Zero to One (by Peter Thiel) Summary - Chapter 9

The following is a summary of Zero to One: Notes on Startups or How to Build the Future. I do not claim to own any of the book's original work, the following is simply a bulleted summarization with a few direct quotes. All copyrights and trademarks belong to their respective owners. Chapter 9 - Foundations:
  • A startup messed up at its foundation cannot be fixed (Thiel’s Law)
    • Decisions made early one are very hard to change later
  • You cannot build a great company only a flawed foundation
  • Founding Matrimony (upon founding, co-founders get ‘married’:
    • When starting something choosing a partner is the most important decision
    • If founders fight, the company suffers
    • Founders should have a background before the founding of the company
      • Otherwise, its luck
  • Ownership, possession, and control:
    • Everyone in your company needs to work well together
    • Doing it alone guarantees alignment
      • Its incredibly hard to do it alone though
    • Need structure in your company to keep everyone aligned for the long term
    • Misalignment can come from the following:
  1. Ownership: who legally owns the company(‘s equity)?
    1. Usually founders, employees, and investors
  2. Possession: who actually runs the company on a day-to-day basis?
    1. Usually managers and employees
  3. Control: who formally governs the company’s affairs
    1. Usually Board of Directors (founders and investors)
  • In the boardroom, less is more
    • The smaller the board, the better the communication
    • In a small board though, it is easy to oppose/accept anything
      • This is why choosing board members is very important
    • A board of three (3) is ideal
      • Should not exceed five (5)
        • Unless publicly held
  • On the Bus or Off the Bus
    • Everyone you involve with the company should be involved full time
      • Rule can be broken (accountants, lawyers, etc.)
    • Anyone who does not own stock (options) or get regular salary will not have the company in their best interest (misaligned)
      • They want value now, and will not help you build it for the future
      • This is why consultants, part time employees do not work
      • Even telecommuting should be avoided
  • Cash is King:
    • When people are fully committed, they should be properly compensated
    • A company does better the less the CEO pays himself
      • Thiel says this is the single clearest pattern he’s noticed in being a VC
      • “In no case should a CEO of an early stage, venture-backed startup receive more than $150,000 per year in salary.”
        • Bills do not matter in deciding a gigantic salary
      • A cash poor executive will focus on increasing the value of the company as a whole
      • A CEO sets the example for all under him, high or low salary
    • Cash offer optionality to your workers
      • High cash compensation teaches workers to take value from the company rather than to help build it
      • “Any kind of cash is more about the present than the future
  • Vested Interests:
    • Equity offers something better than high-cash salary because it vests interests of your employees in the company
    • Must be allocated very carefully as to not create misalignment
      • Handing out equal amounts is a mistake
        • People work different amounts, etc.
      • Employees should get more equity depending on how early the join due to risk
    • Some people only want cash and refuse equity (equity is tied to one company, could be worthless)
      • If they refuse equity it is useful to determine if they care about the cause
  • The ‘birth’ of a company happens just once and in that moment the founder has the opportunity to set the rules and foundation for the future
  If you've liked this summary, I highly recommend you get the full book here: Zero to One: Notes on Startups, or How to Build the Future < Previous Chapter | Overview | Next Chapter > - Alec Kriebel