Zero to One: Notes on Startups, or How to Build the Future

by Peter Thiel

The paradox of teaching entrepreneurship is that such a formula necessarily cannot exist; because every innovation is new and unique, no authority can prescribe in concrete terms how to be innovative.

the single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas.

But there is no reason why technology should be limited to computers. Properly understood, any new and better way of doing things is technology.

in business, equilibrium means stasis, and stasis means death.

If your industry is in a competitive equilibrium, the death of your business won’t matter to the world; some other undifferentiated competitor will always be ready to take your place.

Monopoly is the condition of every successful business.

All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.

If you can’t beat a rival, it may be better to merge.

Sometimes you do have to fight. Where that’s true, you should fight and win. There is no middle ground: either don’t throw any punches, or strike hard and end it quickly.

a great business is defined by its ability to generate cash flows in the future.

Comparing discounted cash flows shows the difference between low-growth businesses and high-growth startups at its starkest.

proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage.

successful network businesses rarely get started by MBA types: the initial markets are so small that they often don’t even appear to be business opportunities at all.

Therefore, every startup should start with a very small market. Always err on the side of starting too small. The reason is simple: it’s easier to dominate a small market than a large one.

It was much easier to reach a few thousand people who really needed our product than to try to compete for the attention of millions of scattered individuals.

Sequencing markets correctly is underrated, and it takes discipline to expand gradually.

moving first is a tactic, not a goal. What really matters is generating cash flows in the future, so being the first mover doesn’t do you any good if someone else comes along and unseats you.

It’s much better to be the last mover—that is, to make the last great development in a specific market and enjoy years or even decades of monopoly profits.

Instead of pursuing many-sided mediocrity and calling it “well-roundedness,” a definite person determines the one best thing to do and then does it.

Finance epitomizes indefinite thinking because it’s the only way to make money when you have no idea how to create wealth.

leanness is a methodology, not a goal. Making small changes to things that already exist might lead you to a local maximum, but it won’t help you find the global maximum.

iteration without a bold plan won’t take you from 0 to 1.

every great entrepreneur is first and foremost a designer.

Forget “minimum viable products”—ever since he started Apple in 1976, Jobs saw that you can change the world through careful planning, not by listening to focus group feedback or copying others’ successes.

founders only sell when they have no more concrete visions for the company, in which case the acquirer probably overpaid;

definite founders with robust plans don’t sell, which means the offer wasn’t high enough.

A business with a good definite plan will always be underrated in a world where people see the future as random.

The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined.

First, only invest in companies that have the potential to return the value of the entire fund.

rule number two: because rule number one is so restrictive, there can’t be any other rules.

VCs must find the handful of companies that will successfully go from 0 to 1 and then back them with every resource.

At Founders Fund, we focus on five to seven companies in a fund, each of which we think could become a multibillion-dollar business based on its unique fundamentals.

Whenever you shift from the substance of a business to the financial question of whether or not it fits into a diversified hedging strategy, venture investing starts to look a lot like buying lottery tickets.

once you think that you’re playing the lottery, you’ve already psychologically pr...

less than 1% of new businesses started each year in the U.S. receive venture funding, and total VC investment accounts for less than 0.2% of GDP.

Venture-backed companies create 11% of all private sector jobs.

They generate annual revenues equivalent to an astou...

life is not a portfolio: not for a startup founder, and not for any individual.

“it doesn’t matter what you do, as long as you do it well.” That is completely false. It does matter what you do. You should focus relentlessly on something you’re good at doing, but before that you must think hard about whether it will be valuable in the future.

the existence of financial bubbles shows that markets can have extraordinary inefficiencies.

The actual truth is that there are many more secrets left to find, but they will yield only to relentless searchers.

so many small and medium-sized businesses don’t use tools that bigger firms take for granted. It’s not that small business proprietors are unusually backward or that good tools don’t exist: distribution is the hidden bottleneck.

Advertising can work for startups, too, but only when your customer acquisition costs and customer lifetime value make every other distribution channel uneconomical.

A product is viral if its core functionality encourages users to invite their friends to become users too.

If every new user leads to more than one additional user, you can achieve a chain reaction of exponential growth.

Whoever is first to dominate the most important segment of a market with viral potential will be the last mover in the whole market.

we wanted to get the most valuable users first. The most obvious market segment in email-based payments was the millions of emigrants still using Western Union to wire money to their families back home.

the transactions were too ...

needed a smaller niche market segment with a higher ...

If you can get just one distribution channel to work, you have a great business. If you try for several but don’t nail one, you’re finished.