Seven Questions for Startup Founders

Seven Questions for Startup Founders

On a recent flight from Seattle to Newark, I read “ Zero to One” by Peter Thiel. Thiel co-founded PayPal and subsequently invested in several successful startups, including Facebook, LinkedIn and SpaceX. In his book, Thiel states that progress is held back by “sameness” – that is, undifferentiated products and services . It is only when companies do something truly different or unique that they create real value. Thiel further states that to avoid failure, every business plan needs to effectively answer seven fundamental questions. The seven questions are:

  • Distribution – Do you have a way to both create and deliver your product or service? Selling and delivering a product or service is at least as important as the product or service itself.
  • Durability – Will your market position be defensible in 10 and 20 years into the future? First-mover advantage does not do you any good if another company unseats you because your business was not defensible.
  • Engineering – Can you create breakthrough technology instead of incremental improvements? Propriety technology must be an order of magnitude (i.e., 10X) better than its nearest substitute.
  • Monopoly – Are you starting with a big share of a small market? It is better to monopolize a unique niche of a small market than face vicious competition in a large one.
  • People – Do you have the right team? Why would someone join your company if they could work for Google for more money and prestige? The talent you want will be attracted to your mission or your team or both.
  • Secret – Have you identified a unique opportunity that others do not see? Conventional truths are not secrets because everyone knows them. You must have a specific reason for success that other people do not see.
  • Timing – Is now the right time to start your particular business? No industry or sector is important enough that merely participating in it will be enough to build a great company.

It is easier to copy a business model than create a new one. Doing what has already been done takes business from 1 to n – adding more of the same. However, when something new is created, business goes from 0 to 1. The act of creation is singular, the result is something different and unique. Today’s best practices lead to dead ends. The best paths are new and untried. The goal is to create new products and services, as well as better ways of making them. Successful startups find value in unexpected places and they do it by working from the above principles, not formulas.

All contents copyright © 2014, Josh Lowry. All rights reserved.

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