I just finished Zero to One and it is the best startup book I have read since readingReWork 6 years ago. Zero to One is fascinating on two levels – business and political. Peter’s libertarian views clearly are part of the foundations of how Founder Fund invests. They also come out pretty clearly on the Founders Fund podcast Anatomy of Next. As interesting as debating the probability of guaranteed minimum income working, the political views are not the main reason I think every entrepreneur should read this book although the contrarian insights are a useful point of view.
Every entrepreneur should read this book because it is one of the clearest articulations of how an investor is looking at a potential venture investment. Most new businesses aren’t startups. Answering the 7 key questions that every company should ask will improve your thinking as you build a company and raise money.
Lean + Agile + Iteration Don’t Get You From Zero to One
There is so much focus in the valley on lean, agile, iterating and prototyping we don’t always see that the insights that generate a revolutionary technology are usually leaps that are bigger than what can be had from iterating learning loops. They come from an insight that is a secret to most people about how the world works. To create a monopoly company people do need the skills to be agile, iterate and build. To have a vision of what to build they need to have an insight or secret that will allow them to create something that is 10x better than everything else out there in that area. The book gives examples of what this type of insight is and makes it crystal clear why it is absolutely required to create a revolutionary company that becomes the market leader not just build something a bit better than what was there. Investors need to believe your opportunity is actually big enough to return their whole fund on your one investment.
Popping out of the Field of Dreams Into Reality
If you build it they won’t come. Peter Thiel articulates the value of all the departments in a company. I think is quite common for engineers and product people to feel like they are the real people building the company and if the product is just good enough it will sell itself. Separately sales and marketing can sometimes also feel like they are the most important department because without them selling the product revenue would not come in. What really is crucial is to see the value in every department of the company.
I have seen first hand that without product market fit you have nothing. With product market fit you have something but without distribution you aren’t going to grow. Most companies do not have growth fueled by a viral loop that is natural to the product so it’s important to be aware of various distribution channels. Most importantly it’s important to be clear on the distribution channel that creates highest value for your company. If you have a killer distribution model you can create a monopoly even if your product offering is not the best one on the market.
If there is any part inside of you that thinks you don’t need all the various functions product, engineering, sales, marketing, business development etc to build a company then read the book. The field of dreams startup is an outlier that is most likely a myth.
7 Questions That Every Business Must Answer
My favorite part of the book was this extremely simple framework for evaluating a company. Not only do you need to be asking the right questions, you have to have to be able to create answers that are meaningful. If you aren’t sure what a meaningful answer is to any of the questions below – read the book.
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?
7 Questions Excerpted from Page 154