Quote from Peter Thiel

Start Small and Monopolize Every startup is small at the...

2018-05-01

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Start Small and Monopolize Every startup is small at the start. Every monopoly dominates a large share of its market. 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. If you think your initial market might be too big, it almost certainly is. Small doesn’t mean nonexistent. We made this mistake early on at PayPal. Our first product let people beam money to each other via PalmPilots. It was interesting technology and no one else was doing it. However, the world’s millions of PalmPilot users weren’t concentrated in a particular place, they had little in common, and they used their devices only episodically. Nobody needed our product, so we had no customers. With that lesson learned, we set our sights on eBay auctions, where we found our first success. In late 1999, eBay had a few thousand high-volume “PowerSellers,” and after only three months of dedicated effort, we were serving 25% of them. 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. The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors. Any big market is a bad choice, and a big market already served by competing companies is even worse. This is why it’s always a red flag when entrepreneurs talk about getting 1% of a $100 billion market. In practice, a large market will either lack a good starting point or it will be open to competition, so it’s hard to ever reach that 1%. And even if you do succeed in gaining a small foothold, you’ll have to be satisfied with keeping the lights on: cutthroat competition means your profits will be zero.

Peter Thiel in "Zero to One: Notes on Startups, or How to Build the Future"

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