Start Ups are not binary: Success stems from design, not chance, it is not a lottery ticket

Peter Thiel’s (ex-PayPal CEO) book, “Zero to One”, on the notes about Start-Ups, is replete with examples that would shock anyone, as conventional wisdom is stretched to the other extreme. Of the best quotes, I would choose those from chapter three, where he says, “Competition and Capitalism are opposites”, or “Monopoly is the condition for every successful business”, which later he goes on to claim that “competition takes away all economic profit”.  

Well what Peter meant perhaps is that the missionary zeal behind all start-ups is directed to ensure that it is one unique offering that has no competition, which by the way has not too many examples other than Google or Facebook. The culture of start-ups however revolves around this self-belief of invincibility which leads venture capitalists to uniquely value them to the stratosphere.

Peter’s chapter on finding secrets in this world that no one has thought of, bear testimony to this belief that demand for unique offering that never existed, in this digital world, through network effects could multiply exponentially and thus one would have examples of the likes of Instagram or Uber or Airbnb which touched millions of people in a short span.

In the book, “Mission”, Hayman & Giles have detailed out this missionary campaign needed to make an unique idea stand out making such an impact that before others even think of getting anywhere close to its ambit, the proliferation of the product or service is complete at a gigantic scale.

Well, of all the things that propel a start-up to such an end, design of the complete eco-system around the product and people is the most potent one.

Peter Thiel has some suggestions, but I am attracted to his thoughts on focusing on the product first and not the sales and later have a double-focused approach on product and sales as well. Most start-ups that fail actually end up focusing both on product and sales at the beginning and then after being confronted with realities of the market, focus on one instead of the other.

A staggering number of start-ups do not succeed, in the book Mission, we have this example from UK; in 2012 there were 132,000 new businesses and 131000 businesses closed in that same year.

What do these failed start-ups miss out?

They mostly miss out on the design of the eco-system around their offering, which would create such a lasting and profound impact that it would withstand all the pressures of the environment that would vie for a pie. Peter goes on to say that, “if you want to create value do not build a business to make a commodity”.

Start-Ups rise to become successful entities when they create that very unique offering that is scalable at a frenetic pace. But that first unique offering is the starting point; we can name any number of start-ups and that is precisely their entry point to success.

How can you make such a unique offering? If only you have people who come together with only unique mindsets, who are carefully selected and nurtured for their abilities that are yet to be tested out.

In other words talent that is yet to be proved, not a resume that announces every height scaled in the past.

A President is chosen for the first time not because he had delivered a Presidency.

The structure of the people in a start-up is the most puzzling part of the story, they collaborate by some unwritten code that is designed to make them stick together when they are about to move apart, and make them move apart when they are about to stick.

When an unknown product or a service is to be created, which needs several traits to come together, that becomes the core structure of collaboration.

Putting a conventional structure will tantamount to protecting the status quo that some experienced ensemble may have created for their vision to be cast in stone.

The design of the eco-system also includes attracting capital and Peter has quite a length of a chapter dedicated to this, “follow the money”. Unless capital is attracted to any business, the business cannot make the delivery.

Here the design is complete, “supply finds its own demand”, as Say would have said.