Business: Startup to IPO

What is a “startup” really?


Peter Thiel proposed this concept of there being two types of startups:

  1. o to 1 startups = actually starting new things
  2. 1 to n startups (with n being whatever number you so choose) = copying what already exists

Initially I was confused. . .how could a startup succeed if it really was just a copy of something consumers already had. However, as I continued to read about this idea I realized that in many instances, whether you’re an entrepreneur starting a new venture or just some kid trying to get through school, we are inadvertently being pushed toward a “1 to n” kind of life. 

05-in-graduation-hire-me

For example, when you graduate college you are expected to get a job, right? So, when I looked at my sales professor and told him I was going to pursue my own venture after school instead of securing a job in some large, well-paying company, he looked at me like I was crazy. Now I’m not implying that getting a job after school is a bad thing, it’s just a “1 to n” kind of route where you copy what everyone else has done after school because it’s been proven; “tried and true”. But, pursuing your own startup would be different, less certain, and much riskier though it is a “0 to 1” decision.

Bringing it back to companies, there are two extreme examples that came to my mind when I thought of what companies fell into which categories.

0 to 1 Startup: The Grameen Bank

images

Muhammad Yunus truly created something new; actually, he created a whole new concept of micro-lending. He knew that banks would only lend money to people who had something to offer for collateral or to those who had a higher likelihood of paying back the loan. He also knew that poor people were very poor (in Bangladesh), and they had little to no way of lifting themselves up. So, he changed the system by created a bank that only lent money to the poor in very small investments. Without getting too much into micro-financing let’s just say that this is a prime example of a “0 to 1” startup.

1 to n Startup: Pinspire 

pinterest-pinspire

I had to use this example because it’s such an extreme look at a startup or new company that just copied what already existed. As you are probably familiar, Pinterest is a site where you can post photos that link back websites and create different groupings of photos, called boards, where you can group together photos of similar content subject matter. So what is Pinspire, essentially the same thing. Pinspire focuses on photos that inspire you and they offer a point system based on usage of their site. You have the opportunity to gain points based on your pinning activity and possibly earn gift cards, etc. However, this site isn’t solving any kind of new problem or filling a need that Pinterest hasn’t already met. Thus, this is a prime example of a “1 to n” startup that in my opinion, doesn’t have long to live.

So what’s it going to be? Are you a “0 to n” person or will you play it safe and take the “1 to n” strategy?

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s