Category: Venture Capital

Last night, Peter Thiel spoke at Stanford – about a wide sweep of topics including entrepreneurship, innovation, macro economic trends and the role of technology in the world. It was a very stimulating discussion across this wide range of topics.

One of the more interesting notions that Peter shared was the difference between intensive growth and extensive growth. Intensive growth is hard work, that’s where the real innovations and breakthroughs occur. Extensive growth is much more about replication and scaling – ramping a business once the breakthroughs have been made. He described intensive growth as all about getting “from zero to one” and extensive growth being all about getting from “one to N”.

Peter noted that many venture investors focus on extensive growth. They want to invest once the breakthroughs have been demonstrated – and scaling is what’s ahead. As an investor, he’s more interested in the work being done in areas of intensive growth – a focus that’s different from many – but certainly not all – VCs.

Another recurring theme from Peter’s remarks was the whole issue of the “right people.” He repeatedly spoke about how his investment decisions revolve much less around the business plan and much more about whether the group of people he’s talking to can demonstrate passion, a desire to change the world, and, importantly, an ability to work together effectively – and with shared sacrifice. The ability of a team to effectively pivot as the business evolves and opportunities emerge is critical – and is basically what he’s trying to assess upfront.

A final point about startup success he discussed was his conclusion that you could tell a lot about whether a new venture might succeed or fail if you looked at just the CEO’s salary. In his experience, CEOs who were paid $120,000 or less much more frequently led their businesses to success – versus CEOs making $160,000 or more where success was less likely. He explained that while this might seem simplistic, the CEO salary level actually has many, many effects on the company and, importantly, on the people who join. If the cash comp is less up front, everyone – including management and investors – are much more aligned for equity returns. Similarly, the team will be made up of folks who are really committed to the dream – and not focused as much on current cash. A fascinating discussion with lots of insight!

[Update: a video of the event is here. More notes on his talk here.]