As per a study, more than 85% of workforce wants to have an independent business if given a choice. Today one of the key challenges Companies face is to retain the employees devoid of motivation to work for others. The key reason behind this phenomena can be attributed to two trends, rising level of education and post technology evolution in ease of doing business. Most humans equipped with education and enabled by technology have some idea to change the way world functions in a particular area of our life, be it mobility, entertainment, education or as bizarre as search of a new planet altogether. The last such boom witnessed was in the 90's where, businesses related to dot com had become common, and the valuations of new age dot com economy were going through the roof.
If such is the strength and urge of starting afresh and new, there must be a formula of success for such wild entrepreneurial spirit. Peter Thiel, himself has donned the hat of starting up and graduated to bringing the art of start-up success to the masses as an advisor and venture capitalist.
The well-articulated book touches on the different perspectives of success as well as a guide about ways of building the entire ecosystem conducive to success. The book provides breakthrough ideas for investors, employees, prospective entrepreneurs and even policy makers through case studies.
The key is in understanding the distinct characteristics related to our own emotions, which are not confined to what we think and how we think, but also why we think the way we think. The root of our optimism or pessimism lies in the desperate facts such as quality of parenting and the environment that we were born and brought up. This is not only limited to the individuals but also the mindset of nations. The future holds for us in store, the way we think and act.
There are two states of mind, optimism and pessimism and it largely depends on our own upbringing on whether we think definitively or in an indefinite manner. China, for example, from an outsiders perspective is a fast growing economy and the world looks at it with utter definite optimism as engine of growth. How not only individuals but nations think, is deep rooted in the history and feelings. One of the examples mentioned is about how Chinese leadership’s thinking is driven by Definite Pessimism. The root of such definite pessimism is driven by the way the current leadership has grown and seen the adversities in their early lives. What they are essentially doing is, copying the west in every aspect in quest to catch up rapidly. The reverse of that is the story of US, the baby boomers, saw their early eighteen to twenty years of formative years post 1950, swiftly getting better and better due to rapid evolution in technology and industrialization. For them, the optimism in growth is given for.
In case of start-ups, what is important to understand is, whether the entrepreneur is driven by the definite optimism. First, whether one looks at the vertical axis of trying to solve a problem resulting in 0 to 1 which presents the infinite possibilities creating a strong monopoly. Second, whether one looks at the horizontal axis of trying to copy the existing idea and grows from 1 to n. The characteristics of monopolies are common in all the successful start-ups, right from Facebook to Google and you may name any. While, they are creating markets of monopoly but would always behave in a manner that they are only a small part of a larger ecosystem. For example, Google, while it has monopoly in the data search, but it never vehemently claims monopoly, in fact, it projects itself as an advertising platform trying to claim a chunk of advertising industry, which is already more than $450 Billion and it is somewhere at 10% of the market. It's a smart way to create a completely new industry without disrupting the bandwagon.
The key to monopoly lies in four areas for any successful start-up. First is Proprietary technology, something which the start-up owns uniquely and doesn't want that edge to be diluted. For example, Amazon owns the entire delivery infrastructure, its expensive to do that, but it's also essential to compete and stay ahead in monopolies. The second, is the Network effects, in which the start-up operates. Facebook, is the best example to understand this characteristic, it started from the Harvard University as one network before rapidly reaching to other Ivy League colleges and eventually opening up to the masses. What, it successfully implemented was a strategy of well thought network effect, which kept on addressing the needs of a critical mass in phases before advancing to the larger ones. The third characteristic is Economies of scale, which is truly portrayed by Facebook and excelled by YouTube, which started with a small critical mass which was interested in watching the videos and advanced in the other side with adding more and more subscribers to make the platform a grand success. The fourth characteristics is Branding, for which Apple is best placed. It simply achieved solutions supported by elegance of the brand. Each of these start-ups have in common, started small and addressed a specific set of target markets before scaling up and each of them did so, without disrupting the market. Lot of start-ups gain momentum and fail miserably as the basic notion they carry is to disrupt the market.
In a world full of start-ups and ideas then, how does one survive with the fatal failure rate of more than 99%. The powerful ideas lay not in fact of then taking it to chances, but try and understand the science of starting up. If we closely look at the behaviour of venture capitalists, they try and invest and spread their money in multiple companies with a hypothesis that, even one investment gone well and hitting the spot, would recover and give the returns for all other failed investments. If that is true, then how do entrepreneurs look at the start up success, it's impossible to work on dozen of start-ups simultaneously! They have to keep all eggs in one basket to become successful. There is a better way to look at this problem then. How about entrepreneurs finding others who are trying and rather than owning up entirely, they can also end up owning a fraction of a successful start-up and work in collaboration. Rather than owning 100% of an idea, that is not even fully in paper, how about owning up something like 1% of Google for example.
The secret sauce, then is not only in ideas, but also finding the right partners. It's like a marriage and finding partners to collaborate can be a tiring task. It's about finding partners from diverse backgrounds. At the same time, it is also important to be careful of how you meet and partner with these diverse people. You cannot meet somebody over a cup of coffee and start up a Company. Such partnership led idea could be the disaster in fact. Most of the VC's look at the length and quality of association of founders very keenly, even if they come from diverse backgrounds. In the case of Paypal, of which, Peter was one of the founder partners, most of the partners came from dreadfully different backgrounds. There has to be a clear distinction between who owns, who controls and who governs the Company. More often, the failed start-ups, miss the point and the entrepreneurs do not set boundaries between the ownership, the management and governing structure. No matter, how diligent one is, it is difficult to don all three hats in pulling off a successful start-up if these boundaries are not defined and adhered to in letter and spirit.
Every start-up has a secret sauce, no matter whether it is explicitly known and communicated. This is what the outsiders call as a cult. It's the opportunity that only you see and can resolve to grow. Outsiders, just can't see, and anyone, who you discuss with becomes part of the cult or secret. That's the team. The way teams for these ventures operate is the real secret and it is important to harness the attitude of a cult, mafia or tribe for success of any idea. That brings to the process followed to onboard those who are driven by the idea and not simply by the quest of status quo or as earlier discussed copying to move from 1 to n. Lastly the founders run the danger of overestimating their own power at times, which may cost the business. While the founders should balance and avoid overestimation of their own strength, they at same time have to live with the collective myth of the organization to ensure the unfettered energy, the magic which keeps the organization going.
To see the green, Peter layers out seven most important questions that any start-up must answer before taking the dip;
1. The Engineering Question
Can you create breakthrough technology instead of incremental improvements?
2. The timing Question
Is now the right time to start your particular business?
3. The monopoly question
Are you starting with a big share of a small market?
4. The people question
Do you have the right team?
5. The distribution question
Do you have a way to not just create but deliver your product?
6. The durability question
Will your market position be defensible 10 and 20 years into the future?
7. The secret question
Have you identified a unique opportunity that others don't see?
Having answered these questions, it will take you closer to living your dream of starting up. Remember, it's a risk that you take and not buy a lottery ticket. If that's true, it's best to be thoughtful and go living your dream in changing a small portion of the world in your own way.