Zero to One
Notes on Startups, or How to build the future
Notes on Startups, or How to build the future
TABLE OF CONTENTS
Globalization cannot be the only progress: the future will not be sustainable without technology.
Where does technology comes from? STARTUPS!
"It is hard to develop new things in big organizations, and it is even harder to do it by yourself."
"Startups operate on the principle that you need to work with other people to get stuff done, but you also need to stay small enough so that you actually can."
"A startup is the largest group of people you can convince of a plan to build a different future."
About the dot-com bubble
Rapid rise in the U.S technology stock equity valuations fueled by crazy investments in internet-based companies during the late 90s.
4 lessons from the dot-com crash... and their opposite principles
1
Make incremental advances
Anyone who claims to be able to do something great is suspect, anyone who wants to change the world should be more humble. Small incremental steps are safer.
VS
It is better to risk boldness than triviality
2
Stay lean and flexible
You should not know what your business will do; planning is arrogant and unflexible. Instead, try things out, iterate and keep experimenting.
VS
A bad plan is better than no plan
3
Improve on the competition
Don't try to create a new market prematurely. Start with existing customer, and improve the product of successful competititors.
VS
Competitive markets destroy profits
4
Focus on product, not sales
Technology is primarily product development. The only sustainable growth is viral growth. If you need to advertise, you are not good enough.
VS
Sales matters just as much as product
Perfect Competition
When producer supply meet consumer demand
No company makes economic profit
All companies are selling similar products
The market dictates the price
They tend to: value the very specific and narrow market they position themselves in, but they tend to forget about other major competitive factors
They are at the INTERSECTION of different markets to emphasize their novelty
VS
Monopoly
No other product equivalent on the market
Free to set their own price
They tend to: underestimate their power by telling how small they are in regards to the market they are in
They are at the UNION of different markets
Competition is not necessarily healthy: the more we compete, the less we gain.
In the war of competition, we lose sight of what matters, and focus on rivals instead.
Competition can make people hallucinate opportunities where none exist.
Winning is better than losing, but everybody loses when the war is not one worth fighting.
If you cannot beat a rival, it may be better to MERGE.
The value of a business today is the sum of all the money it will make IN THE FUTURE
a great business is defined by its ability to generate cash flow in the future
Proprietary Technology (patent): become inimitable, escape from competition
Network Effects: start by satisfying well the need of a small market
Economies of Sales: a good startup should have the potential for great scaleĀ built into its first design
Branding (last): no tech company can be built on branding alone (substance matters more first)
Ex: Apple
Start small and monopolize
Every startup should start with a very small market.
Perfect target = small group of particular people concentrated together and served by a few or no competitors.
Scaling Up
Once you create and dominate a niche market, then you shouldgradually expand into related or slightly broader markets.
Don't Disrupt
Disruption = innovation that radically transforms the current standards of a market
Avoid competition as much as possible when growing
Make the last great development in a specific market
How? Dominate a small niche and scale up from there, toward your ambitious long-term vision
Strategy: "study the end game before anything else"
Reflect about two kinds of attitudes towards the future:
Optimistic/Pessimistic
Definite/Indefinite
Lesson: find a way to a definite optimistic future
We live under a POWER LAW.
Regarding investments, it is wrong to think that having a more diverse and bigger portfolio leads to more return on investment. The investment return follows a power law with the number of companies supported: supporting with more money a few successful companies is a better strategy.
Same applies to entrepreneurship: as a founder, see your time and dedication as an investment. To succeed, spend time on doing a few things well, where you're initially good at, instead of covering a bit of everything in an average level.
3 types of human goals:
Easy: goals that can be satisfied with minimal effort
Hard = secrets: goals that can be satisfied with serious effort
Impossible: goals that cannot be satisfied, no matter the effort
Why don't people keep looking for secrets?
Incrementalism: do what you have been to do step by step to succeed
Risk aversion: scare of being wrong or to do a mistake
Complacency: comfort of doing something known
Flatness of the world, that is too big to achieve something significant (not worth)
2 kinds of secrets: nature (like physics, mathematics, technology) and people (like concept-based startups, social media)
Should I tell a secret I know? Remain hidden. The recipient of a secret becomes a "conspirator".
Tips when you create a company and a cofounding team:
tech and complementary skills, as important as how the founders know each other and work together
get a board as small as possible = reduce misalignment
be aware that founder's vision (create value and keep get investments) can be different than investors' (make profit fast)
only keep fully committed people (full-time, physically available)
Division of a company's power:
Ownership = who owns equity? (founders, employees, investors)
Possession = who runs the company on a day-to-day basis? (managers, employees)
Control = who formally governs the affairs? (board of directors including founders and investors)
From the outside, everyone in your company should be different in the same way.
On the inside, every individual should be sharply distinguished by their work.
Defining roles reduces conflicts: less competition in handling tasks
Build a company culture and specific values that would be the reason why others would like to join your company.
Sales matter as much as the product itself!
As a startup, don't try to be better than the marketing or ads of big companies
If you can get just one distribution channel to work, you have a great business.
If you try several ones, but can't nail one, you're finished.
Technology (AI, software) is not meant to substitute but to complement human beings
Example: fraud detection = first read flag raised by an algorithm analyzing all the data + human intervention to take a decision and act
"Better technology won't replace professionals; it will allow them to do even more"