Class 3 Notes Essay Peter Thiel’s CS183: Startup - Class 3 Notes Essay Here is an essay version of my class notes from Class 3 of CS183: Startup. Errors and omissions are my own. Credit for good stuff is Peter’s entirely. CS183: Startup—Notes Essay—Value Systems The history of the ‘90s was in many ways the history of widespread confusion about the question of value. As we discussed back in Class 1, certain questions and frameworks can anchor our thinking about value. A somewhat different perspective on technology—going from 0 to 1, to revisit our earlier terminology—is the financial or economic one. I. Great companies do three things. The first point is straightforward. Great companies last. Finally—and relatedly—you have to capture much of the value you create in order to be great. II. One way that people try and objectively determine a company’s value is through multiples and comparables. pre-money valuation = ($1M*n_engineers) - ($500k*n_MBAs). One does valuation analysis at a given point in time. III.
Class 2 Notes Essay Peter Thiel’s CS183: Startup - Class 2 Notes Essay Here is an essay version of my class notes from Class 2 of CS183: Startup. Errors and omissions are my own. Credit for good stuff is Peter’s entirely. CS183: Startup—Notes Essay—Party Like It’s 1999? I. History is driven by each generation’s experience. Take someone born in the late 1960s, for instance. There is a keen analogue between the cultural intensity of the ‘60s and the technological intensity of the 1990s. History is a strange thing in that it often turns out to be quite different than what people who lived through it thought it was. II. Most of the 1990s was not the dot com bubble. The 1990s could be said to have started in November of ’89. So from 1992 through the end of 1994, it still felt like the U.S. was mired in recession. To be sure, technological development was going on in Silicon Valley. The Internet would change all that. So Netscape comes along in ’93 and things start to take off. III. A. B. So that’s what they did.
Peter Thiel Peter Andreas Thiel (born October 11, 1967) is an American entrepreneur, venture capitalist, and hedge fund manager. Thiel cofounded PayPal with Max Levchin and Elon Musk and served as its CEO. He also co-founded Palantir, of which he is chairman. He serves as president of Clarium Capital, a global macro hedge fund with $700 million in assets under management; a managing partner in Founders Fund, a venture capital fund with $2 billion in assets under management; co-founder and investment committee chair of Mithril Capital Management; and co-founder and chairman of Valar Ventures.[4][5][6] He was the first outside investor in Facebook, the popular social-networking site, with a 10.2% stake acquired in 2004 for $500,000, and sits on the company's board of directors. Thiel was ranked #293 on the Forbes 400 in 2011, with a net worth of $1.5 billion as of March 2012.[2] He was ranked #4 on the Forbes Midas List of 2014 at $2.2 billion.[7] Thiel lives in San Francisco, California.[8]
Peter Thiel's CS183: Startup - Class 1 Notes Essay Peter Thiel’s CS183: Startup - Class 1 Notes Essay Here is an essay version of my class notes from Class 1 of CS183: Startup. Errors and omissions are my own. CS183: Startup—Notes Essay—The Challenge of the Future Purpose and Preamble We might describe our world as having retail sanity, but wholesale madness. Humanities majors may well learn a great deal about the world. I. For most of recent human history—from the invention of the steam engine in the late 17th century through about the late 1960’s or so— technological progress has been tremendous, perhaps even relentless. The importance of this shift is hard to overstate. The zenith of optimism about the future of technology might have been the 1960’s. But with the exception of the computer industry, it wasn’t. II. Computers have been the happy exception to recent tech deceleration. III. A. Progress comes in two flavors: horizontal/extensive and vertical/intensive. Vertical or intensive progress, by contrast, means doing new things. B.
Class 5 Notes Essay Peter Thiel’s CS183: Startup - Class 5 Notes Essay Here is an essay version of my class notes from Class 5 of CS183: Startup. Errors and omissions are mine. Stephen Cohen, co-founder and Executive VP of Palantir Technologies, and Max Levchin of PayPal and Slide fame joined this class as guest speakers. Credit for good stuff goes to them and Peter. CS183: Startup—Notes Essay—The Mechanics of Mafia I. Everybody knows that company culture is important. Then there are some things that don’t work so well. And then there is what might be called anti-culture, where you really don’t even have a culture at all. Picture a 1-dimensional axis from consultant-nihilism to cultish dogmatism. Good company culture is more nuanced than simple homogeneity or heterogeneity. Similarly, differences qua differences don’t matter much. II. A. Generally speaking, capitalism and competition are better seen as antonyms than as synonyms. Sometimes, though, you need to compete. Gandhi is a great historical figure. B.
Class 6 Notes Essay Peter Thiel’s CS183: Startup - Class 6 Notes Essay Here is an essay version of my class notes from Class 6 of CS183: Startup. Errors and omissions are my own. Credit for good stuff is Peter’s entirely. This class was kind of a crash course in VC financing. CS183: Startup—Notes Essay—Thiel’s Law I. Every company is different. Beginnings of things are very important. The insight that foundings are crucial is what is behind the Founders Fund name. The importance of foundings is embedded in companies. Foundings are obviously temporal. There is, of course, a limit to how much you can do with rules. Consider a 2 x 2 matrix. Good, high trust people with low alignment structure is basically anarchy. Sometimes the opposite combination—low trust people and lots of rules—can work too. The low trust, low alignment model is dog-eat-dog sort of world. The ideal is the combination of high trust people with a structure that provides a high degree of alignment. II. III. Suppose you start a company. IV.
Class 7 Notes Essay Peter Thiel’s CS183: Startup - Class 7 Notes Essay Here is an essay version of my class notes from Class 7 of CS183: Startup. Errors and omissions are mine. Roelof Botha, partner at Sequoia Capital and former CFO of PayPal, and Paul Graham, partner and co-founder of Y Combinator, joined this class as guest speakers. Class 7 Notes Essay—Follow the Money I. Many people who start businesses never deal with venture capitalists. VC started in late 1940s. Venture basically works like this: you pool a bunch of money that you get from people called limited partners. Most of the profits go back to LPs as returns on their investment. VC funds last for several years, because it usually takes years for the companies you invest in to grow in value. There are many dimensions to being a good VC. The standard Einstein line on this is that the most powerful force in universe is compound interest. So consider a prototypical successful venture fund. An example will help clarify. Not always, of course. II.
Class 8 Notes Essay Peter Thiel’s CS183: Startup - Class 8 Notes Essay Here is an essay version of my class notes from Class 8 of CS183: Startup. Errors and omissions are mine. Bruce Gibney, partner at Founders Fund, gave the lecture these notes are based on. Credit for good stuff goes to him and Founders Fund. Class 8 Notes Essay—The Pitch I. One of the most important things to remember when thinking about pitching is that there are huge numbers of pitches in the world. Conceptually, pitching sounds easy. But it’s not that easy. Humans are massively cognitively biased in favor of near-term thinking. Before you pitch you should have a clear goal in mind. First, you need to raise the right amount of capital. Second, higher valuations aren’t always in your interest. Your subsidiary goal should be to keep control of your enterprise. II. It’s always important to understand your audience. One of the most important things to understand is that, like all people, VCs are different people at different times of day.
Class 9 Notes Essay Peter Thiel’s CS183: Startup - Class 9 Notes Essay Here is an essay version of my class notes from Class 9 of CS183: Startup. Errors and omissions are my own. Class 9 Notes Essay—If You Build It, Will They Come? I. Distribution is something of a catchall term. But for whatever reason, people do not get distribution. There are two closely related questions that are worth drilling down on. The first thing to do is to dispel the belief that the best product always wins. II. Before getting more abstract, it’s important to get a quantitative handle on distribution. Customer lifetime value, or CLVAverage revenue per user (per month), or ARPURetention rate (monthly, decay function), or rAverage customer lifetime, which is 1 / (1-r)Cost per customer acquisition, or CPA CLV equals the product of ARPU, gross margin, and average customer lifetime. The basic question is: is CLV greater or less than CPA? Imagine that your company sells second-tier cell phone plans. III. A. B. Look at the images above.
Class 10 Notes Essay Peter Thiel’s CS183: Startup - Class 10 Notes Essay Here is an essay version of my class notes from Class 10 of CS183: Startup. Errors and omissions are mine. Marc Andreessen, co-founder and general partner of the venture capital firm Andreessen Horowitz, joined this class as a guest speaker. Credit for good stuff goes to him and Peter. I have tried to be accurate. Class 10 Notes Essay—After Web 2.0 I. It all started about 40 years ago with ARPANET. The Mosaic browser launched in 1993. “Web 1.0” and “2.0” are terms of art that can be sort of hard to pin down. Relative usage patterns have shifted quite a bit too. II. The Internet has felt a lot like the Wild West for last 20 years or so. Over the last 40 years, the world of stuff has been heavily regulated. Some big-picture Internet developments are on everyone’s radar. III. No one knows for sure when the future will arrive. Villemard’s 1910 prediction of what schools would be like in 2000. Consider mobile technology. IV. V.