that made computing portable, mobile and pervasive with iPads and iPhones.
Needless to say, it was Job’s exceptional vision that made Apple the quintessence of technology. He followed a meticulous plan revolving around his mission to change the way people compute. The story of Steve Jobs clearly demonstrates the need for even a strong company to constantly renew and refurbish their vision to perform in superlative terms.