Chris McCann has kept careful tabs on (former Don of the PayPal mafia) Peter Thiel’s startup class at Stanford. (For those who don’t recall, Peter Thiel once paid students to drop out of school; he is now teaching a class at Stanford.) Anywho, Chris has compiled notes from Peter Thiel’s class in his blog. Here are some of the highlights:
How a company can own a market
If monopolies do exist a new startup should set out to own an entire market. For a company to do this it has to have some combination of brand, scale cost advantages, network affects, or proprietary technology.Of those, brand is hardest to understand and identify in advance. BUT if you build a brand you build a monopoly. Scale advantages, network effects, and proprietary technology are more easily understood.
- Scale advantages work best when there are high fixed costs and low marginal costs. Think about Amazon.
- Network effects lock people into their particular business. Think about the iPod and iTunes.
- Proprietary technology is technology, for whatever reason, no one can use besides yourself. Think about a new drug.
In other news, the Datafest kicks off at Stanford today. Over the next 48 hours they’ll be developing new ways to analyze campaign finance data. Follow them here.
Also, we expected to see giddy Facebookers partying it up in Palo Alto last night night, but besides from the group ordering champagne at the Peninsula Creamery the town seemed pretty sleepy. Any idea what’s up with that?
