Paper writing servicesRead more...
Thoughts on ideas, money, and getting other people on board
Peter Thiel, co-founder of PayPal, first Facebook investor, and co-founder of Founders Fund and Clarium Capital, delivered his keynote address at last night's Vator Splash, and as one of the most sought after investors, he had some interesting insights for the 400 attendees who came to the event:
-PayPal got started when Thiel and co-founder Max Levchin asked themselves: What if you could create a new form of currency? It was a big idea and one that no one else had thought of, which led him to two lessons for developing a successful idea: 1) It has to be something that is fundamentally big, and 2) It has to be something in the tech space that other people haven't already had. You don't want to be in a really competitive space.
--A question that entrepreneurs must ask themselves about their idea is adoption. When Max Levchin and Thiel started PayPal, they considered adoption: how do you create something and convince people to adopt it? This is especially pertinent when it comes to money. So they looked at trends and popular technologies to see what people were already using. Originally, they thought of PalmPilots and other PDAs and wanted to jump straight to mobile--but it was too soon, so they stepped back to link money with email. You can send money to anyone who has an email address--even if they're not signed up with PayPal. It seemed so obvious and trivial that they were surprised no one had done it yet. Then they worked hard to get people to sign on by offering $20 bonuses for joining. The company grew exponentially in the next several months.
--In an interesting side note, Thiel mentioned that banks were hesitant to sign on. They were worried about fraud. "We just kind of ignored it," said Thiel, explaining that their reasoning was that PayPal would not have fraud because it would be "just among friends--there are no frauds among friends."
--In retrospect on his time with PayPal, Thiel believes that there is something to be said for a business idea that is valuable enough and powerful enough to get people to give you money to build the business. You want to build a business that is so valuable that investors will want to give you lots of money. Businesses that only cost an incremental amount of money are not going to be that valuable because anyone can do it. Super capital-intensive businesses are too expensive to work (cleantech, biotech), but if you have a business that only takes a $25,000 to get started, you could have hundreds of other people competing and it could be a lot less valuable.
--If you're going to start a business, you should start a business that's really going to make a difference and change the world. Those kinds of businesses require more capital. The really good companies lose enormous amounts of money and take longer to be profitable. When entrepreneurs come to Thiel and tell him that they're going to be profitable in six months, he sees that is a concern. It's not the conventional wisdom, but the really interesting businesses are more capital-intensive and take five to seven years to get to profitability and do well because they have no competition.
--One of the categories of mistakes made by PayPal was there was a sense that they had no idea what they were doing and were hoping that someone would tell them what to do. Most of the time, there is no one standing behind the curtain. They thought they could get investors on board who knew a lot about startups, but the investors that they ended up with were less than helpful. So entrepreneurs can do two things to ensure that they build a strong, successful company:
1) If you think someone's a bad person, don't work with them.
2) If people can work together really well, they'll build a great company. It's like a sports team, people really have to play together well to win. You don't want to start a company with someone you just met--it's like marrying someone you met in Vegas.
(Disclosure: Thiel is an investor in Vator)
Support VatorNews by Donating
Read more from our "Lessons and advice" series
The Importance of the AMI-Jerusalem Center for Biblical Study and ResearchRead more...