Monopolies: the way of creating the Next Big Thing

Yesterday I saw the 5th lecture of Startup School (YC produced). It’s an insanely great course, even for an experienced startupper with years of experience.

The talk was made by Peter Thiel, a founder and investor with proven track record (he’s founder of Paypal and early investor Facebook). The interesting bit that I brought home is that successful businesses are monopolies.

In the tech world monopolies are Google (search market), Amazon (online ecommerce) or Facebook (social networking). Also if they’ve not been the first companies to create a product in their market, they’ve been able to make a product with an order of magnitude better than their closest competitor. Creating a product 10000x better is what made them winning their market.

Another intersting bit is that these companies have not won a big market. They’ve won a small market, deemed as non interesting by investors and by common sense. When Facebook started the market was 10k user big (maybe an exageration).

These companies entered a small market, they conquered it (becoming a monopoly of this market) and then they made it grow. The ability of these founders is in:

a) creating a product that is way better than the competitor’s one and
b) in understanding that the market they’re targeting will grow.

What Peter transmitted me is that if you want to create the next big thing you should not go after a big enstablished market. You should go after a market that you think will grow.

At the end if you want to be the next Facebook, you shouldn’t try to imitate Facebook.