Paypal co-founder recommends asking yourself these 7 questions before starting a startup

Evaluate your idea and increase your chances of creating a successful business by asking these questions as early as possible, says PayPal co-founder Peter Thiel.

Peter Thiel is not only the co-founder of PayPal, but also of Palantir Technologies and Founders Fund and is known as the first investor in Facebook. He was ranked 4th on the 2014 Forbes Midas list, with a net worth of $2.2 billion, and 391st on the Forbes 400 in 2020, with a net worth of $2.1 billion.

In his book entitled “Zero To One»co-written with Blake Masters in 2014, Peter lists 7 questions that every entrepreneur and startup founder should answer before building a startup or business. These questions can be used to help evaluate your idea and can be used as principles that you can apply in your startup that will help and guide you to build a better future through entrepreneurship.

Simple. The better your answers to the following questions, the better your chances of creating a successful startup or business in the future.

More details:

  • You can increase your chances of advancement and success not only in the early days of your startup, but also as you begin to scale.
  • You can avoid and prevent bad luck that leads to failure in business later on.
  • It makes you a better founder and leader

Successful billion-dollar companies like Airbnb, Uber, PayPal, Palantir, SpaceX, Tesla, Apple, Microsoft, Amazon, Salesforce, Twitter, and Facebook have all been proven to have answered at least 5 out of 7 questions. And look where they are now! Take your time to find the right answer to these questions and be honest! Even 4 good answers is already a sign of a great start, however, aim for 7 out of 7.

Peter Thiel says that big tech must have proprietary knowledge, an order of magnitude better than its closest substitute or competitor. Remember, only when your product is 10 times better can you offer transparent superiority. The billionaire co-founder of Paypal and Palantir is a big fan of innovation and by innovation I mean creating something completely new out of nothing. He also adds that the only way to advance the human race is through innovation and not by copying from other established companies.

Technology means complementarity, which means it is a positive-sum game where technology helps people and people help technology. Quid pro quo. Whereas globalization means substitution, which means it is a zero-sum game where it destroys what it means to replace.

Globalization simply means copying a product and building the same idea in a different design, name and/or location. Technology means creating a completely new product.

Peter Thiel believes that when you create something new, you create technology, and creating technology means going from zero to one. He recommends going with technology if you want to capture lasting values.

Imagine starting Uber in 2004 instead of 2008 where smartphone infrastructure is not quite established. I guess it will most likely fail. Like the other ride-sharing business that was launched before 2008, Uber would not have found its momentum and market without the standardizations of smartphones today. That is what these questions mean.

Start by asking these simple questions:
It’s too early?
Is it the right time?
It’s too late?

Remember to question almost everything and doing market research will also save you a lot of time.

Are you entering an existing market with the product?

Is it a slow moving market or a fast moving market?

As Peter Thiel also mentioned in his book, Cleantechfor example, compared itself to the silicon chip industry of the 1970s, but failed to appreciate the speed at which that market was moving (it was expanding exponentially with Moore’s law) whereas the cleantech industry had no such breakthrough. There was no explosion in growth and the industry lagged behind.

Facebook launched at a time when broadband infrastructure was expanding rapidly and exploded when mobile devices and smartphones became ubiquitous. Infrastructure readiness, social norms, government regulations, established platforms and ecosystems all play a role in the timing issue.

Paypal co-founder highly recommends always starting from a small or niche market and scaling up from there, making sure it is the right market. He also added that if you cannot monopolize a unique solution for a small market, you will be caught in fierce competition. Every startup or business is small at the beginning. Every monopoly dominates a huge portion of its market. Always opt to start too small.

The reason is simple: it is easier to dominate a small market than a large one. If you think your initial market is too big, it almost certainly is.

The smaller your market, the easier it is to dominate. You can then expand into smaller adjacent markets and so on. These days, starting out in a big market is like being a small fish jumping in a sea of ​​sharks. You are more likely to get eaten at any second. The smaller the market, the greater your control and the better your chances of conquering it.

A quote from Airbnb founder and CEO Brian Chesky I would like to mention:

Startups die not by homicide, but by suicide.

Having the right team and the right co-founders is a crucial process to building a successful startup. A wrong and misaligned co-founder could ruin the company’s momentum and image. That’s why it’s relatively important to have co-founders whom you can trust deeply, know very well (at least for 1 year) and who can bring something valuable to the table.

Aside from that, for you to be successful and gain momentum, your team needs to be passionate, persistent, tenacious, and relentless. Peter Thiel recommends avoiding hiring remote workers, consultants (build culture instead), and even part-time employees in the early days of your company.

Everyone should be committed full-time and make sure you have a track record together. Like Brian Chesky’s quote, most companies die due to self-inflicted wounds, not external competition. The older you get, the stronger the wind gets. Resolve any issues with your co-founders as soon as possible and don’t let it get to the point where killing your own company is the only option.

There is a common misconception in Silicon Valley that is quite popular these days. They think that when they create an amazing product, customers and users will just flock to them. Well, let me tell you. It’s never going to happen! You have to find a way to deliver and distribute it. Peter Thiel emphasizes that selling and delivering the product is at least as important as the product itself.

He also adds that selling your company to the media is a necessary part of selling it to everyone else. You can never expect people to buy a superior product simply on its obvious merits without any distribution strategy, you should never assume that people will admire your company without a PR strategy. Remember that the press can help attract investors and employees.

Most startups fail because they failed to see what the future will look like for them and their product. For entrepreneurs and startup founders, it’s important to live in the now, but it’s also important to live in the future. Find the balance. Make sure you have a vision, and part of what makes this question particularly good is that it can teach you how to be a visionary, like Steve Jobs.

Peter says that he always goes for long-term thinking and planning and aims to be the ultimate mover of a particular market. He also mentions how important the idea of ​​making projections, both financial and market-wise, is. He believes that these are crucial materials in the startup world. Who are we to say no to him, right? If there is one thing that Thiel has proven, it is that he has always proven to be right when it comes to startups, technology, and innovation.

For example, Tesla instance had a head start in its field, and its design and technology are moving faster than others – its lead is widening all the time. It also has a distinct and trusted brand, which is envied by consumers. Since buying a car is one of the most important purchasing decisions people make, having trust in a brand is a hard thing to gain – Tesla has that trust where others don’t. Similarly, Apple has that brand trust, which is very hard to displace.

This question is quite important not only for startup founders and entrepreneurs, but also for scientists, professors, and even college students. Albert Einstein highlighted how great innovation comes with great imagination. He also said,

“I am enough of an artist to draw freely from my imagination. Imagination is more important than knowledge. Knowledge is limited. Imagination surrounds the world.”

Having knowledge is important, but what makes knowledgeable people greater is their ability to have imagination. Imagination gives you wings to fly. Peter Thiel in his book recommends looking where other people don’t see because he firmly believes that the greatest opportunities lie in secrets. All great businesses are built on finding answers to secrets, this is the heart of innovation. Take for example Airbnb and Uber or how Albert Einstein found the Theory of Relativity.

Secrets are problems that have an answer, but no one has discovered it yet or we can say they are waiting to be discovered, you just have to find them. Most of the secrets of the environment are unraveled, but the secrets of human nature are still left for new entrepreneurs, inventors and creators to find opportunities for. So, go seek and go observe!

John