Billionaire Pays You To Skip College
GM! It's Thursday, March 16th - Today, we're covering the Thiel Foundation and its outlier success in backing top companies like Ethereum, Oyo Rooms, and Figma ($20B+ acquisition 🤯).
Let's unpack their formula for building breakout companies.
Billionaire Pays You To Skip College
Since 2011, the Thiel Fellowship has produced $250B+ in value by backing the entrepreneurs behind companies like Ethereum, Oyo Rooms, and Figma - which was just acquired for $20Bn!
Peter Thiel, who founded PayPal and was the first outside investor in Facebook, created the Thiel Fellowship to find the next generation of innovators.
Here's the formula...
What’s the Thiel Fellowship?
The Thiel Fellowship offers $100k grants to entrepreneurs under the age of 22 who have impressive and unique business ideas.
- This $100k is delivered over the course of two years and serves as a lifeline for the entrepreneurs as they dive deep into their passion projects
- Acceptance into the Thiel Fellowship connects these young entrepreneurs with mentors, investors, and prospective customers in Silicon Valley
What makes acceptance into the Thiel Fellowship a golden ticket for young entrepreneurs is that there are no strings attached to the $100k; no percentage of profits or equity is taken from these new businesses.
While there are no strings attached to the money – there is what we could call a condition: accepted entrepreneurs must immediately drop out of college or avoid an undergraduate degree entirely.
Basically, the Thiel Fellowship is looking for the next generation of Steve Jobs and Mark Zuckerbergs, both of whom dropped out of college and revolutionized their respective industries.
Success stories from the Thiel Fellowship can be found across a variety of industries, whether that’s crypto, hospitality, AI, software, medicine, etc.
- Ethereum $200B
- Oyo Rooms $20B
- Figma $20B
- Polkadot $7B
- Scale AI $7.5B
- Luminar $3.11B
What the Thiel Fellowship Looks For
A) Future Monopolies: Unlike other entrepreneurs and investors that profess their love for the competitive marketplace that capitalism provides, Peter Thiel seeks out businesses that can avoid competition altogether.
- The Thiel Fellowship backs trendsetters that are destined to become monopolies because they create their own niches through new products or business models
- For example, Ethereum became so dominant because no one else had created a decentralized blockchain platform that could execute smart contracts, so it had no competition
B) Cream of the crop: The Thiel Fellowship has created so many billion-dollar companies because it is more selective than Ivy League schools and therefore only accepts the best young talent with the best ideas
- Approximately 200k young entrepreneurs apply annually
- Only 20-30 fellows are accepted each year
- So, the acceptance rate is 0.01%
The Formula For Breakout Companies
Peter Thiel’s business philosophy is seen as controversial to some, but he’s used it to identify potential Thiel Fellows and guide them to success
1) Build In Small, But High Growth Markets
- Thiel heavily disagrees with the notion that there are few groundbreaking innovations left to discover. He believes that there are endless secrets for hard-working entrepreneurs to discover and innovate upon
- The best place to look for these innovations is in small, but high-growth markets.
2) Competition is for Losers
- Thiel believes that all happy companies are the same in that they’ve figured out a way to radically differentiate themselves and escape from competition
- Companies that are in crowded industries focus on beating the competition and lose sight of innovating and bettering themselves
3) Create a 10X Technology or Solution
The first rule is to create a technology or innovation that is 10X better than what is in the market. One simple way to know if you have a 10X business is to ask yourself two questions:
- Is this 10X better than what is out there?
- Is it different or new enough that people will notice and buy?
4) Build With Economies Scale
Economies of scale allow a company to grow exponentially without growth in its fixed costs or overhead.
Software startups are huge beneficiaries of this rule. Companies like Google, Facebook, and Twitter can add customers or users without adding any fixed costs. Service businesses are more difficult to scale.
A great business should have the potential for scale.
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The New Risk That Nobody Saw Coming
I worked in bank liquidity and treasury for the better part of the last decade, and there is one very interesting risk factor from the SVB collapse that I do not think we have ever witnessed before in modern finance, a 🧵:
— professorstam.eth (@ProfessorStam)
Mar 12, 2023
Silicon Valley Bank represents one of the fastest banking failures ever recorded, but it didn't fail because it was insolvent. There was a new risk that no bank was prepared to deal with.
You Should Know:
- The majority of our financial regulations were developed in 2010. In short, they're very dated. Tech advancement has made many of them obsolete.
- SVB wasn't insolvent but was largely taken down by virality and panic.
- Social Media Risk needs to be defined and taken seriously. Nobody expected that a bank could lose 40% of its deposits overnight...that speed is unheard of.
- Banks need to be more transparent about their business on social media.