Book: Zero to One
Author: Peter Thiel with Blake Masters
Key takeaways: Despite some odd turns that Thiel occasionally takes (comparing hipsters to Unabomber, e.g.), it’s a very good book–not just about startups, but businesses in general.
Perfect Target Market: The perfect market for a startup is a small group of people concentrated together and served by few or no competitors. Any big market is a bad choice, esp. if it is already being served by competition. This is why it’s a red flag when companies talk about getting 1% of a $100 bn market because (a) this is a poor starting point, and (b) if the company ever gets to 1%, it will spend all its money fighting competition.
Sequencing markets correctly is under-rated and it takes discipline to expand gradually. The most successful companies first dominate a given niche before scaling to an adjacent market.
Also beware of the management that rhetorically shrinks the market to appear differentiated but want to be valued based on large lucrative markets.
How to sell a product: Thiel breaks down the kind of marketing needed by the $ amount of sale –
- $1 : viral marketing
- $100 : marketing
- DEAD ZONE
- $10k : sales
- $10 mm : complex sales (works when you don’t have sales-people at all; at that px point people want to talk to the CEO)
Even with the best product, the sales effort has to target the right person. Thiel gives the example of Box (cloud data-storage) which when it started marketing in ’08, went to small groups of people who truly needed the product (vs. selling an enterprise-wise solution to the head of the company). My thought here is that companies often talk about being in the C-suite when selling as if it’s always a good thing, and sometimes it may not be.
It’s important to think about dead zones, because if a product costs $2,000, how do you sell it because neither advertising not personal-sales work at this price-point. Even if there is a clear value-proposition here, it is hard for people to find out about it. This is why SMID businesses often don’t use the tools that large businesses have–and this is truly a distribution channel issues.
Prasad Capital 