Tag Archives: Peter Thiel

Zero to One

Founders should launch an MVP as soon as possible and iterate their way to success…right? Wrong, according to billionaire Peter Thiel.


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The controversial venture capitalist and co-founder of PayPal lays out a very different view in his book Zero to One. As I headed off on vacation last week, I dug into this classic.

Thiel is fundamentally opposed to the Lean Startup framework. Iterating on a minimum viable product (MVP) would never have produced the iPhone, Thiel notes.

Instead, we should create a fundamental innovation. Our new product should be 10x better than alternatives.

And forget about big markets. Thiel’s approach is to completely dominate a small market, then branch out.

“No sector will ever be so important that merely participating in it will be enough to build a great company.”

Peter Thiel

I find Thiel’s approach compelling. Total domination of a small market is a stronger indicator of product-market fit than a tiny slice of a big one.

A monopoly, even in a small area, means you have pricing power. This avoids a race to the bottom with margins headed to zero.

From that strong position, we can branch out to adjacent markets. For example, PayPal was able to move from enabling eBay payments for top sellers to sending money for any reason.

Thiel also includes a great trick for investors: ask founders what they pay themselves.

A reasonable salary of no more than $150,000 ($194,000 in current dollars) strongly correlates with success. This is one of the clearest patterns Thiel has observed from investing in hundreds of startups including Facebook.

I’m going to steal this one! It may lead to some awkward silences on Zoom, but ya gotta break some eggs to make an omelette.

I found Thiel’s take on entrepreneurship refreshing. Zero to One turns the standard startup playbook on its head, and it makes a lot of sense!

I’m going to look more closely at companies dominating an initial small market. And if I ask you your salary, blame Peter.

What do you think of Zero to One? Leave a comment at the bottom and let me know!

Glad to be back!

More on tech:

Seedscout: Where Underestimated Founders Win

Why I Just Invested in Rilla, the Killer App for Outside Sales

Seeing Through SBF: How One VC Found the Truth

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Photo: “Peter Thiel” by jdlasica is licensed under CC BY 2.0.

Palantir CEO Paid $1 Billion to Lose Money

Palantir CEO Alex Karp earned compensation worth about $1.1 billion in 2020, primarily through equity awards granted shortly before his software company went public.

More here.

This company is losing $100 million a month and has never turned a profit in 18 years of existence. I know, I know, Amazon. But Amazon and Google turned a profit in 3-7 years. In my work investing in early stage tech startups, I routinely see even young companies that have reached the breakeven point. Why can’t Palantir?

Palantir is losing $100 million a month and has never turned a profit in 18 years of existence. #palantir #stocks

It’s no wonder that the CEO is able to pay himself so well. He and a couple other co-founders control the voting shares in the company even if they sell their shares. The votes each of their shares has rises whenever they sell, so they maintain control. This arrangement is so controversial they’re actually being sued for it as we speak.

Palantir reminds me a lot of WeWork. Charismatic founder, heavily hyped tech company, nonexistent earnings, ironclad founder control, and excessive CEO pay. And we know how that turned out.

Indeed, Karp seems to be cashing in as fast as he can while things are good:

At the time of the New York Stock Exchange listing, Karp owned about $1 billion worth of Palantir stock. He’s since sold about $350 million worth at share prices ranging from $9.10 to $31.59, according to SEC filings.

Dig into these posts for more on Palantir:

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Palantir Is Growing at a Snail’s Pace

Despite its lofty valuation, Palantir Technologies Inc. is barely growing:

In the fourth quarter, he points out, Palantir signed 21 deals worth more than $5 million, and 12 of more than $10 million. But he adds that it isn’t clear how many of those are actually new customers, as opposed to new projects with existing customers.

He notes that given total customer count went to 139 at year end from 132 one quarter earlier, it would seem that most of the new work is from previous customers. “New customer growth is what will ultimately be required to show the commercial momentum the market wants to see longer term,” he writes. “In this regard, the data is still mixed.”

Seven new customers, net, in 3 months? Not terribly impressive for a company with a market cap of $43 billion and a forward price/earnings ratio of 169. That ratio implies a company that is growing like crazy, not signing a couple of customers a quarter.

Other reports have indicated growth in their core government contracting business has slowed to a crawl. On the commercial side, 20% of revenue comes from a single customer. The business in general is concentrated in a handful of large customers, any one of whose departure would sting, big time.

Until Palantir grows at a rate to justify its buoyant stock price, I’ll be keeping my distance.

For more on Palantir, check out these posts:

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Photo: “PandoMonthly – April 2012 – Sarah Lacy Interviews Peter Thiel” by thekenyeung is licensed under CC BY-NC-ND 2.0

Palantir Stung By Slow Government Contracting Business

Palantir Technologies’ business is largely driven by government contracts. So far in 2021, despite a new Department of Energy contract, the overall picture is not looking good:

The Department of Energy win could potentially add $18 million in incremental revenue per year, but Mielczarek says that, otherwise, the investment firm’s Dotted Line tracker shows that Palantir “had a fairly quiet first quarter for government bookings.”

Besides an early January $8.5 million Army TITAN prototype award, there were no other government contract wins in the quarter.

Palantir’s business is largely driven by government contracts, and so far in 2021, it’s not looking good

This stock trades at a rich multiple, so it needs rapid growth to justify that. The numbers aren’t much better on the commercial side of the business:

“Palantir’s commercial sales increased by 4% in the December quarter,” Mielczarek noted. “The new sales strategy is showing potential, but we believe that it is too early to bet on.”

Add that to the fact that 20% of their commercial business is a single customer, and this looks like an overvalued, moderate growth company with some serious embedded risks. I’ll be avoiding this stock.

For more on Palantir, check out these posts:

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Photo: Palantir co-founder Peter Thiel. “Peter Thiel” by jdlasica is licensed under CC BY 2.0

Palantir’s CEO Is Spending Time Critizing Wall Street, Rather Than Making Money

Palantir Technologies, Inc. CEO Alex Karp had some sharp words for Wall Street recently:

“We told the Wall Streeters that we will focus on building the long-term health of our company, that we are going to invest in our product development and in our clients, and you just have to battle it out with them,” said Karp, also a Palantir co-founder. The developer of data analysis software went public via a direct listing in September after nearly two decades as a private company.

Not everyone on Wall Street has such a short-term focus, Karp acknowledged. Nevertheless, he said it remains “one of the most destructive, corrosive attributes of an otherwise interesting and largely functioning system.”

Is 18 years short term? That’s how long Palantir has been in business, and it’s never made a profit. Google and Amazon built businesses for the long term as well, but they reached profitability far sooner. Amazon took seven years and Google took just three.

I suggest that Karp stop wasting time criticizing Wall Street and start focusing on making his company spit out some cash for shareholders.

For more on Palantir, check out these posts:

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Photo: Palantir co-founder Peter Thiel. “Peter Thiel” by jdlasica is licensed under CC BY 2.0