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Peter Thiel’s CS183: Startup - Class 15 Notes Essay

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Peter Thiel: It is very hard hard for investors to invest in things that are unique. The psychological struggle is hard to overstate. People gravitate to the modern portfolio approach. The narrative that people tell is that their portfolio will be a portfolio of different things. But that seems odd. 

Things that are truly different are hard to evaluate. Suppose someone wants to start a rocket company. You might ask, quite reasonably, “What experience do you have with rockets?” The answer might be “zero.” Elon didn’t have any experience in making rockets before he started SpaceX. Or suppose a VC wants to invest in a rocket company. The question becomes: “What on earth do you know about rockets?” Again, the answer is probably “nothing.” No one has invested in rockets in over 40 years.

iPhone games, by contrast, are entirely familiar. If you ask a gaming entrepreneur what experience he has with games, he’ll tell you about all the games he’s made before. Ask a VC what they know about games and they’ll go on and on about the many gaming companies in their portfolio.

The upside to doing something that you’re unfamiliar with, like rockets, is that it’s likely that no one else is familiar with it, either. The competitive bar is lowered. You can focus on learning and substantive things over process, which is perhaps better than competing against experts. 


I love this quote

funny... the other post that was put out with the Jay Jamison VC blog is super counter to this, right? because, essentially, he said that he only invests in startups where the founders have already been successful, the concept has tons of traction, and success is guaranteed. which echoes other advice, like, get a mentor that knows your industry/market etc. etc.

god help us if more investors don't start thinking like peter thiel and continue instead to think like bankers...

Most investors will think like bankers. That doesn't change.

Peter Thiel is by far the exception.

Sad, isn't it because look what thinking like a banker has done to this country, I respect Peter Thiel because he's not afraid to act & think for himself.

The most successful people act and think for themselves.

And the least successful people, too.

But yes, the most interesting companies of the last 20 years -- Amazon, Google, LinkedIn, Facebook, Twitter -- came because someone was willing to take that risk.

Good point on the least successful people. So, really, it's an ecosystem...

Need more risk takers ;O)

That's not what I said at all. On a plane now but will happily engage in longer discussion.

I think people who know would describe me as many things, but i'd be surprised if 'banker-like' made the top 20. :)

Anyway one reason I love Panda Whale is the openness of conversation and I look forward to carrying it on here.


Jay Jamison

So, my first reaction when I saw your post here, was...i should probably buy this guy a beer or two :D Next time you are near DC, ping me here (or on twitter @cag123) because I would love to talk about this in person (no pitching, just good old fashion chatting). Or, when I am out that way, if you're good with it, I will look you up.

Here's the thing of it: entrepreneurs who want to start a business live and breathe risk, right? we GET IT. it's OUR mortgages that go under, OUR kids who eat ramen & pb&j etc. etc. if we fail. it's not just a failed ROI that might reduce the fund's tax liability or go in the NEVER EVER AGAIN bin. it's our dream, our passion, the thing we feel that if we don't do it, we'll die.

having a great product, a killer team, and market traction is what entrepreneurs who want to SUCCEED as a BUSINESS (as opposed to winning the biggest idea fairy award) are about. what's difficult is - especially in this current capital market - when you have a product/offering that isn't being done anywhere, is a new market, or is a whole new way of mashing up several existing verticals that doesn't look like Instagram, smell like Facebook, and taste like Pinterest or fit neatly into other portfolios in the Venture firm because there's always a pass.

VC's need to think more like entrepreneurs because what makes it win-win for everyone is that the vision is shared and clear. And I think that VCs right now have a shortened focal length. i like the categories of your rubric. i don't like some of the standing criteria - must have already succeeded, must be in a market you know, etc. etc. - not because i don't appreciate the risk you are taking with the money but because i feel PASSIONATELY that our country is in dire need of unfettered innovation to not only pull through this economic crisis but to also break down so many of the barriers to productivity and output that exist.

and the deal is, innovation - magical thinking - is usually at it's highest in a population during times of crisis. there are plenty of people who see a problem they want to solve but may not be experts in the domain and may be thinking about it or have started to execute against it because they just got pink slipped but who figure there is no point in trying to bring it to the world because the prevailing message that the VC world is putting out there is - we only want to deal with you if you fit xxx profile. This works in places like SV, NYC, Boston. But what about that guy in Edmund OK? or that stay at home mom in Clarksville TN? what about those people who are ON to something? Where do they go to get help? banks, home equity, and other traditional options aren't there any more.

i think it's a cop out for the VC world to say, well, if they really wanted it, they would go for it when the VC world itself is by and large not doing that. I would go so far as to say that the rise of incubators and accelerators is proof positive that the world of innovation and entrepreneurship no longer wants to wait for the VC world to think outside the box, to go boldly forward. But people with families - people with experience working and living - can't pack up and hang out in Mountain View for 12 weeks.

I want a venture partner who GETS IT...who knows that I understand risk, who sees that I am incorporating diligence in the execution and management of the venture and who wants to break new ground, not tread over the same beaten path. I want someone who wants to disrupt existing markets because they believe it's needed to save this country or create new markets because they believe it's vital to their kids' future. i don't want a banker who looks at all things in life through a very narrowed filter of minimized risk evaluated by criteria that are not indicative of early stage innovation because real change never looks familiar.

my apologies if i mis-characterized your post.

and i look forward to your feedback because i think dialogue is critical for change.

and i seriously love pandawhale for just this reason! :O)

warm regards,