Paypal Mafia Peter Thiel – An Advice For Starting Out
So let me say let me say a few things about about how to how to build a monopoly and I think I think the one of the sort of very counterintuitive ideas that comes out of this monopoly thread is that you want to go after small markets if you’re a startup you know you want to get to monopoly.
You’re starting a new company you want to get to monopolies monopolies you have a large share of a market how do you get to a large share of a market you start with a really small market and you take over that whole market and then and then over time you.
Find ways to expand that market in in concentric circles and the thing that’s always a big mistake is going after a giant.
Market on on day one because that’s typically evidence that that you somehow haven’t define the categories correctly that the and it’s it normally means that there’s going to be too much competition in one way or another and so I think almost all the successful companies in Silicon Valley had.
Some model of starting with small markets and expanding and you know if you take Amazon you start with.
You start with you know just a bookstore we have all the books in the world so it’s it’s a it’s a it’s a better bookstore than anybody else has in the world when it starts in the 90s its online there’s things you can do you can’t do before and then you gradually expand into all sorts of different forms of e-commerce and other.
Things beyond that you know eBay.
You start with Pez dispensers you move on to beanie babies and eventually it’s it’s all these different.
Auctions for all these sorts of different goods and and what was very counterintuitive about what’s very counterintuitive about many of these companies is they often.
Start with markets that are so small that people.
Don’t think they don’t think that they’re valuable at all when when you get started the the PayPal version of this was was we started with with power sellers on eBay which was about 20,000 people when we first saw this happening and December of 99 January 2000 right after we launched there was a.
Sense that that these were all it was such a small market it was terrible we thought these were terrible customers to have it’s just people.
Selling junk on the Internet why in the world do we want to be going after this market but but you you know you there was a way to get a product that was much better for everybody in that market you could and we got to something like 25-30 percent you know market penetration in two or three months and you got some walking you got brand recognition and you’re able to to build the.
Business from there so um so I always think these are these these very small markets are quite underrated the Facebook version of this I always give is that you know the initial market at Facebook was ten thousand people at Harvard it went from zero to sixty percent market share in ten days that was a very auspicious start on the way this gets analyzed.
In business schools is always that’s ridiculous it’s such a small market.
It can’t have any value at all and so I think the.
Business School analysis of Facebook early on or of PayPal early on or of eBay early on is.